Appendix B: 7 CFR 226 - Child and Adult Care Food Program (CACFP)

Food and Nutrition Service, USDA

Pt. 226

USDC Federal agency responsible for the inspection of the product.
(b) The CN labeled product must be produced under Federal inspection by USDA or
USDC. The Federal inspection must be performed in accordance with an approved partial or total quality control program or
standards established by the appropriate
Federal inspection service.
(c) The CN label statement must be printed
as an integral part of the product label along
with the product name, ingredient listing,
the inspection shield or mark for the appropriate inspection program, the establishment number where appropriate and the
manufacturer’s or distributor’s name and address.
(1) The inspection marking for CN labeled
non-meat, non-poultry, and non-seafood
products with the exception of juice drinks
and juice drink products is established as follows:

company’s name will be circulated to regional FNS offices; and (d) FNS will require
the food service program involved to notify
the State agency of the labeling violation.
7. FNS is authorized to issue operational
policies, procedures, and instructions for the
CN Labeling Program. To apply for a CN
label and to obtain additional information
on CN label application procedures, write to:
CN Labels, U.S. Department of Agriculture,
Food and Nutrition Service, Nutrition and
Technical Services Division, 3101 Park Center Drive, Alexandria, Virginia 22302.

PART 226—CHILD AND ADULT
CARE FOOD PROGRAM
Subpart A—General
Sec.
226.1
226.2
226.3

General purpose and scope.
Definitions.
Administration.

Subpart B—Assistance to States
(d) Yields for determining the product’s
contribution toward meal pattern requirements must be calculated using the Food
Buying Guide for Child Nutrition Programs
(Program Aid Number 1331).
5. In the event a company uses the CN logo
and CN label statement inappropriately, the
company will be directed to discontinue the
use of the logo and statement and the matter
will be referred to the appropriate agency for
action to be taken against the company.
6. Products that bear a CN label statement
as set forth in paragraph 3(c) carry a warranty. This means that if a food service authority participating in the child nutrition
programs purchases a CN labeled product
and uses it in accordance with the manufacturer’s directions, the school or institution
will not have an audit claim filed against it
for the CN labeled product for noncompliance with the meal pattern requirements of
7 CFR 210.10, 220.8, 225.16, and 226.20. If a
State or Federal auditor finds that a product
that is CN labeled does not actually meet the
meal pattern requirements claimed on the
label, the auditor will report this finding to
FNS. FNS will prepare a report on the findings and send it to the appropriate divisions
of FSIS and AMS of the USDA, National Marine Fisheries Service of the USDC, Food and
Drug Administration, or the Department of
Justice for action against the company. Any
or all of the following courses of action may
be taken: (a) The company’s CN label may be
revoked for a specific period of time; (b) The
appropriate agency may pursue a misbranding or mislabeling action against the
company producing the product; (c) The

226.4
226.5

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

Subpart C—State Agency Provisions
226.6 State agency administrative responsibilities.
226.7 State agency responsibilities for financial management.
226.8 Audits.

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

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

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§ 226.1

7 CFR Ch. II (1–1–03 Edition)

Subpart F—Food Service Equipment
Provisions
226.24

Property management requirements.

Subpart G—Other Provisions
226.25 Other provisions.
226.26 Program information.
226.27 Information
collection/recordkeeping—OMB assigned control numbers.
APPENDIX A TO PART 226—ALTERNATE FOODS
FOR MEALS
APPENDIX B TO PART 226 [RESERVED]
APPENDIX C TO PART 226—CHILD NUTRITION
(CN) LABELING PROGRAM
AUTHORITY: Secs. 9, 11, 14, 16, and 17, Richard B. Russell National School Lunch Act, as
amended (42 U.S.C. 1758, 1759a, 1762a, 1765 and
1766).
SOURCE: 47 FR 36527, Aug. 20, 1982, unless
otherwise noted.

Subpart A—General
§ 226.1 General purpose and scope.
This part announces the regulations
under which the Secretary of Agriculture will carry out the Child and
Adult Care Food Program. Section 17
of the National School Lunch Act, as
amended, authorizes assistance to
States through grants-in-aid and other
means to initiate, maintain, and expand nonprofit food service programs
for children or adult participants in
nonresidential institutions which provide care. The Program is intended to
enable such institutions to integrate a
nutritious food service with organized
care services for enrolled participants.
Payments will be made to State agencies or FNS Regional Offices to enable
them to reimburse institutions for food
service to enrolled participants.
[53 FR 52587, Dec. 28, 1988, as amended by
Amdt. 22, 55 FR 1377, Jan. 14, 1990]

§ 226.2 Definitions.
AFDC assistance unit means any individual or group of individuals which is
currently certified to receive assistance under the Aid to Families with
Dependent Children Program in a State
where the standard of eligibility for
AFDC benefits does not exceed the income eligibility guidelines for free
meals under this part.
Act means the National School Lunch
Act, as amended.

Administrative costs means costs incurred by an institution related to
planning, organizing, and managing a
food service under the Program, and allowed by the State agency financial
management instruction. These administrative costs may include administrative expenses associated with outreach
and recruitment of unlicensed family
or group day care homes and the allowable licensing-related expenses of such
homes.
Administrative review means the fair
hearing provided upon request to:
(a) An institution that has been
given notice by the State agency of
any action or proposed action that will
affect their participation or reimbursement under the Program, in accordance with § 226.6(k);
(b) A principal or individual responsible for an institution’s serious deficiency after the responsible principal
or responsible individual has been
given a notice of intent to disqualify
them from the Program; and
(c) A day care home that has been
given a notice of proposed termination
for cause.
Administrative review official means
the independent and impartial official
who conducts the administrative review held in accordance with § 226.6(k).
Adult means, for the purposes of the
collection of social security numbers
as a condition of eligibility for free or
reduced-price meals, any individual 21
years of age or older.
Adult day care center means any public or private nonprofit organization or
any proprietary title XIX or title XX
center (as defined in this section)
which (a) is licensed or approved by
Federal, State or local authorities to
provide nonresidential adult day care
services to functionally impaired
adults (as defined in this section) or
persons 60 years of age or older in a
group setting outside their homes or a
group living arrangement on a less
than 24-hour basis and (b) provides for
such care and services directly or
under arrangements made by the agency or organization whereby the agency
or organization maintains professional
management responsibility for all such
services. Such centers shall provide a
structured, comprehensive program
that provides a variety of health, social

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and related support services to enrolled
adult participants through an individual plan of care.
Adult day care facility means a licensed or approved adult day care center under the auspices of a sponsoring
organization.
Adult participant means a person enrolled in an adult day care center who
is functionally impaired (as defined in
this section) or 60 years of age or older.
Advanced payments means financial
assistance made available to an institution for its Program costs prior to
the month in which such costs will be
incurred.
CACFP child care standards means the
Child and Adult Care Food Program
child care standards developed by the
Department for alternate approval of
child care centers, outside-school-hours
care centers, and day care homes by
the State agency under the provisions
of § 226.6(d)(2) and (3).
Center means a child care center, an
adult day care center, or an outsideschool-hours care center.
Child care center means any public or
private nonprofit organization, or any
proprietary title XX center, as defined
in this section (‘‘Proprietary title XX
center’’), licensed or approved to provide nonresidential child care services
to enrolled children, primarily of preschool age, including but not limited to
day care centers, settlement houses,
neighborhood centers, Head Start centers and organizations providing day
care services for children with handicaps. Child care centers may participate in the Program as independent
centers or under the auspices of a sponsoring organization.
Child care facility means a licensed or
approved child care center, day care
home, or outside-school-hours care center under the auspices of a sponsoring
organization.
Children means (a) persons 12 years of
age and under, (b) children of migrant
workers 15 years of age and under, and
(c) persons with mental or physical
handicaps, as defined by the State, enrolled in an institution or a child care
facility serving a majority of persons
18 years of age and under.
Claiming percentage means the ratio
of the number of enrolled participants
in an institution in each reimburse-

ment category (free, reduced-price or
paid) to the total of enrolled participants in the institution.
Current income means income received during the month prior to application for free or reduced-price meals.
If such income does not accurately reflect the household’s annual income,
income shall be based on the projected
annual household income. If the prior
year’s income provides an accurate reflection of the household’s current annual income, the prior year may be
used as a base for the projected annual
income.
Day care home means an organized
nonresidential child care program for
children enrolled in a private home, licensed or approved as a family or group
day care home and under the auspices
of a sponsoring organization.
Days means calendar days unless otherwise specified.
Department means the U.S. Department of Agriculture.
Disclosure means individual children’s
program eligibility information obtained through the free and reduced
price meal eligibility process that is
revealed or used for a purpose other
than for the purpose for which the information was obtained. The term refers to access, release, or transfer of
personal data about children by means
of print, tape, microfilm, microfiche,
electronic communication or any other
means.
Disqualified means the status of an
institution, a responsible principal or
responsible individual, or a day care
home that is ineligible for participation.
Documentation means:
(a) The completion of the following
information on a free and reduced-price
application:
(1) Names of all household members;
(2) Income received by each household member, identified by source of
income (such as earnings, wages, welfare, pensions, support payments, unemployment compensation, social security and other cash income);
(3) The signature of an adult household member; and
(4) The social security number of the
adult household member who signs the
application, or an indication that he/

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7 CFR Ch. II (1–1–03 Edition)

she does not possess a social security
number; or
(b) For a child who is a member of a
food stamp or FDPIR household or an
AFDC assistance unit, ‘‘documentation’’ means the completion of only the
following information on a free and reduced price application:
(1) The name(s) and appropriate food
stamp, FDPIR or AFDC case number(s)
for the child(ren); and
(2) The signature of an adult member
of the household; or
(c) For a child in a tier II day care
home who is a member of a household
participating in a Federally or State
supported child care or other benefit
program with an income eligibility
limit that does not exceed the eligibility standard for free or reduced price
meals:
(1) The name(s), appropriate case
number(s) (if the program utilizes case
numbers), and name(s) of the qualifying program(s) for the child(ren), and
the signature of an adult member of
the household; or
(2) If the sponsoring organization or
day care home possesses it, official evidence of the household’s participation
in a qualifying program (submission of
a free and reduced price application by
the household is not required in this
case); or
(d) For an adult participant who is a
member of a food stamp or FDPIR
household or is an SSI or Medicaid participant, as defined in this section,
‘‘documentation’’ means the completion of only the following information
on a free and reduced price application:
(1) The name(s) and appropriate food
stamp or FDPIR case number(s) for the
participant(s) or the adult participant’s SSI or Medicaid identification
number, as defined in this section; and
(2) The signature of an adult member
of the household; or
(e) For a child who is a Head Start
participant, the Head Start statement
of income eligibility issued upon initial
enrollment in the Head Start Program
or, if such statement is unavailable,
other documentation from Head Start
officials that the child’s family meets
the Head Start Program’s low-income
criteria.
Emergency shelter means a public or
private nonprofit organization whose

primary purpose is to provide temporary shelter and food services to
homeless families with children.
Enrolled child means a child whose
parent or guardian has submitted to an
institution a signed document which
indicates that the child is enrolled for
child care. In addition, for the purposes
of calculations made by sponsoring organizations of family day care homes
in accordance with §§ 226.13(d)(3)(ii) and
226.13(d)(3)(iii), ‘‘enrolled child’’ (or
‘‘child in attendance’’) means a child
whose parent or guardian has submitted a signed document which indicates that the child is enrolled for
child care; who is present in the day
care home for the purpose of child care;
and who has eaten at least one meal
during the claiming period.
Enrolled participant means an ‘‘Enrolled child’’ (as defined in this section) or ‘‘Adult participant’’ (as defined
in this section).
Expansion payments means financial
assistance made available to a sponsoring organization for its administrative expenses associated with expanding a food service program to day care
homes located in low-income or rural
areas. These expansion payments may
include administrative expenses associated with outreach and recruitment of
unlicensed family or group day care
homes and the allowable licensing-related expenses of such homes.
Facility means a sponsored center or
a family day care home.
Family means, in the case of children,
a group of related or nonrelated individuals, who are not residents of an institution or boarding house, but who
are living as one economic unit or, in
the case of adult participants, the
adult participant, and if residing with
the adult participant, the spouse and
dependent(s) of the adult participant.
FDPIR household means any individual or group of individuals which is
currently certified to receive assistance as a household under the Food
Distribution Program on Indian Reservations.
Fiscal Year means a period of 12 calendar months beginning October 1 of
any year and ending with September 30
of the following year.
FNS means the Food and Nutrition
Service of the Department.

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FNSRO means the appropriate Regional Office of the Food and Nutrition
Service.
Food service equipment assistance
means Federal financial assistance formerly made available to State agencies
to assist institutions in the purchase
or rental of equipment to enable institutions to establish, maintain or expand food service under the Program.
Food service management company
means an organization other than a
public or private nonprofit school, with
which an institution may contract for
preparing and, unless otherwise provided for, delivering meals, with or
without milk for use in the Program.
Food Stamp household means any individual or group of individuals which is
currently certified to receive assistance as a household under the Food
Stamp Program.
Free meal means a meal served under
the Program to a participant from a
family which meets the income standards for free school meals; or to a child
who is automatically eligible for free
meals by virtue of food stamp, FDPIR,
or AFDC recipiency; or to a child who
is a Head Start participant; or to an
adult participant who is automatically
eligible for free meals by virtue of food
stamp or FDPIR recipiency or is a SSI
or Medicaid participant. Regardless of
whether the participant qualified for
free meals by virtue of meeting one of
the criteria of this definition, neither
the participant nor any member of
their family shall be required to pay or
to work in the food service program in
order to receive a free meal.
Functionally impaired adult means
chronically impaired disabled persons
18 years of age or older, including victims of Alzheimer’s disease and related
disorders with neurological and organic
brain dysfunction, who are physically
or mentally impaired to the extent
that their capacity for independence
and their ability to carry out activities
of daily living is markedly limited. Activities of daily living include, but are
not limited to, adaptive activities such
as cleaning, shopping, cooking, taking
public transportation, maintaining a
residence, caring appropriately for
one’s grooming or hygiene, using telephones and directories, or using a post
office. Marked limitations refer to the

severity of impairment, and not the
number of limited activities, and occur
when the degree of limitation is such
as to seriously interfere with the ability to function independently.
Group living arrangement means residential communities which may or
may not be subsidized by federal, State
or local funds but which are private
residences housing an individual or a
group of individuals who are primarily
responsible for their own care and who
maintain a presence in the community
but who may receive on-site monitoring.
Household means ‘‘family’’, as defined
in § 226.2 (‘‘Family’’).
Head Start participant means a child
currently receiving assistance under a
Federally-funded Head Start Program
who is categorically eligible for free
meals in the CACFP by virtue of meeting Head Start’s low-income criteria.
Income standards means the familysize and income standards prescribed
annually by the Secretary for determining eligibility for free and reducedprice meals under the National School
Lunch Program and the School Breakfast Program.
Income to the program means any
funds used in an institution’s food service program, including, but not limited
to all monies, other than Program payments, received from other Federal,
State, intermediate, or local government sources; participant’s payments
for meals and food service fees; income
from any food sales to adults; and
other income, including cash donations
or grants from organizations or individuals.
Independent center means a child care
center, outside-school-hours care center or adult day care center which enters into an agreement with the State
agency to assume final administrative
and financial responsibility for Program operations.
Infant cereal means any iron-fortified
dry cereal specially formulated for and
generally recognized as cereal for infants that is routinely mixed with
breast milk or iron-fortified infant formula prior to consumption.
Infant formula means any iron-fortified formula intended for dietary use

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§ 226.2

7 CFR Ch. II (1–1–03 Edition)

solely as a food for normal, healthy infants; excluding those formulas specifically formulated for infants with inborn errors of metabolism or digestive
or absorptive problems. Infant formula,
as served, must be in liquid state at
recommended dilution.
Institution means a sponsoring organization, child care center, outsideschool-hours care center, emergency
shelter or adult day care center which
enters into an agreement with the
State agency to assume final administrative and financial responsibility for
Program operations.
Internal controls means the policies,
procedures, and organizational structure of an institution designed to reasonably assure that:
(a) The Program achieves its intended result;
(b) Program resources are used in a
manner that protects against fraud,
abuse, and mismanagement and in accordance with law, regulations, and
guidance; and
(c) Timely and reliable Program information is obtained, maintained, reported, and used for decision-making.
Key Element Reporting System (KERS)
means a comprehensive national system for reporting critical key element
performance data on the operation of
the program in institutions.
Low-income area means a geographical area in which at least 50 percent of the children are eligible for free
or reduced price school meals under the
National School Lunch Program and
the School Breakfast Program, as determined in accordance with paragraphs (b) and (c), definition of tier I
day care home.
Meals means food which is served to
enrolled participants at an institution,
child care facility or adult day care facility and which meets the nutritional
requirements set forth in this part.
Medicaid means Title XIX of the Social Security Act.
Medicaid participant means an adult
participant who receives assistance
under title XIX of the Social Security
Act, the Grant to States for Medical
Assistance Programs—Medicaid.
Milk means pasteurized fluid types of
unflavored or flavored whole milk,
lowfat milk, skim milk, or cultured
buttermilk which meet State and local

standards for such milk, except that, in
the meal pattern for infants (0 to 1
year of age), milk means breast milk
or iron-fortified infant formula. In
Alaska, Hawaii, American Samoa,
Guam, Puerto Rico, the Trust Territory of the Pacific Islands, the Northern Mariana Islands, and the Virgin Islands if a sufficient supply of such
types of fluid milk cannot be obtained,
‘‘milk’’ shall include reconstituted or
recombined milk. All milk should contain vitamins A and D at levels specified by the Food and Drug Administration and be consistent with State and
local standards for such milk.
National disqualified list means the
list, maintained by the Department, of
institutions, responsible principals and
responsible individuals, and day care
homes disqualified from participation
in the Program.
New institution means an institution
applying to participate in the Program
for the first time, or an institution applying to participate in the Program
after a lapse in participation.
Nonpricing program means an institution in which there is no separate identifiable charge made for meals served
to participants.
Nonprofit food service means all food
service operations conducted by the institution principally for the benefit of
enrolled participants, from which all of
the Program reimbursement funds are
used solely for the operations or improvement of such food service.
Nonresidential means that the same
participants are not maintained in care
for more than 24 hours on a regular
basis.
Notice means a letter sent by certified mail, return receipt (or the
equivalent private delivery service), by
facsimile, or by email, that describes
an action proposed or taken by a State
agency or FNS with regard to an institution’s Program reimbursement or
participation. Notice also means a letter sent by certified mail, return receipt (or the equivalent private delivery service), by facsimile, or by email,
that describes an action proposed or
taken by a sponsoring organization
with regard to a day care home’s participation. The notice must specify the
action being proposed or taken and the
basis for the action, and is considered

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to be received by the institution or day
care home when it is delivered, sent by
facsimile, or sent by email. If the notice is undeliverable, it is considered to
be received by the institution, responsible principal or responsible individual, or day care home five days after
being sent to the addressee’s last
known mailing address, facsimile number, or email address.
OIG means the Office of the Inspector
General of the Department.
Operating costs means expenses incurred by an institution in serving
meals to participants under the Program, and allowed by the State agency
financial management instruction.
Outside-school-hours care center means
a public or private nonprofit organization, or a proprietary title XX center,
as defined in this section (‘‘Proprietary
title XX center’’), licensed or approved
to provide organized nonresidential
child care services to enrolled children
outside of school hours. Outside-schoolhours care centers may participate in
the Program as independent centers or
under the auspices of a sponsoring organization.
Participants means ‘‘Children’’ or
‘‘Adult participants’’ as defined in this
section.
Personal property means property of
any kind except real property. It may
be tangible—having physical existence—or intangible—having no physical existence such as patents, inventions, and copyrights.
Pricing program means an institution
in which a separate identifiable charge
is made for meals served to participants.
Principal means any individual who
holds a management position within,
or is an officer of, an institution or a
sponsored center, including all members of the institution’s board of directors or the sponsored center’s board of
directors.
Program means the Child and Adult
Care Food Program authorized by section 17 of the National School Lunch
Act, as amended.
Program payments means financial assistance in the form of start-up payments, expansion payments, advance
payments, or reimbursement paid or
payable to institutions for operating
costs and administrative costs.

Proprietary title XIX center means any
private, for profit center (a) providing
nonresidential adult day care services
for which it receives compensation
from amounts granted to the States
under title XIX of the Social Security
Act and (b) in which title XIX beneficiaries were not less than 25 percent
of enrolled eligible participants in the
calendar month preceding initial application or annual reapplication for Program participation.
Proprietary title XX center means any
private, for profit center:
(a) Providing nonresidential child
care services for which it receives compensation from amounts granted to the
States under title XX of the Social Security Act, and in which title XX child
care beneficiaries constitute no less
than 25 percent of enrolled eligible participants or licensed capacity, whichever is less, during the calendar month
preceding initial application or annual
reapplication for Program participation; or,
(b) Providing nonresidential adult
day care services for which it receives
compensation from amounts granted to
the States under title XX of the Social
Security Act and in which adult beneficiaries were not less than 25 percent
of enrolled eligible participants during
the calendar month preceding initial
application or annual reapplication for
Program participation.
Reduced-price meal means a meal
served under the Program to a participant from a family which meets the income
standards
for
reduced-price
school meals. Any separate charge imposed shall be less than the full price of
the meal, but in no case more than 40
cents for a lunch or supper, 30 cents for
a breakfast, and 15 cents for a supplement, and for which neither the participant nor any member of his family is
required to work in the food service
program.
Reimbursement means Federal financial assistance paid or payable to institutions for Program costs within the
rates assigned by the State agency.
Renewing institution means an institution that is participating in the Program at the time it submits a renewal
application.
Responsible principal or responsible individual means:

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(a) A principal, whether compensated
or uncompensated, who the State agency or FNS determines to be responsible
for an institution’s serious deficiency;
(b) Any other individual employed
by, or under contract with, an institution or sponsored center, who the State
agency or FNS determines to be responsible for an institution’s serious
deficiency; or
(c) An uncompensated individual who
the State agency or FNS determines to
be responsible for an institution’s serious deficiency.
Rural area means any geographical
area in a county which is not a part of
a Metropolitan Statistical Area or any
‘‘pocket’’ within a Metropolitan Statistical Area which, at the option of the
State agency and with FNSRO concurrence, is determined to be geographically isolated from urban areas.
SSI participant means an adult participant who receives assistance under
title XVI of the Social Security Act,
the Supplemental Security Income
(SSI) for the Aged, Blind and Disabled
Program.
School year means a period of 12 calendar months beginning July 1 of any
year and ending June 30 of the following year.
Seriously deficient means the status of
an institution or a day care home that
has been determined to be non-compliant in one or more aspects of its operation of the Program.
Sponsoring organization means a public or nonprofit private organization
which is entirely responsible for the
administration of the food program in:
(a) One or more day care homes; (b) a
child care center, outside-school-hours
care centers, or adult day care center
which is a legally distinct entity from
the sponsoring organization; (c) two or
more child care centers, outsideschool-hours care centers, or adult day
care centers; or (d) any combination of
child care centers, adult day care centers, day care homes, and outsideschool-hours care centers. The term
‘‘sponsoring organization’’ also includes a for-profit organization which
is entirely responsible for administration of the Program in any combination of two or more child care centers,
adult day care centers and outsideschool-hours care centers which are

part of the same legal entity as the
sponsoring organization, and which are
proprietary title XIX or XX centers, as
defined in this section (‘‘Proprietary
Title XIX center’’, ‘‘Proprietary Title
XX center’’).
Start-up payments means financial assistance made available to a sponsoring
organization for its administrative expenses associated with developing or
expanding a food service program in
day care homes and initiating successful Program operations. These start-up
payments may include administrative
expenses associated with outreach and
recruitment of unlicensed family or
group day care homes and the allowable licensing-related expenses of such
homes.
State means any of the 50 States, the
District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, the
Trust Territory of the Pacific Islands,
and the Northern Mariana Islands.
State agency means the State educational agency or any other State
agency that has been designated by the
Governor or other appropriate executive, or by the legislative authority of
the State, and has been approved by
the Department to administer the Program within the State or in States in
which FNS administers the Program,
FNSRO. This also may include a State
agency other than the existing CACFP
State Agency, when such agency is designated by the Governor of the State to
administer only the adult day care
component of the CACFP.
State 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

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§ 226.2

they move through the possible subsequent stages of corrective action, proposed termination, suspension, agreement termination, and/or disqualification, as applicable;
(b) Responsible principals and responsible individuals who have been disqualified from participation by the
State agency, including their names,
mailing addresses, and dates of birth;
and
(c) Day care home providers whose
agreements have been terminated for
cause by a sponsoring organization in
the State, including their names, mailing addresses, and dates of birth.
State Children’s Health Insurance Program (SCHIP) means the State medical
assistance program under title XXI of
the Social Security Act ( 42 U.S.C.
1397aa et seq.).
Suspended means the status of an institution or day care home that is temporarily ineligible for participation (including Program payments).
Suspension review means the review
provided, upon the institution’s request, to an institution that has been
given a notice of intent to suspend participation (including Program payments), based on a determination that
the institution has knowingly submitted a false or fraudulent claim.
Suspension review official means the
independent and impartial official who
conducts the suspension review.
Termination for cause means the termination of a day care home’s Program
agreement by the sponsoring organization due to the day care home’s violation of the agreement.
Termination for convenience means
termination of a day care home’s Program agreement by either the sponsoring organization or the day care
home, due to considerations unrelated
to either party’s performance of Program responsibilities under the agreement.
Tier I day care home means (a) a day
care home that is operated by a provider whose household meets the income standards for free or reducedprice meals, as determined by the sponsoring organization based on a completed free and reduced price application, and whose income is verified by
the sponsoring organization of the
home in accordance with § 226.23(h)(6);

(b) A day care home that is located in
an area served by a school enrolling elementary students in which at least 50
percent of the total number of children
enrolled are certified eligible to receive
free or reduced price meals; or
(c) A day care home that is located in
a geographic area, as defined by FNS
based on census data, in which at least
50 percent of the children residing in
the area are members of households
which meet the income standards for
free or reduced price meals.
Tier II day care home means a day
care home that does not meet the criteria for a Tier I day care home.
Title XVI means Title XVI of the Social Security Act which authorizes the
Supplemental Security Income for the
Aged, Blind, and Disabled Program—
SSI.
Title XIX means Title XIX of the Social Security Act which authorizes the
Grants to States for Medical Assistance Programs—Medicaid.
Title XX means Title XX of the Social
Security Act.
Unannounced review means an on-site
review for which no prior notification
is given to the facility or institution.
Uniform Federal Assistance Regulations
means the Department’s regulations, 7
CFR part 3015, establishing Department-wide policies and standards for
administration of grants and cooperative agreements.
Verification means a review of the information reported by institutions to
the State agency regarding the eligibility of participants for free or reduced-price meals, and, in addition, for
a pricing program, confirmation of eligibility for free or reduced-price benefits under the program. Verification for
a pricing program shall include confirmation of income eligibility and, at
State discretion, any other information required on the application which
is defined as documentation in § 226.2.
Such verification may be accomplished
by examining information (e.g., wage
stubs, etc.) provided by the household
or other sources of information as specified in § 226.23(h)(2)(iv). However, if a
food stamp, FDPIR or AFDC case number is provided for a child, verification
for such child shall include only confirmation that the child is included in
a currently certified food stamp or

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§ 226.3

7 CFR Ch. II (1–1–03 Edition)

FDPIR household or AFDC assistance
unit. If a Head Start statement of income eligibility is provided for a child,
verification for such child shall include
only confirmation that the child is a
Head Start participant. For an adult
participant, if a food stamp or FDPIR
case number or SSI or Medicaid assistance identification number is provided,
verification for such participant shall
include only confirmation that the participant is included in a currently certified food stamp or FDPIR household
or is a current SSI or Medicaid participant.
Yogurt means commercially coagulated milk products obtained by the
fermentation of specific bacteria, that
meet milk fat or milk solid requirements to which flavoring foods or ingredients may be added. These products are covered by the Food and Drug
Administration’s Standard of Identity
for yogurt, lowfat yogurt, and nonfat
yogurt, (21 CFR 131.200), (21 CFR
131.203), (21 CFR 131.206), respectively.
[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct.
15, 1982, as amended at 48 FR 21529, May 13,
1983; 48 FR 41142, Sept. 14, 1983; 50 FR 19310,
May 8, 1985; 51 FR 31316, Sept. 3, 1986; 52 FR
36906, Oct. 2, 1987; 53 FR 52587, Dec. 28, 1988;
54 FR 27153, June 28, 1989; Amdt. 22, 55 FR
1377, Jan. 14, 1990; 61 FR 25554, May 22, 1996;
62 FR 901, Jan. 7, 1997; 62 FR 23617, May 1,
1997; 63 FR 9104, Feb. 24, 1998; 63 FR 9727, Feb.
26, 1998; 64 FR 61775, Nov. 15, 1999; 66 FR 2203,
Jan. 11, 2001; 67 FR 43476, June 27, 2002]

§ 226.3 Administration.
(a) Within the Department, FNS
shall act on behalf of the Department
in the administration of the Program.
(b) Within the States, responsibility
for the administration of the Program
shall be in the State agency, except
that if FNS has continuously administered the Program in any State since
October 1, 1980, FNS shall continue to
administer the Program in that State.
A State in which FNS administers the
Program may, upon request to FNS,
assume administration of the Program.
(c) Each State agency desiring to
take part in the Program shall enter
into a written agreement with the Department for the administration of the
Program in the State in accordance
with the provisions of this part. This
agreement shall cover the operation of
the Program during the period speci-

fied therein and may be extended by
consent of both parties.
(d) FNSRO shall, in each State in
which it administers the Program,
have available all funds and assume all
responsibilities of a State agency as set
forth in this part.

Subpart B—Assistance to States
§ 226.4 Payments to States and use of
funds.
(a) Availability of funds. For each fiscal year based on funds provided to the
Department, FNS shall make funds
available to each State agency to reimburse institutions for their costs in
connection with food service operations, including administrative expenses, under this part. Funds shall be
made available in an amount no less
than the sum of the totals obtained
under paragraphs (b), (c), (d), (e) and
(h) of this section. However, in any fiscal year, the aggregate amount of assistance provided to a State under this
part shall not exceed the sum of the
Federal funds provided by the State to
participating institutions within the
State for that fiscal year and any funds
used by the State under paragraphs (h)
and (j) of this section.
(b) Center funds. For meals served to
participants in child care centers,
adult day care centers and outsideschool-hours care centers, funds shall
be made available to each State agency
in an amount no less than the sum of
the products obtained by multiplying:
(1) The number of breakfasts served
in the Program within the State to
participants from families that do not
satisfy the eligibilty standards for free
and reduced-price school meals enrolled in institutions by the national
average payment rate for breakfasts
for such participants under section 4 of
the Child Nutrition Act of 1966;
(2) The number of breakfasts served
in the Program within the State to
participants from families that satisfy
the eligibilty standards for free school
meals enrolled in institutions by the
national average payment rate for free
breakfasts under section 4 of the Child
Nutrition Act of 1966;
(3) The number of breakfasts served
to participants from families that satisfy the eligibilty standard for reduced-

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§ 226.4

price school meals enrolled in institutions by the national average payment
rate for reduced-price school breakfasts under section 4 of the Child Nutrition Act of 1966;
(4) The number of lunches and suppers served in the Program within the
State by the national average payment
rate for lunches under section 4 of the
National School Lunch Act. (All
lunches and suppers served in the State
are funded under this provision);
(5) The number of lunches and suppers served in the Program within the
State to participants from families
that satisfy the eligibilty standard for
free school meals enrolled in institutions by the national average payment
rate for free lunches under section 11 of
the National School Lunch Act;
(6) The number of lunches and suppers served in the Program within the
State to participants from families
that satisfy the eligibilty standard for
reduced-price school meals enrolled in
institutions by the national average
payment rate for reduced-price lunches
under section 11 of the National School
Lunch Act;
(7) The number of supplements served
in the Program within the State to
participants from families that do not
satisfy the eligibilty standards for free
and reduced-price school meals enrolled in institutions by 2.75 cents;
(8) The number of supplements served
in the Program within the State to
participants from families that satisfy
the eligibilty standard for free school
meals enrolled in institutions by 30
cents;
(9) The number of supplements served
in the Program within the State to
participants from families that satisfy
the eligibilty standard for reducedprice school meals enrolled in institutions by 15 cents.
(c) Day care home funds. For meals
served to children in day care homes,
funds shall be made available to each
State agency in an amount no less
than the sum of products obtained by
multiplying:
(1) The number of breakfasts served
in the Program within the State to
children enrolled in tier I day care
homes by the current tier I day care
home rate for breakfasts;

(2) The number of breakfasts served
in the Program within the State to
children enrolled in tier II day care
homes that have been determined eligible for free or reduced price meals by
the current tier I day care home rate
for breakfasts;
(3) The number of breakfasts served
in the Program within the State to
children enrolled in tier II day care
homes that do not satisfy the eligibility standards for free or reduced
price meals, or to children from whose
households applications were not collected, by the current tier II day care
home rate for breakfasts;
(4) The number of lunches and suppers served in the Program within the
State to children enrolled in tier I day
care homes by the current tier I day
care home rate for lunches/suppers;
(5) The number of lunches and suppers served in the Program within the
State to children enrolled in tier II day
care homes that have been determined
eligible for free or reduced price meals
by the current tier I day care home
rate for lunches/suppers;
(6) The number of lunches and suppers served in the Program within the
State to children enrolled in tier II day
care homes that do not satisfy the eligibility standards for free or reduced
price meals, or to children from whose
households applications were not collected, by the current tier II day care
home rate for lunches/suppers;
(7) The number of supplements served
in the Program within the State to
children enrolled in tier I day care
homes by the current tier I day care
home rate for supplements;
(8) The number of supplements served
in the Program within the State to
children enrolled in tier II day care
homes that have been determined eligible for free or reduced price meals by
the current tier I day care home rate
for supplements; and
(9) The number of supplements served
in the Program within the State to
children enrolled in tier II day care
homes that do not satisfy the eligibility standards for free or reduced
price meals, or to children from whose
households applications were not collected, by the current tier II day care
home rate for supplements.

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§ 226.5

7 CFR Ch. II (1–1–03 Edition)

(d) Administrative funds. For administrative payments to day care home
sponsoring organizations, funds shall
be made available to each State agency
in an amount not less than the product
obtained each month by multiplying
the number of day care homes participating under each sponsoring organization within the State by the applicable
rates specified in § 226.12(a)(3).
(e) Start-up and expansion funds. For
start-up and expansion payments to eligible sponsoring organizations, funds
shall be made available to each State
agency in an amount equal to the total
amount of start-up and expansion payments made in the most recent period
for which reports are available for that
State or on the basis of estimates by
FNS.
(f) Funding assurance. FNS shall ensure that, to the extent funds are appropriated, each State has sufficient
Program funds available for providing
start-up, expansion and advance payments in accordance with this part.
(g) Rate adjustments. FNS shall publish a notice in the FEDERAL REGISTER
to announce each rate adjustment.
FNS shall adjust the following rates on
the specified dates:
(1) The rates for meals served in tier
I and tier II day care homes shall be
adjusted annually, on July 1 (beginning
July 1, 1997), on the basis of changes in
the series for food at home of the Consumer Price Index for All Urban Consumers published by the Department of
Labor. Such adjustments shall be
rounded to the nearest lower cent
based on changes measured over the
most recent twelve-month period for
which data are available. The adjustments shall be computed using the
unrounded rate in effect for the preceding school year.
(2) The rate for supplements served in
child care centers, adult day care centers and outside-school-hours care centers shall be adjusted annually, on July
1, on the basis of changes in the series
for food away from home of the Consumer Price Index for All Urban Consumers published by the Department of
Labor. Such adjustments shall be made
to the nearest $.0025 based on changes
measured over the most recent twelvemonth period for which data are available.

(3) The rate for administrative payments to day care home sponsoring organizations shall be adjusted annually,
on July 1, on the basis of changes in
the series for all items of the Consumer
Price Index for All Urban Consumers
published by the Department of Labor.
Such adjustments shall be made to the
nearest dollar based on changes measured over the most recent twelvemonth period for which data are available.
(h) Audit funds. For the expense of
conducting audits and reviews under
§ 226.8, funds shall be made available to
each State agency in an amount equal
to two percent of the Program reimbursement provided to institutions
within the State during the second fiscal year preceding the fiscal year for
which these funds are to be made available. The amount of assistance provided to a State under this paragraph
in any fiscal year may not exceed the
State’s expenditures under § 226.8 during such fiscal year.
(i) Method of funding. FNS shall authorize funds for State agencies in accordance with the Uniform Federal Assistance Regulations.
(j) Special developmental projects. The
State agency may use in carrying out
special developmental projects an
amount not to exceed one percent of
Program funds used in the second prior
fiscal year. Special developmental
projects shall conform to FNS guidance
and be approved in writing by FNS.
[47 FR 36527, Aug. 20, 1982, as amended at 52
FR 36906, Oct. 2, 1987; 53 FR 52588, Dec. 28,
1988; 62 FR 902, Jan. 7, 1997; 63 FR 9728, Feb.
26, 1998]

§ 226.5 Donation of commodities.
(a) USDA foods available under section 6 of this Act, section 416 of the Agricultural Act of 1949 (7 U.S.C. 1431) or
purchased under section 32 of the Act
of August 24, 1935 (7 U.S.C. 1431), section 709 of the Food and Agriculture
Act of 1965 (7 U.S.C. 1446a–1), or other
authority, and donated by the Department shall be made available to each
State.
(b) The value of such commodities
donated to each State for each school
year shall be, at a minimum, the
amount obtained by multiplying the
number of reimbursable lunches and

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§ 226.6

suppers served in participating institutions in that State during the preceding school year by the rate for commodities established under section 6(e)
of the Act for the current school year.
Adjustments shall be made at the end
of each school year to reflect the difference between the number of reimbursable lunches and suppers served
during the preceding year and the number served during the current year, and
subsequent commodity entitlement
shall be based on the adjusted meal
counts. At the discretion of FNS, current-year adjustments may be made for
significant variations in the number of
reimbursable meals served. Such current-year adjustments will not be routine and will only be made for unusual
problems encountered in a State, such
as a disaster that necessitates institutional closures for a prolonged period
of time. CACFP State agencies electing
to receive cash-in-lieu of commodities
will receive payments based on the
number of reimbursable meals actually
served during the current school year.
[47 FR 36527, Aug. 20, 1982, as amended at 62
FR 23618, May 1, 1997]

Subpart C—State Agency
Provisions
§ 226.6 State agency administrative responsibilities.
(a) State agency personnel. Each State
agency shall provide sufficient consultative, technical and managerial personnel to administer the Program, provide sufficient training and technical
assistance to institutions and monitor
performance to facilitate expansion
and effective operation of the Program.
(b) Application Approval. Each State
agency must establish an application
procedure to determine the eligibility
under this part of applicant institutions, and facilities for which applications are submitted by sponsoring organizations. Any institution applying
for participation in the Program must
be notified of approval or disapproval
by the State agency in writing within
30 days of filing a complete and correct
application. If an institution submits
an incomplete application, the State
agency must notify the institution
within 15 days of receipt of the application and must provide technical assist-

ance, if necessary, to the institution
for the purpose of completing its application. Any disapproved applicant
must be notified of the procedures for
seeking an administrative review (in
accordance with paragraphs (k) or (l) of
this section, as appropriate). The application procedures must include or conform to the following requirements:
(1) Agreements. The State agency, by
written consent of the State agency
and the institutions, must renew agreements with institutions not less frequently than annually. The State agency is prohibited from entering into an
agreement that is effective during two
fiscal years, but may nevertheless establish an ongoing renewal process for
the purpose of reviewing and approving
applications from participating institutions throughout the fiscal year;
(2) Participant eligibility information.
Centers must submit current information on the number of enrolled participants who are eligible for free, reduced
price, and paid meals;
(3) Enrollment information. Sponsoring
organizations of day care homes must
submit the current total number of
children enrolled, with an assurance
that day care home providers’ own
children enrolled in the Program are
eligible for free or reduced price meals;
(4) Nondiscrimination statement. Institutions must issue a non-discrimination policy statement and media release;
(5) Management plan. Sponsoring organizations must submit a management plan;
(6) Administrative budget. Institutions
must submit an administrative budget;
(7) Licensing/approval. Institutions
must document that each facility for
which application is made meets Program licensing/approval requirements;
(8) Proprietary centers. Institutions
must document that each proprietary
center for which application is made
meets the definition of a proprietary
title XIX center or a proprietary title
XX center, as applicable and as set
forth at § 226.2;
(9) Commodites/Cash-in-lieu of commodities. Institutions must state their preference to receive cash or cash-in-lieu of
commodities;
(10) Advance payments. Institutions
must state their preference to receive

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7 CFR Ch. II (1–1–03 Edition)

all, part, or none of the advance payment;
(11) 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 new sponsoring organization must submit documentation that its participation will
help ensure the delivery of benefits to
otherwise unserved facilities or participants in accordance with the State
agency’s criteria.
(12) National disqualified list. A State
agency is prohibited from approving an
institution’s application if the institution or any of its principals is on the
National disqualified list, and is prohibited from approving an application
submitted by a sponsoring organization
on behalf of a facility if the facility or
any of its principals is on the National
disqualified list;
(13) 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 the institution’s principals have been declared ineligible for any other publicly funded
program by reason of violating that
program’s requirements. However, this
prohibition does not apply if the institution or the principal has been fully
reinstated in, or determined eligible
for, that program, including the payment of any debts owed;
(ii) Certification. As part of an application, institutions must submit a certification regarding their past performance in other publicly funded programs. The certification shall include
language stating that institutions and
individuals providing false certifications will be placed on the National
disqualified list and will be subject to
any other applicable civil or criminal
penalties. This certification will include:
(A) A statement listing the publicly
funded programs in which the institu-

tion 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; and
(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;
(14) Criminal convictions.—(i) General.
A State agency is prohibited from approving an institution’s application if
the institution or any of its principals
has been convicted of any activity that
occurred during the past seven years
and that indicated a lack of business
integrity. A lack of business integrity
includes fraud, antitrust violations,
embezzlement, theft, forgery, bribery,
falsification or destruction of records,
making false statements, receiving stolen property, making false claims, obstruction of justice, or any other activity indicating a lack of business integrity as defined by the State agency;
and
(ii) Certification. As part of an application, institutions must submit a certification regarding any criminal convictions. The certification shall include language stating that institutions and individuals providing false
certifications will be placed on the National disqualified list and will be subject to any other applicable civil or
criminal penalties. This certification
will state that neither the institution
nor any of its principals has been convicted of any activity that occurred
during the past seven years and that
indicated a lack of business integrity.

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§ 226.6

A lack of business integrity includes
fraud, antitrust violations, embezzlement, theft, forgery, bribery, falsification or destruction of records, making
false statements, receiving stolen property, making false claims, obstruction
of justice, or any other activity indicating a lack of business integrity as
defined by the State agency;
(15) Truth of applications and names
and addresses. Institutions must submit
a certification that all information on
the application is true and correct,
along with the name, mailing address,
and date of birth of the institution’s
executive director and chairman of the
board of directors;
(16) Outside employment policy. Sponsoring organizations must submit an
outside employment policy. The policy
must restrict other employment by
employees that interferes with an employee’s performance of Program-related duties and responsibilities, including outside employment that constitutes a real or apparent conflict of
interest. Sponsoring organizations that
are participating on July 29, 2002 must
submit an outside employment policy
not later than September 27, 2002. The
policy shall be effective unless disapproved by the State agency;
(17) Bond. Sponsoring organizations
applying for initial participation on or
after June 20, 2000, must submit a bond,
if such bond is required by State law,
regulation, or policy. If the State agency requires a bond for sponsoring organizations pursuant to State law, regulation, or policy, the State agency
must submit a copy of that requirement and a list of sponsoring organizations posting a bond to the appropriate
FNSRO on an annual basis; and
(18) Each new or renewing institution
must submit information sufficient to
document that it is financially viable,
is administratively capable of operating the Program in accordance with
this part, and has internal controls in
effect to ensure accountability. To document this, any new institution must
demonstrate in its application that it
is capable of operating in conformance
with the following performance standards, and any renewing institution
must demonstrate in its application
that it currently operates in conformance with the following performance

standards. The State agency must only
approve the applications of those institutions that meet these performance
standards, and must deny the applications of those institutions that do not
meet the standards.
(i) Performance Standard 1—Financial
viability and financial management. The
new or renewing institution must be financially viable. Program funds must
be expended and accounted for in accordance with the requirements of this
part, FNS Instruction 796–2 (‘‘Financial
Management in the Child and Adult
Care Food Program’’), and 7 CFR Parts
3015 and 3016. To demonstrate financial
viability, the new or renewing institution must document that it meets the
following criteria:
(A) Description of Need/Recruitment. A
new sponsoring organization must
demonstrate in its management plan
that its participation will help ensure
the delivery of Program benefits to
otherwise unserved facilities or participants, in accordance with criteria developed by the State agency pursuant
to paragraph (b)(11) of this section. All
sponsoring organizations must demonstrate that they will use appropriate
practices for recruiting facilities, consistent with paragraph (p) of this section and any State agency requirements;
(B) Fiscal Resources and Financial History. An institution must demonstrate
that it has adequate financial resources to operate the CACFP on a
daily basis, has adequate sources of
funds to withstand temporary interruptions in Program payments and/or fiscal claims against the institution, and
can document financial viability (for
example, through audits, financial
statements, etc.); and
(C) Administrative Budgets. Costs in
the institution’s administrative budget
must be necessary, reasonable, allowable, and appropriately documented;
(ii) Performance Standard 2—Administrative capability. The new or renewing
institution must be administratively
capable. Appropriate and effective
management practices must be in effect to ensure that the Program operates in accordance with this part. To
demonstrate administrative capability,
the new or renewing institution must

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§ 226.6

7 CFR Ch. II (1–1–03 Edition)

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 set forth
in § 226.16(b)(1), and the factors established by the State agency in accordance with § 226.6(f)(2); 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 or renewing institution must have internal controls
and other management systems in effect to ensure fiscal accountability and
to ensure that the Program operates in
accordance with the requirements of
this part. To demonstrate Program accountability, the new or renewing institution must document that it meets
the following criteria:
(A) Board of directors. Has adequate
oversight of the Program by its governing board of directors;
(B) Fiscal accountability. Has a financial system with management controls
specified in writing. For 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 are processed accurately, and in a timely manner;
(4) That funds and property are 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, approved budget amendments,
and, if applicable, management plans
and appropriate records on facility operations;

(D) Sponsoring organization operations.
A sponsoring organization must document in its management plan that it
will:
(1) Provide adequate and regular
training of sponsoring organization
staff and sponsored facilities in accordance with §§ 226.15(e)(13) and 226.16(d);
(2) Perform monitoring in accordance
with § 226.16(d), to ensure that sponsored facilities accountably and appropriately operate the Program;
(3) If applicable, accurately classify
day care homes as tier I or tier II in accordance with § 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
at
§§ 226.12(a) and 226.16(b)(1); and
(E) Facility level operations. All independent centers and sponsored facilities must follow practices which 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 § 226.20;
(2) Comply with licensure or approval
requirements set forth in paragraph (d)
of this section;
(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.
(c) Denial of applications and termination of agreements. (1) Denial of a new
institution’s application.
(i) General. If a new institution’s application does not meet all of the requirements in paragraph (b) of this section and in §§ 226.15(b) and 226.16(b), the
State agency must deny the application. If, in reviewing a new institution’s application, the State agency determines that the institution has committed one or more serious deficiency

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Food and Nutrition Service, USDA

§ 226.6

listed in paragraph (c)(1)(ii) of this section, the State agency must initiate
action to:
(A) Deny the new institution’s application; and
(B) Disqualify the new institution
and the responsible principals and responsible individuals (e.g., the person
who signs the application).
(ii) List of serious deficiencies for new
institutions. The list of serious deficiencies is not identical for each category of institution (new, renewing,
participating) because the type of information likely to be available to the
State agency is different, depending on
whether the State agency is reviewing
a new or renewing institution’s application or is conducting a review of a
participating institution. Serious deficiencies for new institutions are:
(A) Submission of false information
on the institution’s application, including but not limited to a determination
that the institution has concealed a
conviction for any activity that occurred during the past seven years and
that indicates a lack of business integrity. A lack of business integrity includes fraud, antitrust violations, embezzlement, theft, forgery, bribery, falsification or destruction of records,
making false statements, receiving stolen property, making false claims, obstruction of justice, or any other activity indicating a lack of business integrity as defined by the State agency; or
(B) Any other action affecting the institution’s ability to administer the
Program in accordance with Program
requirements.
(iii) Serious deficiency notification procedures for new institutions. If the State
agency determines that a new institution has committed one or more serious deficiency listed in paragraph
(c)(1)(ii) of this section, the State agency must use the following procedures
to provide the institution and the responsible principals and responsible individuals with notice of the serious deficiency(ies) and an opportunity to
take corrective action.
(A) Notice of serious deficiency. The
State agency must notify the institution’s executive director and chairman
of the board of directors that the institution has been determined to be seriously deficient. The notice must iden-

tify the responsible principals and responsible individuals (e.g., for new institutions, the person who signed the
application) and must be sent to those
persons as well. The State agency may
specify in the notice different corrective action, and time periods for completing the corrective action, for the
institution and the responsible principals and responsible individuals. At
the same time the notice is issued, the
State agency must add the institution
to the State agency list, along with the
basis for the serious deficiency determination, and provide a copy of the notice to the appropriate FNSRO. The notice must also specify:
(1) The serious deficiency(ies);
(2) The actions to be taken to correct
the serious deficiency(ies);
(3) The time allotted to correct the
serious deficiency(ies) in accordance
with paragraph (c)(4) of this section.
(4) That the serious deficiency determination is not subject to administrative review;
(5) That failure to fully and permanently correct the serious deficiency(ies) within the allotted time
will result in denial of the institution’s
application and the disqualification of
the institution and the responsible
principals and responsible individuals;
and
(6) That the State agency will not
pay any claims for reimbursement for
eligible meals served or allowable administrative expenses incurred until
the State agency has approved the institution’s application and the institution has signed a Program agreement.
(B) Successful corrective action.
(1) If corrective action has been
taken to fully and permanently correct
the serious deficiency(ies) within the
allotted time and to the State agency’s
satisfaction, the State agency must:
(i) notify the institution’s executive
director and chairman of the board of
directors, and the responsible principals and responsible individuals, that
the State agency has rescinded its serious deficiency determination; and
(ii) offer the new institution the opportunity to resubmit its application.
If the new institution resubmits its application, the State agency must complete its review of the application

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§ 226.6

7 CFR Ch. II (1–1–03 Edition)

within 30 days after receiving a complete and correct application.
(2) If corrective action is complete
for the institution but not for all of the
responsible principals and responsible
individuals (or vice versa), the State
agency must:
(i) continue with the actions (as set
forth in paragraph (c)(1)(iii)(C) of this
section) against the remaining parties;
(ii) at the same time the notice is
issued, the State agency must also update the State agency list to indicate
that the serious deficiency(ies) has(ve)
been corrected and provide a copy of
the notice to the appropriate FNSRO;
and
(iii) if the new institution has corrected the serious deficiency(ies), offer
it the opportunity to resubmit its application. If the new institution resubmits its application, the State agency
must complete its review of the application within 30 days after receiving a
complete and correct application.
(C) Application denial and proposed
disqualification. If timely corrective action is not taken to fully and permanently correct the serious deficiency(ies), the State agency must notify the institution’s executive director
and chairman of the board of directors,
and the responsible principals and responsible individuals, that the institution’s application has been denied. At
the same time the notice is issued, the
State agency must also update the
State agency list and provide a copy of
the notice to the appropriate FNSRO.
The notice must also specify:
(1) That the institution’s application
has been denied and the State agency
is proposing to disqualify the institution and the responsible principals and
responsible individuals;
(2) The basis for the actions; and
(3) The procedures for seeking an administrative review (in accordance
with paragraph (k) of this section) of
the application denial and proposed
disqualifications.
(D) Program payments. The State
agency is prohibited from paying any
claims for reimbursement from a new
institution for eligible meals served or
allowable administrative expenses incurred until the State agency has approved its application and the institu-

tion and State agency have signed a
Program agreement.
(E) Disqualification. When the time
for requesting an administrative review expires or when the administrative review official upholds the State
agency’s denial and proposed disqualifications, the State agency must notify
the institution’s executive director and
chairman of the board of directors, and
the responsible principals and responsible individuals that the institution
and the responsible principal and responsible individuals have been disqualified. At the same time the notice
is issued, the State agency must also
update the State agency list and provide a copy of the notice and the mailing address and date of birth for each
responsible principal and responsible
individual to the appropriate FNSRO.
(2) Denial of a renewing institution’s
application.
(i) General. If a renewing institution’s
application does not meet all of the requirements in paragraph (b) of this section and in §§ 226.15(b) and 226.16(b), the
State agency must deny the application. If, in reviewing a renewing institution’s application, the State agency
determines that the institution has
committed one or more serious deficiency listed in paragraph (c)(2)(ii) of
this section, the State agency must initiate action to deny the renewing institution’s application and initiate action
to disqualify the renewing institution
and the responsible principals and responsible individuals.
(ii) List of serious deficiencies for renewing institutions. The list of serious
deficiencies is not identical for each
category of institution (new, renewing,
participating) because the type of information likely to be available to the
State agency is different, depending on
whether the State agency is reviewing
a new or renewing institution’s application or is conducting a review of a
participating institution. Serious deficiencies for renewing institutions are:
(A) Submission of false information
on the institution’s application, including but not limited to a determination
that the institution has concealed a
conviction for any activity that occurred during the past seven years and

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Food and Nutrition Service, USDA

§ 226.6

that indicates a lack of business integrity. A lack of business integrity includes fraud, antitrust violations, embezzlement, theft, forgery, bribery, falsification or destruction of records,
making false statements, receiving stolen property, making false claims, obstruction of justice, or any other activity indicating a lack of business integrity as defined by the State agency;
(B) Failure to operate the Program in
conformance with the performance
standards set forth in paragraph (b)(18)
of this section;
(C) Failure to comply with the bid
procedures and contract requirements
of applicable Federal procurement regulations;
(D) Use of a food service management
company that is in violation of health
codes;
(E) Failure by a sponsoring organization of day care homes to properly
classify day care homes as tier I or tier
II in accordance with § 226.15(f);
(F) Failure by a sponsoring organization to properly train or monitor sponsored facilities in accordance with
§ 226.16(d);
(G) Failure to perform any of the
other financial and administrative responsibilities required by this part;
(H) Failure to properly implement
and administer the day care home termination and administrative review
provisions set forth at paragraph (l) of
this section and § 226.16(l); or
(I) any other action affecting the institution’s ability to administer the
Program in accordance with Program
requirements.
(iii) Serious deficiency notification procedures for renewing institutions. If the
State agency determines that a renewing institution has committed one or
more serious deficiency listed in paragraph (c)(2)(ii) of this section, the
State agency must use the following
procedures to provide the institution
and the responsible principals and responsible individuals notice of the serious deficiency(ies) and an opportunity
to take corrective action.
(A) Notice of serious deficiency. The
State agency must notify the institution’s executive director and chairman
of the board of directors that the institution has been determined to be seriously deficient. The notice must iden-

tify the responsible principals and responsible individuals and must be sent
to those persons as well. The State
agency may specify in the notice different corrective action, and time periods for completing the corrective action, for the institution and the responsible principals and responsible individuals. At the same time the notice
is issued, the State agency must add
the institution to the State agency
list, along with the basis for the serious deficiency determination, and provide a copy of the notice to the appropriate FNSRO. The notice must also
specify:
(1) The serious deficiency(ies);
(2) The actions to be taken to correct
the serious deficiency(ies);
(3) The time allotted to correct the
serious deficiency(ies) in accordance
with paragraph (c)(4) of this section;
(4) That the serious deficiency determination is not subject to administrative review.
(5) That failure to fully and permanently correct the serious deficiency(ies) within the allotted time
will result in the State agency’s denial
of the institution’s application, the
proposed termination of the institution’s agreement (if the State agency
has temporarily extended the agreement
pursuant
to
paragraph
(c)(2)(iii)(D) of this section) and the
proposed disqualification of the institution and the responsible principals
and responsible individuals; and
(6) That the institution’s voluntary
termination of its agreement with the
State agency after having been notified
that it is seriously deficient will still
result in the instituion’s formal termination by the State agency and placement of the institution and its responsible principals and responsible individuals on the National disqualified list.
(B) Successful corrective action.
(1) If corrective action has been
taken to fully and permanently correct
the serious deficiency(ies) within the
allotted time and to the State agency’s
satisfaction, the State agency must:
(i) Notify the institution’s executive
director and chairman of the board of
directors, and the responsible principals and responsible individuals, that
the State agency has rescinded its serious deficiency determination; and

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§ 226.6

7 CFR Ch. II (1–1–03 Edition)

(ii) Offer the renewing institution the
opportunity to resubmit its application. If the renewing institution resubmits its application, the State agency
must complete its review of the application within 30 days after receiving a
complete and correct application.
(2) If corrective action is complete
for the institution but not for all of the
responsible principals and responsible
individuals (or vice versa), the State
agency must:
(i) continue with the actions (as set
forth in paragraph (c)(2)(iii)(C) of this
section) against the remaining parties;
(ii) at the same time the notice is
issued, the State agency must also update the State agency list to indicate
that the serious deficiency(ies) has(ve)
been corrected and provide a copy of
the notice to the appropriate FNSRO;
and
(iii) if the renewing institution has
corrected the serious deficiency(ies),
offer it the opportunity to resubmit its
application. If the renewing institution
resubmits its application, the State
agency must complete its review of the
application within 30 days after receiving a complete and correct application.
(C) Application denial and proposed
disqualification. If timely corrective action is not taken to fully and permanently correct the serious deficiency(ies), the State agency must notify the institution’s executive director
and chairman of the board of directors,
and the responsible principals and responsible individuals, that the institution’s application has been denied. At
the same time the notice is issued, the
State agency must update the State
agency list and provide a copy of the
notice to the appropriate FNSRO. The
notice must also specify:
(1) That the institution’s application
has been denied and the State agency
is proposing to terminate the institution’s temporarily-extended agreement
and to disqualify the institution and
the responsible principals and responsible individuals;
(2) The basis for the actions;
(3) That, if the institution voluntarily terminates its agreement after
receiving the notice of the proposed
termination, the institution and the
responsible principals and responsible
individuals will be disqualified;

(4) The procedures for seeking an administrative review (in accordance
with paragraph (k) of this section) of
the application denial and proposed
disqualifications; and
(5) That the institution may continue
to participate in the Program and receive Program reimbursement for eligible meals served and allowable administrative costs incurred until its administrative review is completed.
(D) Program payments and extended
agreement. If the renewing institution’s
agreement expires before the end of the
time allotted for corrective action,
and/or the conclusion of any administrative review requested by the renewing institution:
(1) The State agency must temporarily extend its current agreement
with the renewing institution and continue to pay any valid unpaid claims
for reimbursement for eligible meals
served and allowable administrative
expenses incurred; and
(2) The actions set forth in paragraph
(c)(2)(iii)(D)(1) of this section must be
taken either until the serious deficiency(ies) is corrected or until the institution’s agreement is terminated,
including the period of any administrative review;
(E) Agreement termination and disqualification. When the time for requesting an administrative review expires or when the administrative review official upholds the State agency’s denial of the institution’s application, the proposed termination, and the
proposed disqualifications, the State
agency must:
(1) Notify the institution’s executive
director and chairman of the board of
directors, and the responsible principals and responsible individuals, that
the temporarily-extended agreement
has been terminated and that the institution and the responsible principals
and responsible individuals have been
disqualified;
(2) Update the State agency list at
the time such notice is issued; and
(3) Provide a copy of the notice and
the mailing address and date of birth
for each responsible principal and responsible individual to the appropriate
FNSRO.
(3) Termination of a participating institution’s agreement. (i) General. If the

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Food and Nutrition Service, USDA

§ 226.6

State agency holds an agreement with
an institution operating in more than
one State that has been disqualified
from the Program by another State
agency and placed on the National disqualified list, the State agency must
terminate the institution’s agreement
effective no later than 45 days of the
date of the institution’s disqualification by the other State agency. At the
same time the notice of termination is
issued, the State agency must add the
institution to the State agency list and
indicate that the institution’s agreement has been terminated and provide
a copy of the notice to the appropriate
FNSRO. If the State agency determines
that a participating institution has
committed one or more serious deficiency listed in paragraph (c)(3)(ii) of
this section, the State agency must initiate action to terminate the agreement
of a participating institution and initiate action to disqualify the institution and any responsible principals and
responsible individuals.
(ii) List of serious deficiencies for participating institutions. The list of serious
deficiencies is not identical for each
category of institution (new, renewing,
participating) because the type of information likely to be available to the
State agency is different, depending on
whether the State agency is reviewing
a new or renewing institution’s application or is conducting a review of a
participating institution. Serious deficiencies for participating institutions
are:
(A) Submission of false information
on the institution’s application, including but not limited to a determination
that the institution has concealed a
conviction for any activity that occurred during the past seven years and
that indicates a lack of business integrity. A lack of business integrity includes fraud, antitrust violations, embezzlement, theft, forgery, bribery, falsification or destruction of records,
making false statements, receiving stolen property, making false claims, obstruction of justice, or any other activity indicating a lack of business integrity as defined by the State agency;
(B) Permitting an individual who is
on the National disqualified list to
serve in a principal capacity with the
institution or, if a sponsoring organiza-

tion, permitting such an individual to
serve as a principal in a sponsored center or as a day care home;
(C) Failure to operate the Program in
conformance with the performance
standards set forth in paragraph (b)(18)
of this section;
(D) Failure to comply with the bid
procedures and contract requirements
of applicable Federal procurement regulations;
(E) Failure to return to the State
agency any advance payments that exceeded the amount earned for serving
eligible meals, or failure to return disallowed start-up or expansion payments;
(F) Failure to maintain adequate
records;
(G) Failure to adjust meal orders to
conform to variations in the number of
participants;
(H) Claiming reimbursement for
meals not served to participants;
(I) Claiming reimbursement for a significant number of meals that do not
meet Program requirements;
(J) Use of a food service management
company that is in violation of health
codes;
(K) Failure of a sponsoring organization to disburse payments to its facilities in accordance with the regulations
at § 226.16(g) and (h) or in accordance
with its management plan;
(L) Claiming reimbursement for
meals served by a proprietary title XX
child care center during a calendar
month in which less than 25 percent of
its enrolled children, or 25 percent of
its licensed capacity, whichever is less,
were title XX beneficiaries;
(M) Claiming reimbursement for
meals served by a proprietary title XIX
or title XX adult day care center during a calendar month in which less
than 25 percent of its enrolled adult
participants were title XIX or title XX
beneficiaries;
(N) Failure by a sponsoring organization of day care homes to properly
classify day care homes as tier I or tier
II in accordance with § 226.15(f);
(O) Failure by a sponsoring organization to properly train or monitor sponsored facilities in accordance with
§ 226.16(d);
(P) Use of day care home funds by a
sponsoring organization to pay for the

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§ 226.6

7 CFR Ch. II (1–1–03 Edition)

sponsoring organization’s administrative expenses;
(Q) Failure to perform any of the
other financial and administrative responsibilities required by this part;
(R) Failure to properly implement
and administer the day care home termination and administrative review
provisions set forth at paragraph (l) of
this section and § 226.16(l);
(S) The fact the institution or any of
the institution’s principals have been
declared ineligible for any other publicly funded program by reason of violating that program’s requirements.
However, this prohibition does not
apply if the institution or the principal
has been fully reinstated in, or is now
eligible to participate in, that program, including the payment of any
debts owed;
(T) Conviction of the institution or
any of its principals for any activity
that occurred during the past seven
years and that indicates a lack of business integrity. A lack of business integrity includes fraud, antitrust violations, embezzlement, theft, forgery,
bribery, falsification or destruction of
records, making false statements, receiving stolen property, making false
claims, obstruction of justice, or any
other activity indicating a lack of
business integrity as defined by the
State agency; or
(U) Any other action affecting the institution’s ability to administer the
Program in accordance with Program
requirements.
(iii) Serious deficiency notification procedures for participating institutions. If
the State agency determines that a
participating institution has committed one or more serious deficiency
listed in paragraph (c)(3)(ii) of this section, the State agency must use the
following procedures to provide the institution and the responsible principals
and responsible individuals notice of
the serious deficiency(ies) and an opportunity to take corrective action.
However, if the serious deficiency(ies)
constitutes an imminent threat to the
health or safety of participants, or the
institution has engaged in activities
that threaten the public health or safety, the State agency must follow the
procedures in paragraph (c)(5)(i) of this
section instead of the procedures

below. Further, if the serious deficiency is the submission of a false or
fraudulent claim, in addition to the
procedures below, the State agency
may suspend the institution’s participation in accordance with paragraph
(c)(5)(ii) of this section.
(A) Notice of serious deficiency. The
State agency must notify the institution’s executive director and chairman
of the board of directors that the institution has been determined seriously
deficient. The notice must identify the
responsible principals and responsible
individuals and must be sent to those
persons as well. The State agency may
specify in the notice different corrective action and time periods for completing the corrective action for the institution and the responsible principals
and responsible individuals. At the
same time the notice is issued, the
State agency must add the institution
to the State agency list, along with the
basis for the serious deficiency determination, and provide a copy of the notice to the appropriate FNSRO. The notice must also specify:
(1) The serious deficiency(ies);
(2) The actions to be taken to correct
the serious deficiency(ies);
(3) The time allotted to correct the
serious deficiency(ies) in accordance
with paragraph (c)(4) of this section;
(4) That the serious deficiency determination is not subject to administrative review.
(5) That failure to fully and permanently correct the serious deficiency(ies) within the allotted time
will result in the State agency’s proposed termination of the institution’s
agreement and the proposed disqualification of the institution and the responsible principals and responsible individuals; and
(6) That the institution’s voluntary
termination of its agreement with the
State agency after having been notified
that it is seriously deficient will still
result in the instituion’s formal termination by the State agency and placement of the institution and its responsible principals and responsible individuals on the National disqualified list.
(B) Successful corrective action.
(1) If corrective action has been
taken to fully and permanently correct
the serious deficiency(ies) within the

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Food and Nutrition Service, USDA

§ 226.6

allotted time and to the State agency’s
satisfaction, the State agency must:
(i) Notify the institution’s executive
director and chairman of the board of
directors, and the responsible principals and responsible individuals, that
the State agency has rescinded its serious deficiency determination; and
(ii) Offer the renewing institution the
opportunity to resubmit its application. If the renewing institution resubmits its application, the State agency
must complete its review of the application within 30 days after receiving a
complete and correct application.
(2) If corrective action is complete
for the institution but not for all of the
responsible principals and responsible
individuals (or vice versa), the State
agency must:
(i) Continue with the actions (as set
forth in paragraph (c)(3)(iii)(C) of this
section) against the remaining parties;
(ii) At the same time the notice is
issued, the State agency must also update the State agency list to indicate
that the serious deficiency(ies) has(ve)
been corrected and provide a copy of
the notice to the appropriate FNSRO;
and
(iii) If the renewing institution has
corrected the serious deficiency(ies),
offer it the opportunity to resubmit its
application. If the renewing institution
resubmits its application, the State
agency must complete its review of the
application within 30 days after receiving a complete and correct application.
(C) Proposed termination and proposed
disqualification. If timely corrective action is not taken to fully and permanently correct the serious deficiency(ies), the State agency must notify the institution’s executive director
and chairman of the board of directors,
and the responsible principals and responsible individuals, that the State
agency is proposing to terminate the
institution’s agreement and to disqualify the institution and the responsible principals and responsible individuals. At the same time the notice is
issued, the State agency must also update the State agency list and provide
a copy of the notice to the appropriate
FNSRO. The notice must also specify:
(1) That the State agency is proposing to terminate the institution’s
agreement and to disqualify the insti-

tution and the responsible principals
and responsible individuals;
(2) The basis for the actions;
(3) That, if the institution voluntarily terminates its agreement after
receiving the notice of proposed termination, the institution and the responsible principals and responsible individuals will be disqualified.
(4) The procedures for seeking an administrative review (in accordance
with paragraph (k) of this section) of
the application denial and proposed
disqualifications; and
(5) That, unless participation has
been suspended, the institution may
continue to participate and receive
Program reimbursement for eligible
meals served and allowable administrative costs incurred until its administrative review is completed.
(D) Program payments. Unless participation has been suspended, the State
agency must continue to pay any valid
unpaid claims for reimbursement for
eligible meals served and allowable administrative expenses incurred until
the serious deficiency(ies) is corrected
or the institution’s agreement is terminated, including the period of any administrative review.
(E) Agreement termination and disqualification. When the time for requesting an administrative review expires or when the administrative review official upholds the State agency’s proposed termination and disqualifications, the State agency must:
(1) Notify the institution’s executive
director and chairman of the board of
directors, and the responsible principals and responsible individuals, that
the institution’s agreement has been
terminated and that the institution
and the responsible principals and responsible individuals have been disqualified;
(2) Update the State agency list at
the time such notice is issued; and
(3) Provide a copy of the notice and
the mailing address and date of birth
for each responsible principal and responsible individual to the appropriate
FNSRO.
(4) Corrective action timeframes.
(i) General. Except as noted in this
paragraph (c)(4), the State agency is
prohibited from allowing more than 90
days for corrective action from the

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date the institution receives the serious deficiency notice.
(ii) Unlawful practices. If the State
agency determines that the institution
has engaged in unlawful practices, submitted false or fraudulent claims or
other information to the State agency,
or been convicted of or concealed a
criminal background, the State agency
is prohibited from allowing more than
30 days for corrective action.
(iii) Long-term changes. For serious
deficiencies requiring the long-term revision of management systems or processes, the State agency may permit
more than 90 days to complete the corrective action as long as a corrective
action plan is submitted to and approved by the State agency within 90
days (or such shorter deadline as the
State agency may establish). The corrective action must include milestones
and a definite completion date that the
State agency will monitor. The determination of serious deficiency will remain in effect until the State agency
determines that the serious deficiency(ies) has(ve) been fully and permanently corrected within the allotted
time.
(5) Suspension of an institution’s participation. A State agency is prohibited
from suspending an institution’s participation (including all Program payments) except for the reasons set forth
in this paragraph (c)(5).
(i) Public health or safety.
(A) General. If State or local health
or licensing officials have cited an institution for serious health or safety
violations, the State agency must immediately suspend the institution’s
Program participation, initiate action
to terminate the institution’s agreement, and initiate action to disqualify
the institution and the responsible
principals and responsible individuals
prior to any formal action to revoke
the institution’s licensure or approval.
If the State agency determines that
there is an imminent threat to the
health or safety of participants at an
institution, or that the institution has
engaged in activities that threaten the
public health or safety, the State agency must immediately notify the appropriate State or local licensing and
health authorities and take action that
is consistent with the recommenda-

tions and requirements of those authorities. An imminent threat to the
health or safety of participants and engaging in activities that threaten the
public health or safety constitute serious deficiencies; however, the State
agency must use the procedures in this
paragraph (c)(5)(i) (instead of the procedures in paragraph (c)(3) of this section) to provide the institution notice
of the suspension of participation, serious deficiency, proposed termination of
the institution’s agreement, and proposed disqualification of the responsible principals and responsible individuals.
(B) Notice of suspension, serious deficiency, proposed termination, and proposed disqualification. The State agency
must notify the institution’s executive
director and chairman of the board of
directors that the institution’s participation (including Program payments)
has been suspended, that the institution has been determined to be seriously deficient, and that the State
agency proposes to terminate the institution’s agreement and to disqualify
the institution and the responsible
principals and responsible individuals.
The notice must also identify the responsible principals and responsible individuals and must be sent to those
persons as well. At the same time this
notice is sent, the State agency must
add the institution and the responsible
principals and responsible individuals
to the State agency list, along with the
basis for the serious deficiency determination and provide a copy of the notice to the appropriate FNSRO. The notice must also specify:
(1) That the State agency is suspending the institution’s participation
(including Program payments), proposing to terminate the institution’s
agreement, and proposing to disqualify
the institution and the responsible
principals and responsible individuals;
(2) The serious deficiency(ies);
(3) That, if the institution voluntary
terminates its agreement with the
State agency after having been notified
of the proposed termination, the institution and the responsible principals
and responsible individuals will be disqualified;

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(4) That the serious deficiency determination is not subject to administrative review;
(5) The procedures for seeking an administrative review (consistent with
paragraph (k) of this section) of the
suspension, proposed termination, and
proposed disqualifications; and
(6) That, if the administrative review
official overturns the suspension, the
institution may claim reimbursement
for eligible meals served and allowable
administrative costs incurred during
the suspension period.
(C) Agreement termination and disqualification. When the time for requesting
an administrative review expires or
when the administrative review official
upholds the State agency’s proposed
termination and disqualifications, the
State agency must:
(1) Notify the institution’s executive
director and chairman of the board of
directors, and the responsible principals and responsible individuals, that
the institution’s agreement has been
terminated and that the institution
and the responsible principals and responsible individuals have been disqualified;
(2) update the State agency list at
the time such notice is issued; and
(3) provide a copy of the notice and
the mailing address and date of birth
for each responsible principal and responsible individual to the appropriate
FNSRO.
(D) Program payments. The State
agency is prohibited from paying any
claims for reimbursement from a suspended institution. However, if the suspended institution prevails in the administrative review of the proposed
termination, the State agency must
pay any claims for reimbursement for
eligible meals served and allowable administrative costs incurred during the
suspension period.
(ii) False or fraudulent claims.
(A) General. If the State agency determines that an institution has knowingly submitted a false or fraudulent
claim, the State agency may initiate
action to suspend the institution’s participation and must initiate action to
terminate the institution’s agreement
and initiate action to disqualify the institution and the responsible principals
and responsible individuals (in accord-

ance with paragraph (c)(3) of this section). The submission of a false or
fraudulent claim constitutes a serious
deficiency as set forth in paragraph
(c)(3)(ii) of this section, which lists serious deficiencies for participating institutions. If the State agency wishes
to suspend the institution’s participation, it must use the following procedures to issue the notice of proposed
suspension of participation at the same
time it issues the serious deficiency notice, which must include the information
described
in
paragraph
(c)(3)(iii)(A) of this section.
(B) Proposed suspension of participation. If the State agency decides to propose to suspend an institution’s participation due to the institution’s submission of a false or fraudulent claim,
it must notify the institution’s executive director and chairman of the board
of directors that the State agency intends to suspend the institution’s participation (including all Program payments) unless the institution requests
a review of the proposed suspension. At
the same time the notice is issued, the
State agency must also update the
State agency list and provide a copy of
the notice to the appropriate FNSRO.
The notice must identify the responsible principals and responsible individuals and must be sent to those persons
as well. The notice must also specify:
(1) That the State agency is proposing to suspend the institution’s participation;
(2) That the proposed suspension is
based on the institution’s submission
of a false or fraudulent claim, as described in the serious deficiency notice;
(3) The effective date of the suspension (which may be no earlier than 10
days after the institution receives the
suspension notice);
(4) The name, address and telephone
number of the suspension review official who will conduct the suspension
review; and
(5) That if the institution wishes to
have a suspension review, it must request a review and submit to the suspension review official written documentation opposing the proposed suspension within 10 days of the institution’s receipt of the notice.
(C) Suspension review. If the institution requests a review of the State

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7 CFR Ch. II (1–1–03 Edition)

agency’s proposed suspension of participation, the suspension review must
be heard by a suspension review official
who must:
(1) Be an independent and impartial
person other than, and not accountable
to, any person involved in the decision
to initiate suspension proceedings;
(2) Immediately notify the State
agency that the institution has contested the proposed suspension and
must obtain from the State agency its
notice of proposed suspension of participation, along with all supporting
documentation; and
(3) Render a decision on suspension of
participation within 10 days of the
deadline for receiving the institution’s
documentation opposing the proposed
suspension.
(D) Suspension review decision. If the
suspension review official determines
that the State agency’s proposed suspension is not appropriate, the State
agency is prohibited from suspending
participation. If the suspension review
official determines, based on a preponderance of the evidence, that the State
agency’s action was appropriate, the
State agency must suspend the institution’s participation (including all Program payments), effective on the date
of the suspension review decision. The
State agency must notify the institution’s executive director and chairman
of the board of directors, and the responsible principals and responsible individuals, that the institution’s participation has been suspended. At the
same time the notice is issued, the
State agency must also update the
State agency list and provide a copy of
the notice to the appropriate FNSRO.
The notice must also specify:
(1) That the State agency is suspending the institution’s participation
(including Program payments);
(2) The effective date of the suspension (the date of the suspension review
decision);
(3) The procedures for seeking an administrative review (in accordance
with paragraph (k) of this section) of
the suspension; and
(4) That if the administrative review
official overturns the suspension, the
institution may claim reimbursement
for eligible meals served and allowable

administrative costs incurred during
the suspension period.
(E) Program payments. A State agency
is prohibited from paying any claims
for reimbursement submitted by a suspended institution. However, if the institution suspended for the submission
of false or fraudulent claims is a sponsoring organization, the State agency
must ensure that sponsored facilities
continue to receive reimbursement for
eligible meals served during the suspension period. If the suspended institution prevails in the administrative
review of the proposed termination, the
State agency must pay any valid unpaid claims for reimbursement for eligible meals served and allowable administrative costs incurred during the
suspension period.
(F) Maximum time for suspension.
Under no circumstances may the suspension of participation remain in effect for more than 120 days following
the suspension review decision.
(6) FNS determination of serious deficiency. (i) General. FNS may determine
independently that a participating institution has committed one or more
serious deficiency listed in paragraph
(c)(3)(ii) of this section, which lists serious deficiencies for participating institutions.
(ii) Serious deficiency notification procedures. If FNS determines that an institution has committed one or more
serious deficiency listed in paragraph
(c)(3)(ii) of this section (the list of serious deficiencies for participating institutions), FNS will use the following
procedures to provide the institution
and the responsible principals and responsible individuals with notice of the
serious deficiency(ies) and an opportunity to take corrective action.
(A) Notice of serious deficiency. FNS
will notify the institution’s executive
director and chairman of the board of
directors that the institution has been
found to be seriously deficient. The notice will identify the responsible principals and responsible individuals and
will be sent to them as well. FNS may
specify in the notice different corrective action and time periods for completing the corrective action, for the
institution and the responsible principals and responsible individuals. The
notice will also specify:

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(1) The serious deficiency(ies);
(2) The actions to be taken to correct
the serious deficiency(ies);
(3) The time allotted to correct the
serious deficiency(ies) in accordance
with paragraph (c)(4) of this section;
(4) That failure to fully and permanently correct the serious deficiency(ies) within the allotted time, or
the institution’s voluntary termination of its agreement(s) with any
State agency after having been notified
that it is seriously deficient, will result
in the proposed disqualification of the
institution and the responsible principals and responsible individuals and
the termination of its agreement(s)
with all State agencies; and
(5) That the serious deficiency determination is not subject to administrative review.
(B) Suspension of participation. If FNS
determines that there is an imminent
threat to the health or safety of participants at an institution, or that the
institution has engaged in activities
that threaten the public health or safety, any State agency that holds an
agreement with the institution must
suspend the participation of the institution. If FNS determines that the institution has submitted a false or
fraudulent claim, it may require any
State agency that holds an agreement
with the institution to initiate action
to suspend the institution’s participation for false or fraudulent claims in
accordance with paragraph (c)(5)(ii) of
this section (which deals with an institution’s suspension by a State agency
for submission of false or fraudulent
claims). In both cases, FNS will provide the State agency the information
necessary to support these actions and,
in the case of a false and fraudulent
claim, will provide an individual to
serve as the suspension review official
if requested by the State agency.
(C) Successful corrective action.
(1) If corrective action has been
taken to fully and permanently correct
the serious deficiency(ies) within the
allotted time and to FNS’s satisfaction, FNS will notify the institution’s
executive director and chairman of the
board of directors, and the responsible
principals and responsible individuals,
that it has rescinded its serious deficiency determination; and

(2) If corrective action is complete
for the institution but not for all of the
responsible principals and responsible
individuals (or vice versa), FNS will
continue with the actions (as set forth
in paragraph (c)(6)(ii)(D) of this section) against the remaining parties.
(D) Proposed disqualification. If timely
corrective action is not taken to fully
and permanently correct the serious
deficiency(ies), FNS will notify the institution’s executive director and
chairman of the board of directors, and
the responsible principals and responsible individuals, that FNS is proposing
to disqualify them. The notice will also
specify:
(1) That FNS is proposing to disqualify the institution and the responsible principals and responsible individuals;
(2) The basis for the actions;
(3) That, if the institution seeks to
voluntarily terminate its agreement
after receiving the notice of proposed
disqualification, the institution and
the responsible principals and responsible individuals will be disqualified;
(4) The procedures for seeking an administrative review (in accordance
with paragraph (k) of this section) of
the proposed disqualifications;
(5) That unless participation has been
suspended, the institution may continue to participate and receive Program reimbursement for eligible meals
served and allowable administrative
costs incurred until its administrative
review is completed; and
(6) That if the institution does not
prevail in the administrative review,
any State agency holding an agreement with the institution will be required to terminate that agreement
and the institution is prohibited from
seeking an administrative review of
the termination of the agreement by
the State agency(ies).
(E) Disqualification. When the time
for requesting an administrative review expires or when the administrative review official upholds FNS’s proposed disqualifications, FNS will notify the institution’s executive director
and chairman of the board of directors,
and the responsible principals and responsible individuals, that the institution and the responsible principal or

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responsible individual have been disqualified.
(F) Program payments. If the State
agency holds an agreement with an institution that FNS has determined to
be seriously deficient, the State agency
must continue to pay any valid unpaid
claims for reimbursement for eligible
meals served and allowable administrative expenses incurred until the serious
deficiency(ies) is corrected or the State
agency terminates the institution’s
agreement, including the period of any
administrative review, unless participation has been suspended.
(G) Required State agency action. (1)
Disqualified institutions. If the State
agency holds an agreement with an institution that FNS determines to be seriously deficient and subsequently disqualifies, the State agency must terminate the institution’s agreement effective no later than 45 days after the
date of the institution’s disqualification by FNS. As noted in paragraph
(k)(3)(iv) of this section, the termination is not subject to administrative
review. At the same time the notice of
termination is issued, the State agency
must add the institution to the State
agency list and provide a copy of the
notice to the appropriate FNSRO.
(2) Disqualified principals. If the State
agency holds an agreement with an institution whose principal FNS determines to be seriously deficient and subsequently disqualifies, the State agency must determine the institution to
be seriously deficient and initiate action to terminate and disqualify the institution in accordance with the procedures in paragraph (c)(3) of this section. The State agency must initiate
these actions no later than 45 days
after the date of the principal’s disqualification by FNS.
(7) National disqualified list.
(i) Maintenance and availability of list.
FNS will maintain the National disqualified list and make it available to
all State agencies and all sponsoring
organizations.
(ii) Effect on institutions. No organization on the National disqualified list
may participate in the Program as an
institution. As noted in paragraph
(b)(12) of this section, the State agency
must deny the application of a new or
renewing institution if the institution

is on the National disqualified list. In
addition, as noted in paragraphs
(c)(3)(i) and (c)(6)(ii)(G)(1) of this section, the State agency must terminate
the agreement of any participating institution that is disqualified by another State agency or by FNS.
(iii) Effect on sponsored centers. No organization on the National disqualified
list may participate in the Program as
a sponsored center. As noted in
§ 226.16(b) and paragraph (b)(12) of this
section, a sponsoring organization is
prohibited from submitting an application on behalf of a sponsored facility
(and a State agency is prohibited from
approving such an application) if the
facility is on the National disqualified
list.
(iv) Effect on individuals. No individual on the National disqualified list
may serve as a principal in any institution or facility or as a day care home
provider.
(A) Principal for an institution or a
sponsored facility. As noted in paragraph (b)(12) of this section, the State
agency must deny the application of a
new or renewing institution if any of
the institution’s principals is on the
National disqualified list. As noted in
paragraphs
(c)(3)(ii)(B)
and
(c)(6)(ii)(G)(2) of this section, the State
agency must declare an institution seriously deficient and initiate action to
terminate the institution’s agreement
and disqualify the institution if the institution permits an individual who is
on the National disqualified list to
serve in a principal capacity for the institution or one of its facilities.
(B) Principal for a sponsored facility.
As noted in § 226.16(b) and paragraph
(b)(12) of this section, a sponsoring organization is prohibited from submitting an application on behalf of a sponsored facility (or a State agency from
approving such an application) if any
of the facility’s principals are on the
National disqualified list.
(C) Serving as a day care home. As
noted in § 226.16(b) and paragraph (b)(12)
of this section, a sponsoring organization is prohibited from submitting an
application on behalf of a sponsored facility (and a State agency is prohibited
from approving such an application) if
the facility is on the National disqualified list.

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(v) Removal of institutions, principals,
and individuals from the list. Once included on the National disqualified
list, an institution and responsible
principals and responsible individuals
remain on the list until such time as
FNS, in consultation with the appropriate State agency, determines that
the serious deficiency(ies) that led to
their placement on the list has(ve)
been corrected, or until seven years
have elapsed since they were disqualified from participation. However, if the
institution, principal or individual has
failed to repay debts owed under the
Program, they will remain on the list
until the debt has been repaid.
(vi) Removal of day care homes from the
list. Once included on the National disqualified list, a day care home will remain on the list until such time as the
State agency determines that the serious deficiency(ies) that led to its placement on the list has(ve) been corrected,
or until seven years have elapsed since
its agreement was terminated for
cause. However, if the day care home
has failed to repay debts owed under
the Program, it will remain on the list
until the debt has been repaid.
(8) State agency list. (i) Maintenance of
the State agency list. The State agency
must maintain a State agency list (in
the form of an actual paper or electronic
list
or
retrievable
paper
records). The list must be made available to FNS upon request, and must include the following information:
(A) Institutions determined to be seriously deficient by the State agency,
including the names and mailing addresses of the institutions and the status of the institutions as they move
through the possible subsequent stages
of corrective action, proposed termination, suspension, agreement termination, and/or disqualification, as applicable;
(B) Responsible principals and individuals who have been disqualified
from participation by the State agency, including their names, mailing addresses, and dates of birth; and
(C) Day care home providers whose
agreements have been terminated for
cause by a sponsoring organization in
the State, including their names, mailing addresses, and dates of birth.

(ii) Referral of disqualified day care
homes to FNS. Within 10 days of receiving a notice of termination and disqualification from a sponsoring organization, the State agency must provide
the appropriate FNSRO the name,
mailing address, and date of birth of
each day care home provider whose
agreement is terminated for cause on
or after July 29, 2002.
(iii) Prior lists of disqualified day care
homes. If on July 29, 2002 the State
agency maintains a list of day care
homes that have been disqualified from
participation, the State agency may
continue to prohibit participation by
those day care homes. However, the
State agency must remove a day care
home from its prior list no later than
the time at which the State agency determines
that
the
serious
deficiency(ies) that led to the day care
home’s placement on the list has(ve)
been corrected or July 29, 2009 (unless
the day care home has failed to repay
debts owed under the Program). If the
day care home has failed to repay its
debt, the State agency may keep the
day care home on its prior list until
the debt has been repaid.
(d) Licensing/approval for child care
centers, outside-school-hours care centers
and day care homes. This section prescribes State agency responsibilities to
ensure that child care centers and day
care homes meet the licensing/approval
criteria set forth in this part. Sponsoring organizations shall submit to
the State agency documentation that
facilities under their jurisdiction are in
compliance with licensing/approval requirements. Independent centers shall
submit such documentation to the
State agency on their own behalf.
(1) General. Each State agency shall
establish procedures to annually review information submitted by institutions to ensure that all participating
child care centers, day care homes, and
outside-school-hours care centers either:
(i) Are licensed or approved by Federal, State, or local authorities, provided that institutions which are approved for Federal programs on the
basis of State or local licensing shall
not be eligible for the Program if their
licenses lapse or are terminated; or

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(ii) Are complying with applicable
procedures to renew licensing or approval in situations where the State
agency has no information that licensing or approval will be denied; or
(iii) Receive Title XX funds for providing child care, if licensing or approval is not available; or
(iv) Demonstrate compliance with
applicable State or local child care
standards to the State agency, if licensing is not available and title XX
funds are not received; or
(v) Demonstrate compliance with
CACFP child care standards to the
State agency, if licensing or approval
is not available and Title XX funds are
not received.
(2) CACFP child care standards. (i)
When licensing or approval is not
available, independent child care centers, and sponsoring organizations on
behalf of their child care centers or day
care homes, may elect to demonstrate
compliance, annually, with the following CACFP child care standards or
other standards specified in paragraph
(d)(3) of this section:
(A) Staff/child ratios. (1) Day care
homes provide care for no more than 12
children at any one time. One home
caregiver is responsible for no more
than 6 children ages 3 and above, or no
more than 5 children ages 0 and above.
No more than 2 children under the age
of 3 are in the care of 1 caregiver. The
home provider’s own children who are
in care and under the age of 14 are
counted in the maximum ratios of
caregivers to children.
(2) Child care centers and outsideschool-hours care centers do not fall
below the following staff/child ratios:
(i) For children under 6 weeks of
age—1:1
(ii) For children ages 6 weeks up to 3
years—1:4
(iii) For children ages 3 years up to 6
years—1:6
(iv) For children ages 6 years up to 10
years—1:15
(v) For children ages 10 and above—
1:20
(B) Nondiscrimination. Day care services are available without discrimination on the basis of race, color, national origin, sex, age, or handicap.
(C) Safety and sanitation. (1) A current
health/sanitation permit or satisfac-

tory report of an inspection conducted
by local authorities within the past 12
months shall be submitted.
(2) A current fire/building safety permit or satisfactory report of an inspection conducted by local authorities
within the past 12 months shall be submitted.
(3) Fire drills are held in accordance
with local fire/building safety requirements.
(D) Suitability of facilities. (1) Ventilation, temperature, and lighting are
adequate for children’s safety and comfort.
(2) Floors and walls are cleaned and
maintained in a condition safe for children.
(3) Space and equipment, including
rest arrangements for preschool age
children, are adequate for the number
of age range of participating children.
(E) Social services. Independent centers, and sponsoring organizations in
coordination with their facilities, have
procedures for referring families of
children in care to appropriate local
health and social service agencies.
(F) Health services. (1) Each child is
observed daily for indications of difficulties in social adjustment, illness,
neglect, and abuse, and appropriate action is initiated.
(2) A procedure is established to ensure prompt notification of the parent
or guardian in the event of a child’s illness or injury, and to ensure prompt
medical treatment in case of emergency.
(3) Health records, including records
of medical examinations and immunizations, are maintained for each enrolled child. (Not applicable to day
care homes.)
(4) At least one full-time staff member is currently qualified in first aid,
including artificial respiration techniques. (Not applicable to day care
homes.)
(5) First aid supplies are available.
(6) Staff members undergo initial and
periodic health assessments.
(G) Staff training. The institution provides for orientation and ongoing
training in child care for all caregivers.
(H) Parental involvement. Parents are
afforded the opportunity to observe
their children in day care.

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(I) Self-evaluation. The institution has
established a procedure for periodic
self-evaluation on the basis of CACFP
child care standards.
(ii) When licensing or approval is not
available, independent outside-schoolhours care centers, and sponsoring organizations on behalf of their outsideschool-hours care centers, may elect to
demonstrate compliance with child
care standards developed by the State
agency which shall include, as a minimum, information on: (A) Fire/safety,
(B) sanitation, (C) organized activities,
(D) kitchen and restroom facilities, (E)
appropriateness of games and materials, (F) availability of emergency
medical care, and (G) child-staff ratios
as indicated in § 226.6(d)(2)(i)(A). For
items (A) and (B), of this paragraph,
appropriate State or local permits are
required.
(3) Alternate approval procedures. Each
State agency shall establish procedures
to review information submitted by institutions for centers or homes for
which licensing or approval is not
available in order to establish eligibility for the Program. Licensing or
approval is not available when (i) no
Federal, State, or local licensing/approval standards have been established
for child care centers, outside-schoolhours care centers, or day care homes;
or (ii) no mechanism exists to determine compliance with licensing/approval standards. In these situations,
independent centers, and sponsoring
organizations on behalf of their facilities, may choose to demonstrate compliance with either CACFP child care
standards, applicable State child care
standards, or applicable local child
care standards. State agencies shall
provide information about applicable
State child care standards and CACFP
child care standards to institutions,
but may require institutions electing
to demonstrate compliance with applicable local child care standards to
identify and submit these standards.
The State agency may permit independent centers, and sponsoring organizations on behalf of their facilities,
to submit self-certification forms, and
may grant approval without first conducting a compliance review at the
center or facility. But the State agency
shall require submission of health/sani-

tation and fire/safety permits or certificates for all independent centers
and facilities seeking alternate child
care standards approval. Compliance
with applicable child care standards
are subject to review in accordance
with § 226.6(o).
(e) Licensing/approval for adult day
care centers. This paragraph prescribes
State agency responsibilities to ensure
that adult day care centers meet the licensing/approval criteria set forth in
this part. Sponsoring organizations
shall submit to the State agency documentation that facilities under their
jurisdiction are in compliance with licensing/approval requirements. Independent adult day care centers shall
submit such documentation to the
State agency on their own behalf. Each
State agency shall establish procedures
to annually review information submitted by institutions to ensure that
all participating adult day care centers
either:
(1) Are licensed or approved by Federal, State or local authorities, provided that institutions which are approved for Federal programs on the
basis of State or local licensing shall
not be eligible for the Program if their
licenses lapse or are terminated; or
(2) Are complying with applicable
procedures to renew licensing or approval in situations where the State
agency has no information that licensing or approval will be denied.
(f) Annual requirements. State agencies shall require institutions to comply with applicable provisions of this
part. Each State agency shall annually:
(1) Enter into and execute a written
Program agreement with each institution, or renew such agreement with the
written concurrence of the institution.
The Program agreement shall provide
that the institution shall accept final
financial and administrative responsibility for management of an effective
food service, comply with all requirements under this part, and comply
with all requirements of title VI of the
Civil Rights Act of 1964, title IX of the
Education Amendments of 1972, Section 504 of the Rehabilitation Act of
1973, the Age Discrimination Act of
1975 and the Department’s regulations
concerning nondiscrimination (7 CFR

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7 CFR Ch. II (1–1–03 Edition)

parts 15, 15a and 15b), including requirements for racial and ethnic participation data collection, public notification of the nondiscrimination policy, and reviews to assure compliance
with such policy, to the end that no
person shall, on the grounds of race,
color, national origin, sex, age, or
handicap be excluded from participation in, be denied the benefits of, or be
otherwise subjected to discrimination
under the Program. The Program
agreement must also notify the institution of the right of the State agency,
the Department, and other State or
Federal officials to make announced or
unannounced reviews of their operations during the institution’s normal
hours of child or adult care operations
and that anyone making such reviews
must show photo identification that
demonstrates that they are employees
of one of these entities.
(2) Require each sponsoring organization to submit a management plan
with its application for review and approval. Such a plan shall include: detailed information on the organizational administrative structure; the
staff assigned to Program management
and monitoring; administrative budget;
procedures which will be used by the
sponsoring organization to administer
the Program in and disburse payments
to the child care facilities under its jurisdiction; and, for sponsoring organizations of day care homes, a description of the system for making tier I
day care home determinations, and a
description of the system of notifying
tier II day care homes of their options
for reimbursement. The State agency
must establish factors, consistent with
§ 226.16(b)(1), that the State agency will
consider in determining whether a
sponsoring organization has sufficient
staff to perform required monitoring
responsibilities at all of its sponsored
facilities. As part of its review of the
management plan, the State agency
must determine the appropriate level
of staffing for each sponsoring organization, consistent with the staffing
range of monitors set forth in
§ 226.16(b)(1) and the factors it has established. The State agency must ensure that each new sponsoring organization applying for participation after
July 29, 2002 meets this requirement.

The State agency must ensure that
each currently participating sponsoring organization meets this requirement no later than July 29, 2003.
(3) Require each institution to submit an administrative budget. Each
sponsoring organization shall be required to incorporate this budget into
its management plan. For a sponsoring
organization 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 that 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 § 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.
(4) Determine that all meal procurements with food service management
companies are in conformance with the
bid and contractual requirements of
§ 226.22.
(5) Inquire as to the preference of institutions for commodities or cash-inlieu of commodities.
(6) Provide institutions with information on foods available in plentiful supply, based on information provided by
the Department.
(7) Inform institutions with separate
meal charges of their responsibility to
ensure that free and reduced-price
meals are served to participants unable
to pay the full price and provide to all
institutions a copy of the income
standards to be used by institutions for
determining the eligibility of participants for free and reduced-price meals
under the Program.
(8) Perform verification of the eligibility of participants for free and reduced-price meals in participating institutions in accordance with the procedures outlined in § 226.23(h). State

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§ 226.6

agencies verifying the information on
free and reduced-price applications
shall ensure that verification activities
are applied without regard to race,
color, national origin, sex, age, or
handicap.
(9) Coordinate with the State agency
which administers the National School
Lunch Program to ensure the receipt of
a list of elementary schools in the
State in which at least one-half of the
children enrolled are certified eligible
to receive free or reduced price meals.
The State agency shall provide the list
to sponsoring organizations by April 1,
1997, and by February 15 of each year
thereafter, unless the State agency
that administers the National School
Lunch Program has elected to base
data for the list on a month other than
October, in which case the State agency shall provide the list to sponsoring
organizations within 15 calendar days
of its receipt from the State agency
that administers the National School
Lunch Program. The State agency also
shall provide each sponsoring organization with census data, as provided to
the State agency by FNS upon its
availability on a decennial basis, showing areas in the State in which at least
50 percent of the children are from
households meeting the income standards for free or reduced price meals. In
addition, the State agency shall ensure
that the most recent available data is
used if the determination of a day care
home’s eligibility as a tier I day care
home is made using school or census
data. Determinations of a day care
home’s eligibility as a tier I day care
home shall be valid for one year if
based on a provider’s household income, three years if based on school
data, or until more current data are
available if based on census data. However, a sponsoring organization, the
State agency, or FNS may change the
determination if information becomes
available indicating that a home is no
longer in a qualified area. The State
agency shall not routinely require annual redeterminations of the tiering
status of tier I day care homes based
on updated elementary school data.
(10) Provide all sponsoring organizations of day care homes in the State
with a listing of State-funded programs, participation in which by a par-

ent or child will qualify a meal served
to a child in a tier II home for the tier
I rate of reimbursement.
(11) Require each sponsoring organization of day care homes to submit the
total number of tier I and tier II day
care homes that it sponsors; a breakdown showing the total number of children enrolled in tier I day care homes;
the total number of children enrolled
in tier II day care homes; and the number of children in tier II day care
homes that have been identified as eligible for free or reduced price meals.
(g) Program expansion. Each State
agency shall take action to expand the
availability of benefits under this Program. At a minimum, the State shall
annually notify each nonparticipating
child care center, outside-school-hours
care center, and day care home within
the State that is licensed, approved,
registered, or receiving funds under
title XX and each nonparticipating
adult day care center that is licensed
or approved, of the availability of the
Program, the requirements for Program participation, and the application procedures to be followed in the
Program. The State agency shall make
the list of child care centers, adult day
care centers, outside-school-hours care
centers, and day care homes notified
each year available to the public upon
request.
(h) Commodity distribution. The State
shall annually inquire as to the preference of each institution for commodities or cash-in-lieu of commodities.
Each institution electing cash-in-lieu
of commodities shall receive such payments. Each institution which elects to
receive commodities shall have commodities provided to it unless the
State agency, after consultation with
the State commodity distribution
agency, demonstrates to FNS that distribution of commodities to the number of such institutions would be impracticable. The State agency may
then, with the concurrence of FNS,
provide cash-in-lieu of commodities for
all institutions. A State agency request for cash-in-lieu of all commodities shall be submitted to FNS not
later than May 1 of the school year preceding the school year for which the request is made. The State agency shall,
by June 1 of each year, submit a list of

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§ 226.6

7 CFR Ch. II (1–1–03 Edition)

institutions which have elected to receive commodities to the State commodity distribution agency, unless
FNS has approved a request for cashin-lieu of commodities for all institutions. The list shall be accompanied by
information on the average daily number of lunches and suppers to be served
to participants by each such institution.
(i) Standard contract. Each State
agency shall develop a standard contract in accordance with § 226.21 and
provide for its use between institutions
and food service management companies. The contract shall expressly and
without exception stipulate:
(1) The institution shall provide the
food service management company
with a list of the State agency approved child care centers, day care
homes, adult day care centers, and outside-school-hours care centers to be
furnished meals by the food service
management company, and the number
of meals, by type, to be delivered to
each location;
(2) The food service management
company shall maintain such records
(supported by invoices, receipts or
other evidence) as the institution will
need to meet its responsibilities under
this part, and shall promptly submit
invoices and delivery reports to the institution no less frequently than
monthly;
(3) The food service management
company shall have Federal, State or
local health certification for the plant
in which it proposes to prepare meals
for use in the Program, and it shall ensure that health and sanitation requirements are met at all times. In addition, the State agency may require
the food service management company
to provide for meals which it prepares
to be periodically inspected by the
local health department or an independent agency to determine bacteria
levels in the meals being prepared.
These bacteria levels shall conform to
the standards which are applied by the
local health authority with respect to
the level of bacteria which may be
present in meals prepared or served by
other establishments in the locality.
Results of these inspections shall be
submitted to the institution and to the
State agency;

(4) The meals served under the contract shall conform to the cycle menus
upon which the bid was based, and to
menu changes agreed upon by the institution and food service management
company;
(5) The books and records of the food
service management company pertaining to the institution’s food service
operation shall be available for inspection and audit by representatives of
the State agency, of the Department,
and of the U.S. General Accounting Office at any reasonable time and place,
for a period of 3 years from the date of
receipt of final payment under the contract, or in cases where an audit requested by the State agency or the Department remains unresolved, until
such time as the audit is resolved;
(6) The food service management
company shall operate in accordance
with current Program regulations;
(7) The food service management
company shall not be paid for meals
which are delivered outside of the
agreed upon delivery time, are spoiled
or unwholesome at the time of delivery, or do not otherwise meet the meal
requirements contained in the contract;
(8) Meals shall be delivered in accordance with a delivery schedule prescribed in the contract;
(9) Increases and decreases in the
number of meal orders may be made by
the institution, as needed, within a
prior notice period mutually agreed
upon in the contract;
(10) All meals served under the Program shall meet the requirements of
§ 226.20;
(11) All breakfasts, lunches, and suppers delivered for service in outsideschool-hours care centers shall be unitized, with or without milk, unless the
State agency determines that unitization would impair the effectiveness of
food service operations. For meals delivered to child care centers and day
care homes, the State agency may require unitization, with or without
milk, of all breakfasts, lunches, and
suppers only if the State agency has
evidence which indicates that this requirement is necessary to ensure compliance with § 226.20.
(j) Procurement provisions. State agencies shall require institutions to adhere

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Food and Nutrition Service, USDA

§ 226.6

to the procurement provisions set forth
in § 226.22.
(k) Administrative reviews for institutions and responsible principals and responsible individuals.
(1) General. The State agency must
develop procedures for offering administrative reviews to institutions and responsible principals and responsible individuals. The procedures must be consistent with paragraph (k) of this section.
(2) Actions subject to administrative review. Except as provided in § 226.8(g),
the State agency must offer an administrative review for the following actions:
(i) Application denial. Denial of a new
or renewing institution’s application
for participation (see paragraph (b) of
this section, on State agency review of
an institution’s application; and paragraphs (c)(1) and (c)(2) of this section,
on State agency denial of a new or renewing institution’s application);
(ii) Denial of sponsored facility application. Denial of an application submitted by a sponsoring organization on
behalf of a facility;
(iii) Notice of proposed termination.
Proposed termination of an institution’s
agreement
(see
paragraphs
(c)(2)(iii)(C),
(c)(3)(iii)(C),
and
(c)(5)(i)(B) of this section, dealing with
proposed termination of agreements
with renewing institutions, participating institutions, and participating
institutions suspended for health or
safety violations);
(iv) Notice of proposed disqualification
of a responsible principal or responsible
individual. Proposed disqualification of
a responsible principal or responsible
individual (see paragraphs (c)(1)(iii)(C),
(c)(2)(iii)(C),
(c)(3)(iii)(C),
and
(c)(5)(i)(B) of this section, dealing with
proposed disqualification of responsible
principals or responsible individuals in
new, renewing, and participating institutions, and participating institutions
suspended for health or safety violations);
(v) Suspension of participation. Suspension of an institution’s participation (see paragraphs (c)(5)(i)(B) and
(c)(5)(ii)(D) of this section, dealing with
suspension for health or safety reasons

or submission of a false or fraudulent
claim);
(vi) Start-up or expansion funds denial.
Denial of an institution’s application
for start-up or expansion payments (see
§ 226.7(h));
(vii) Advance denial. Denial of a request for an advance payment (see
§ 226.10(b));
(viii) Recovery of advances. Recovery
of all or part of an advance in excess of
the claim for the applicable period. The
recovery may be through a demand for
full repayment or an adjustment of
subsequent payments (see § 226.10(b)(3));
(ix) Claim denial. Denial of all or a
part of an institution’s claim for reimbursement (except for a denial based on
a late submission under § 226.10(e)) (see
§§ 226.10(f) and 226.14(a));
(x) Claim deadline exceptions and requests for upward adjustments to a claim.
Decision by the State agency not to
forward to FNS an exception request
by an institution for payment of a late
claim, or a request for an upward adjustment to a claim (see § 226.10(e));
(xi) Overpayment demand. Demand for
the remittance of an overpayment (see
§ 226.14(a)); and
(xii) Other actions. Any other action
of the State agency affecting an institution’s participation or its claim for
reimbursement.
(3) Actions not subject to administrative
review. The State agency is prohibited
from offering administrative reviews of
the following actions:
(i) FNS decisions on claim deadline exceptions and requests for upward adjustments to a claim. A decision by FNS to
deny an exception request by an institution for payment of a late claim, or
for an upward adjustment to a claim
(see § 226.10(e));
(ii) Determination of serious deficiency.
A determination that an institution is
seriously deficient (see paragraphs
(c)(1)(iii)(A), (c)(2)(iii)(A), (c)(3)(iii)(A),
and (c)(5)(i)(B) of this section, dealing
with proposed disqualification of responsible principals or responsible individuals in new, renewing, and participating institutions, and participating
institutions suspended for health or
safety violations);

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§ 226.6

7 CFR Ch. II (1–1–03 Edition)

(iii) Disqualification and placement on
State agency list and National disqualified list. Disqualification of an institution or a responsible principal or responsible individual, and the subsequent placement on the State agency
list and the National disqualified list
(see
paragraphs
(c)(1)(iii)(E),
(c)(2)(iii)(E),
(c)(3)(iii)(E),
and
(c)(5)(i)(C) of this section, dealing with
proposals to disqualify related to new,
renewing, and participating institutions, and in institutions suspended for
health or safety violations); or
(iv) Termination. Termination of a
participating institution’s agreement,
including termination of a participating institution’s agreement based
on the disqualification of the institution by another State agency or FNS
(see paragraphs (c)(3)(i) and (c)(7)(ii) of
this section).
(4) Provision of administrative review
procedures to institutions and responsible
principals and responsible individuals.
The State agency’s administrative review procedures must be provided:
(i) Annually to all institutions;
(ii) To an institution and to each responsible principal and responsible individual when the State agency takes
any action subject to an administrative review as described in paragraph
(k)(2) of this section; and
(iii) Any other time upon request.
(5) Procedures. Except as described in
paragraph (k)(9) of this section, which
sets forth the circumstances under
which an abbreviated administrative
review is held, the State agency must
follow the procedures in this paragraph
(k)(5) when an institution or a responsible principal or responsible individual
appeals any action subject to administrative review as described in paragraph (k)(2) of this section.
(i) Notice of action. The institution’s
executive director and chairman of the
board of directors, and the responsible
principals and responsible individuals,
must be given notice of the action
being taken or proposed, the basis for
the action, and the procedures under
which the institution and the responsible principals or responsible individuals may request an administrative review of the action.
(ii) Time to request administrative review. The request for administrative re-

view must be submitted in writing not
later than 15 days after the date the
notice of action is received, and the
State agency must acknowledge the receipt of the request for an administrative review within 10 days of its receipt
of the request.
(iii) Representation. The institution
and the responsible principals and responsible individuals may retain legal
counsel, or may be represented by another person.
(iv) Review of record. Any information
on which the State agency’s action was
based must be available to the institution and the responsible principals and
responsible individuals for inspection
from the date of receipt of the request
for an administrative review.
(v) Opposition. The institution and
the responsible principals and responsible individuals may refute the findings contained in the notice of action
in person or by submitting written documentation to the administrative review official. In order to be considered,
written documentation must be submitted to the administrative review official not later than 30 days after receipt of the notice of action.
(vi) Hearing. A hearing must be held
by the administrative review official in
addition to, or in lieu of, a review of
written information only if the institution or the responsible principals and
responsible individuals request a hearing in the written request for an administrative review. If the institution’s
representative, or the responsible principals or responsible individuals or
their representative, fail to appear at a
scheduled hearing, they waive the right
to a personal appearance before the administrative review official, unless the
administrative review official agrees to
reschedule the hearing. A representative of the State agency must be allowed to attend the hearing to respond
to the testimony of the institution and
the responsible principals and responsible individuals and to answer questions posed by the administrative review official. If a hearing is requested,
the institution, the responsible principals and responsible individuals, and
the State agency must be provided
with at least 10 days advance notice of
the time and place of the hearing.

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Food and Nutrition Service, USDA

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(vii) Administrative review official. The
administrative review official must be
independent and impartial. This means
that, although the administrative review official may be an employee of the
State agency, he/she must not have
been involved in the action that is the
subject of the administrative review, or
have a direct personal or financial interest in the outcome of the administrative review. The institution and the
responsible principals and responsible
individuals must be permitted to contact the administrative review official
directly if they so desire.
(viii) Basis for decision. The administrative review official must make a determination based solely on the information provided by the State agency,
the institution, and the responsible
principals and responsible individuals,
and based on Federal and State laws,
regulations, policies, and procedures
governing the Program.
(ix) Time for issuing a decision. Within
60 days of the State agency’s receipt of
the request for an administrative review, the administrative review official
must inform the State agency, the institution’s executive director and
chairman of the board of directors, and
the responsible principals and responsible individuals, of the administrative
review’s outcome. This timeframe is an
administrative requirement for the
State agency and may not be used as a
basis for overturning the State agency’s action if a decision is not made
within the specified timeframe.
(x) Final decision. The determination
made by the administrative review official is the final administrative determination to be afforded the institution
and the responsible principals and responsible individuals.
(6) Federal audit findings. FNS may
assert a claim against the State agency, in accordance with the procedures
set forth in § 226.14(c), when an administrative review results in the dismissal of a claim against an institution
asserted by the State agency based
upon Federal audit findings.
(7) Record of result of administrative reviews. The State agency must maintain
searchable records of all administrative reviews and their disposition.
(8) Combined administrative reviews for
responsible principals and responsible in-

dividuals. The State agency must conduct the administrative review of the
proposed disqualification of the responsible principals and responsible individuals as part of the administrative review of the application denial, proposed termination, and/or proposed disqualification of the institution with
which the responsible principals or responsible individuals are associated.
However, at the administrative review
official’s discretion, separate administrative reviews may be held if the institution does not request an administrative review or if either the institution or the responsible principal or responsible individual demonstrates that
their interests conflict.
(9) Abbreviated administrative review.
The State agency must limit the administrative review to a review of written submissions concerning the accuracy of the State agency’s determination if the application was denied or
the State agency proposes to terminate
the institution’s agreement because:
(i) The information submitted on the
application was false (see paragraphs
(c)(1)(ii)(A),
(c)(2)(ii)(A),
and
(c)(3)(ii)(A) of this section);
(ii) The institution, one of its sponsored facilities, or one of the principals
of the institution or its facilities is on
the national disqualified list (see paragraph (b)(12) of this section);
(iii) The institution, one of its sponsored facilities, or one of the principals
of the institution or its facilities is ineligible to participate in any other
publicly funded program by reason of
violation of the requirements of the
program (see paragraph (b)(13) and
(c)(3)(ii)(S) of this section); or
(iv) The institution, one of its sponsored facilities, or one of the principals
of the institution or its facilities has
been convicted for any activity that indicates a lack of business integrity (see
paragraphs (b)(14) and (c)(3)(ii)(T) of
this section).
(10) Effect of State agency action. The
State agency’s action must remain in
effect during the administrative review. The effect of this requirement on
particular State agency actions is as
follows.
(i) Overpayment demand. During the
period of the administrative review,
the State agency is prohibited from

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7 CFR Ch. II (1–1–03 Edition)

taking action to collect or offset the
overpayment. However, the State agency must assess interest beginning with
the initial demand for remittance of
the
overpayment
and
continuing
through the period of administrative
review unless the administrative review official overturns the State agency’s action.
(ii) Recovery of advances. During the
administrative review, the State agency must continue its efforts to recover
advances in excess of the claim for reimbursement for the applicable period.
The recovery may be through a demand
for full repayment or an adjustment of
subsequent payments.
(iii) Program payments. The availability of Program payments during an
administrative review of the denial of a
new institution’s application, denial of
a renewing institution’s application,
proposed termination of a participating institution’s agreement, and
suspension of an institution are addressed in paragraphs (c)(1)(iii)(D),
(c)(2)(iii)(D), (c)(3)(iii)(D), (c)(5)(i)(D),
and (c)(5)(ii)(E), respectively, of this
section.
(l) Administrative reviews for day care
homes.
(1) General. The State agency must
ensure that, when a sponsoring organization proposes to terminate its Program agreement with a day care home
for cause, the day care home is provided an opportunity for an administrative review of the proposed termination. The State agency may do this
either by electing to offer a State-level
administrative review, or by electing
to require the sponsoring organization
to offer an administrative review. The
State agency must notify the appropriate FNSRO of its election under this
option, or any change it later makes
under this option, by September 25,
2002 or within 30 days of any subsequent change under this option. The
State agency must make the same
election with regard to who offers the
administrative review to any day care
home in the Program in that State.
The State agency or the sponsoring organization must develop procedures for
offering and providing these administrative reviews, and these procedures
must be consistent with this paragraph
(l).

(2) Actions subject to administrative review. The State agency or sponsoring
organization must offer an administrative review to a day care home that appeals a notice of intent to terminate
their agreement for cause or a suspension
of
their
participation
(see
§§ 226.16(l)(3)(iii) and (l)(4)(ii)).
(3) Actions not subject to administrative
review. Neither the State agency nor
the sponsoring organization is required
to offer an administrative review for
reasons other than those listed in paragraph (l)(2) of this section.
(4) Provision of administrative review
procedures to day care homes. The administrative review procedures must be
provided:
(i) Annually to all day care homes;
(ii) To a day care home when the
sponsoring organization takes any action subject to an administrative review as described in paragraph (l)(2) of
this section; and
(iii) Any other time upon request.
(5) Procedures. The State agency or
sponsoring organization, as applicable
(depending on the State agency’s election pursuant to paragraph (l)(1) of this
section) must follow the procedures in
this paragraph (l)(5) when a day care
home requests an administrative review of any action described in paragraph (l)(2) of this section.
(i) Uniformity. The same procedures
must apply to all day care homes.
(ii) Representation. The day care home
may retain legal counsel, or may be
represented by another person.
(iii) Review of record and opposition.
The day care home may review the
record on which the decision was based
and refute the action in writing. The
administrative review official is not required to hold a hearing.
(iv) Administrative review official. The
administrative review official must be
independent and impartial. This means
that, although the administrative review official may be an employee of the
State agency or an employee or board
member of the sponsoring organization, he/she must not have been involved in the action that is the subject
of the administrative review or have a
direct personal or financial interest in
the outcome of the administrative review;

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Food and Nutrition Service, USDA

§ 226.6

(v) Basis for decision. The administrative review official must make a determination based on the information provided by the sponsoring organization
and the day care home and on Federal
and State laws, regulations, polices,
and procedures governing the Program.
(vi) Time for issuing a decision. The administrative review official must inform the sponsoring organization and
the day care home of the administrative review’s outcome within the period of time specified in the State
agency’s or sponsoring organization’s
administrative review procedures. This
timeframe is an administrative requirement for the State agency or
sponsoring organization and may not
be used as a basis for overturning the
termination if a decision is not made
within the specified timeframe.
(vii) Final decision. The determination made by the administrative review
official is the final administrative determination to be afforded the day care
home.
(m) Program assistance.
(1) General. The State agency must
provide technical and supervisory assistance to institutions and facilities
to facilitate effective Program operations,
monitor
progress
toward
achieving Program goals, and ensure
compliance with all requirements of
title VI of the Civil Rights Act of 1964,
title IX of the Education amendments
of 1972, Section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, and the Department’s
regulations concerning nondiscrimination (7 CFR Parts 15, 15a, and 15b). The
State agency must maintain documentation of supervisory assistance activities, including reviews conducted,
corrective actions prescribed, and follow-up efforts.
(2) Review priorities. In choosing institutions for review, in accordance with
paragraph (m)(4) of this section, the
State agency must target for more frequent review institutions whose prior
review included a finding of serious deficiency.
(3) Review content. Reviews must:
(i) Assess institutional compliance
with the provisions of this part and
with any applicable instructions of
FNS and the Department;

(ii) Evaluate the documentation used
by sponsoring organizations to classify
their day care homes as tier I day care
homes; and
(iii) Evaluate sponsoring organizations’ implementation of serious deficiency and termination procedures and,
if delegated to sponsoring organizations pursuant to paragraph (l)(1) of
this section, the administrative review
procedures for day care homes.
(4) Review frequency. The State agency must annually review 33.3 percent of
all institutions. At least 15 percent of
the total number of facility reviews required must be unannounced. The
State agency must review institutions
according to the following schedule:
(i) Independent centers and sponsoring organizations of 1–100 facilities
must be reviewed at least once every
three years. A review of a sponsoring
organization must include 10 percent of
its facilities;
(ii) Sponsoring organizations with
more than 100 facilities must be reviewed at least once every two years.
These reviews must include reviews of
5 percent of the first 1,000 facilities and
2.5 percent of the facilities in excess of
1,000; and
(iii) New institutions that are sponsoring organizations of five or more facilities must be reviewed within the
first 90 days of Program operation.
(n) Program irregularities. Each State
agency shall promptly investigate
complaints received or irregularities
noted in connection with the operation
of the Program, and shall take appropriate action to correct any irregularities. State agencies shall maintain on
file evidence of such investigations and
actions. FNS and OIG may make investigations at the request of the State
agency, or whenever FNS or OIG determines that investigations are appropriate.
(o) Child care standards compliance.
The State agency shall, when conducting administrative reviews of child
care centers, outside-school-hours care
centers, and day care homes approved
by the State agency under paragraph
(d)(3) of this section, determine compliance with the child care standards used
to establish eligibility, and the institution shall ensure that all violations are
corrected and the State shall ensure

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§ 226.7

7 CFR Ch. II (1–1–03 Edition)

that the institution has corrected all
violations. If violations are not corrected within 60 calendar days of written notification to the institution, the
State agency shall terminate the Program participation of the violating institution or facility. However, if the
health or safety of the children is imminently threatened, the State agency
may immediately terminate participation of the institution or facility. If,
during an administrative review of a
child care center, outside-school-hours
care center, or day care home not approved by the State agency under paragraph (d)(3) of this section, the State
agency observes violations of applicable health, safety, or staff-child ratio
standards, or attendance in excess of licensed capacity, the State agency shall
promptly refer such violations to the
appropriate authority. The State agency may deny reimbursement for meals
served to attending children in excess
of authorized capacity.
(p) Sponsoring organization agreement.
Each State agency shall develop and
provide for the use of a standard form
of agreement between each day care
home sponsoring organization and all
day care homes participating in the
Program under such organization. The
State agency must also include in this
agreement its policy to restrict transfers of day care homes between sponsoring organizations. The policy must
restrict the transfers to no more frequently than once per year, except
under extenuating circumstances, such
as termination of the sponsoring organization’s agreement or other circumstances defined by the State agency. However, the State agency may, at
the request of the sponsor, approve an
agreement developed by the sponsor.
State agencies may develop a similar
form for use between sponsoring organizations and other types of facilities.
(q) Following its reviews of institutions and facilities under §§ 226.6(m)
and 226.23(h) conducted prior to July 1,
1988, the State agency shall report data
on key elements of program operations
on a form designated by FNS. These
key elements include but are not limited to the program areas of meal requirements, determination of eligibility for free and reduced price meals,
and the accuracy of reimbursement

claims. These forms shall be submitted
within 90 days of the completion of the
data collection for the institutions except that, if the State has elected to
conduct reviews of verification separate from its administrative reviews,
the State shall retain data until all
key elements have been reviewed and
shall report all data for each institution on one form within 90 days of the
completion of the data collection for
all key elements for that institution.
States shall ensure that all key element data for an institution is collected during a 12-month period.
[47 FR 36527, Aug. 20, 1982]
EDITORIAL NOTE: For FEDERAL REGISTER citations affecting § 226.6, see the List of CFR
Sections Affected, which appears in the
Finding Aids section of the printed volume
and on GPO Access.

§ 226.7 State agency responsibilities
for financial management.
(a) This section prescribes standards
of financial management systems in
administering Program funds by the
State agency and institutions.
(b) Each State agency shall maintain
an acceptable financial management
system, adhere to financial management standards and otherwise carry
out financial management policies as
delineated in the Uniform Federal Assistance Regulations, at 7 CFR part
3015. State agencies or FNSRO’s, where
applicable, shall also have a system in
place for monitoring and reviewing the
institutions’ documentation of their
nonprofit status to ensure that all Program reimbursement funds are used: (1)
Solely for the conduct of the food service operation; or (2) to improve such
food service operations, principally for
the benefit of the participants.
(c) Management evaluations and audits. State agencies shall provide FNS
with full opportunity to conduct management evaluations (including visits
to institutions and facilities) of all operations of the State agency under the
Program and shall provide OIG with
full opportunity to conduct audits (including visits to institutions and facilities) of all operations of the State
agency under the Program. Within 60
calendar days of receipt of each management evaluation report, the State

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Food and Nutrition Service, USDA

§ 226.7

agency shall submit to FNSRO a written plan for correcting serious deficiencies, including specific timeframes
for accomplishing corrective actions
and initiating follow-up efforts. If a
State agency makes a showing of good
cause, however, FNS may allow more
than 60 days in which to submit a plan.
Each State agency shall make available its records, including records of
the receipt and expenditure of funds,
upon request by FNS or OIG. OIG shall
also have the right to make audits of
the records and operation of any institution.
(d) Reports. Each State agency shall
submit to FNS the final Report of the
Child and Adult Care Food Program
(FNS 44) for each month which shall be
limited to claims submitted in accordance with § 226.10(e) and which shall be
postmarked and/or submitted no later
than 90 days following the last day of
the month covered by the report.
States shall not receive Program funds
for any month for which the final report is not submitted within this time
limit unless FNS grants an exception.
Upward adjustments to a State agency’s report shall not be made after 90
days from the month covered by the report unless authorized by FNS. Downward adjustments shall always be
made, without FNS authorization, regardless of when it is determined that
such adjustments are necessary. Adjustments shall be reported to FNS in
accordance with procedures established
by FNS. Each State agency shall also
submit to FNS a quarterly Financial
Status Report (SF–269) on the use of
Program funds. Such reports shall be
postmarked and/or submitted no later
than 30 days after the end of each fiscal
year quarter. Obligations shall be reported only for the fiscal year in which
they occur. A final Financial Status
Report for each fiscal year shall be
postmarked and/or submitted to FNS
within 120 days after the end of the fiscal year. FNS shall not be responsible
for reimbursing unpaid Program obligations reported later than 120 days
after the close of the fiscal year in
which they were incurred.
(e) Annual plan. Each State shall submit to the Secretary for approval by
August 15 of each year an annual plan
for the use of State administrative ex-

pense funds, including a staff formula
for State personnel.
(f) Rate assignment. Each State agency shall require institutions (other
than sponsoring organizations for day
care homes) to submit, not less frequently than annually, information
necessary to assign rates of reimbursement as outlined in § 226.9.
(g) Administrative budget approval. The
State agency shall approve institution
administrative budgets, and shall limit
allowable administrative costs claimed
by each sponsoring organization for
day care homes to administrative costs
approved in its annual budget. The
State agency may establish such administrative costs limits for other institutions. 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 § 226.20. Administrative
budget levels may be adjusted to reflect changes in Program activities.
(h) Start-up and expansion payments.
Each State agency shall establish procedures for evaluating requests for
start-up and expansion payments,
issuing these payments to eligible
sponsoring organizations, and monitoring the use of these payments.
(i) Advance payments. Each State
agency shall establish procedures for
issuing advance payments by the first
day of each month and comparing
these payments with earned reimbursement on a monthly basis. The State
agency shall maintain on file a statement of the State’s law and policy governing the use of interest earned on advanced funds by sponsors, institutions,
child care facilities and adult day care
facilities.

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§ 226.8

7 CFR Ch. II (1–1–03 Edition)

(j) Recovery of overpayments. Each
State agency shall establish procedures
to recover outstanding start-up, expansion and advance payments from institutions which, in the opinion of the
State agency, will not be able to earn
these payments.
(k) Claims processing. Each State
agency shall establish procedures for
institutions to properly submit claims
for reimbursement. All valid claims
shall be paid within 45 calendar days of
receipt. Within 15 calendar days of receipt of any incomplete or incorrect
claim which must be revised for payment, the State agency shall notify the
institution as to why and how such
claim must be revised. If the State
agency disallows partial or full payment for a claim for reimbursement, it
shall notify the institution which submitted the claim of its right to appeal
under § 226.6(k). State agencies may
permit disallowances to be appealed
separately from claims for reimbursement.
(l) Participation controls. The State
agency may establish control procedures to ensure that payment is not
made for meals served to participants
attending in excess of the authorized
capacity of each independent center,
adult day care facility or child care facility.
(m) Financial management system.
Each State agency shall establish a financial management system in accordance with the Uniform Federal Assistance Regulations, 7 CFR part 3015, and
FNS guidance to identify allowable
Program costs and establish standards
for institutional recordkeeping and reporting. These standards shall (1) prohibit claiming reimbursement for
meals provided by a participant’s family, except as authorized by § 226.18(e)
and (2) allow the cost of meals served
to adults who perform necessary food
service labor under the Program, except in day care homes. The State
agency shall provide guidance on financial management requirements to each
institution.
[47 FR 36527, Aug. 20, 1982, as amended at 48
FR 21530, May 13, 1983; Amdt. 5, 49 FR 18988,
May 4, 1984; 50 FR 8580, Mar. 4, 1985; 50 FR
26975, July 1, 1985; 53 FR 52589, Dec. 28, 1988;
Amdt. 22, 55 FR 1378, Jan. 14, 1990; 63 FR 9728,
Feb. 26, 1998; 67 FR 43490, June 27, 2002]

§ 226.8 Audits.
(a) Unless otherwise exempt, audits
at the State and institution levels
shall be conducted in accordance with
the Office of Management and Budget’s
Circulars A–128 and A–110 and the Department’s Uniform Federal Assistance
Regulations (7 CFR part 3015). Title
XIX and title XX proprietary institutions not subject to organization-wide
audits shall be audited by the State
agency at least once every two years.
(b) The funds provided to the State
agency under § 226.4(h) may be made
available to institutions to fund a portion of organization-wide audits, provided that the organization-wide audit
includes tests of the CACFP in accordance with section 10.558 of the Compliance Supplement to OMB Circular A–
128. The funds provided to an institution for an organization-wide audit
shall not exceed the portion of the audit’s cost equal to the CACFP’s portion
of the total Federal grant.
(c) Funds provided under § 226.4(h)
may be used by the State agency to
conduct program-specific audits of institutions not subject to organizationwide audits, or for which the State
agency considers program specific audits to be needed. The State agency
may use any funds remaining after all
required program-specific audits have
been performed to conduct administrative reviews of institutions.
(d) Funds provided under § 226.4(h)
may only be obligated during the fiscal
year for which those funds are allocated. If funds provided under § 226.4(h)
are not sufficient to meet the requirements of this section, the State agency
may then use available State administrative expense funds to conduct audits, provided that the State agency is
arranging for the audits and has not
passed the responsibility down to the
institution.
(e) In conducting management evaluations or audits for any fiscal year,
FNS or OIG may disregard any overpayment which does not exceed $100. In
conducting State agency sponsored audits in State administered programs,
the State agency may disregard any
overpayment which does not exceed the
amount established by State law, regulations or procedures as a minimum for
which claims will be made for State

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Food and Nutrition Service, USDA

§ 226.9

losses generally. No overpayment shall
be disregarded, however, where there
are unpaid claims of the same fiscal
year from which the overpayment can
be deducted, or where there is evidence
of violation of criminal law or civil
fraud statutes.
(f) While OIG shall rely to the fullest
extent feasible upon State sponsored
audits, OIG may, whenever it considers
necessary:
(1) Make audits on a statewide basis;
(2) Perform on-site test audits;
(3) Review audit reports and related
working papers of audits performed by
or for State agencies.
(g) State agencies are not required to
provide a hearing to an institution for
State actions taken on the basis of a
Federal audit determination. If a State
agency does not provide a hearing in
such situations, FNS will provide a
hearing, upon request, in accordance
with procedures set forth in § 226.6(k).
[47 FR 36527, Aug. 20, 1982, as amended at 50
FR 8580, Mar. 4, 1985; 51 FR 4295, Feb. 4, 1986;
52 FR 5526, Feb. 25, 1987; 53 FR 52590, Dec. 28,
1988; Amdt. 22, 55 FR 1378, Jan. 14, 1990; 67 FR
43490, June 27, 2002]

Subpart D—Payment Provisions
§ 226.9 Assignment of rates of reimbursement for centers.
(a) The State agency shall assign
rates of reimbursement, not less frequently than annually, on the basis of
family-size and income information reported by each institution. Assigned
rates of reimbursement may be
changed more frequently than annually
if warranted by changes in family-size
and income information. Assigned
rates of reimbursement shall be adjusted annually to reflect changes in
the national average payment rates.
(b) The State agency shall either:
(1) Require that institutions submit
each month’s figures for meals served
daily to participants from families
meeting the eligibility standards for
free meals, to participants from families meeting the eligibility standards
for reduced-price meals, and to participants from families not meeting such
guidelines; or
(2) Establish claiming percentages,
not less frequently that annually, for
each institution on the basis of the

number of enrolled participants eligible for free, reduced-price, and paid
meals; or
(3) Determine a blended per-meal
rate of reimbursement, not less frequently than annually, by adding the
products obtained by multiplying the
applicable national average payment
rate of reimbursement for each category (free, reduced-price, paid) by the
claiming percentage for that category.
(c) States have two methods of reimbursing institutions. The method chosen by the State agency must be applied to all institutions participating
in the Program in that State. These
methods are:
(1) Meals times rates payment, which
involves reimbursing an institution for
meals served at the assigned rate for
each meal. This method entails no
comparison to the costs incurred by
the institution for the meal service;
and,
(2) Meals times rates or actual costs,
whichever is the lesser, which involves
reimbursing an institution for meals
served at the assigned rate for each
meal or at the level of the costs actually incurred by the institution for the
meal service. This method does entail a
comparison of the costs incurred to the
meal rates, with the costs being a limiting factor on the level of reimbursement an institution may receive.
(d) In those States where the State
agency has chosen the option to implement a meals times rates payment system State-wide, the State agency may
elect to pay an institution’s final claim
for reimbursement for the fiscal year
at higher reassigned rates of reimbursement for lunches and suppers;
however, the reassigned rates may not
exceed the applicable maximum rates
of reimbursement established under
§ 210.11(b) of the National School Lunch
Program regulations. In those States
which use the method of comparing
meals times rates or actual costs,
whichever is lesser, the total payments
made to an institution shall not exceed
the total net costs incurred for the fiscal year.
[47 FR 36527, Aug. 20, 1982, as amended at 48
FR 21530, May 13, 1983; 53 FR 52590, Dec. 28,
1988; Amdt. 22, 55 FR 1378, Jan. 14, 1990]

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§ 226.10

7 CFR Ch. II (1–1–03 Edition)

§ 226.10 Program payment procedures.
(a) By the first day of each month of
operation, the State agency shall provide an advance payment to each institution electing to receive such payments, in accordance with § 226.6(b)(10).
Advance payments shall equal the full
level of claims estimated by the State
agency to be submitted in accordance
with paragraph (c) of this section, considering prior reimbursement claims
and other information such as fluctuations in enrollment. The institution
may decline to receive all or any part
of the advance.
(b) For each fiscal year, the amount
of payment made, including funds advanced to an institution, shall not exceed the amount of valid reimbursement claimed by that institution. To
ensure that institutions do not receive
excessive advance payments, the State
agency shall observe the following procedures:
(1) After three advance payments
have been made to an institution, the
State agency shall ensure that no subsequent advance is made until the
State agency has validated the institution’s claim for reimbursement for the
third month prior to the month for
which the next advance is to be paid.
(2) If the State agency has audit or
monitoring evidence of extensive program deficiencies or other reasons to
believe that an institution will not be
able to submit a valid claim for reimbursement, advance payments shall be
withheld until the claim is received or
the deficiencies are corrected.
(3) Each month the State agency
shall compare incoming claims against
advances to ensure that the level of
funds authorized under paragraph (a) of
this section does not exceed the claims
for reimbursement received from the
institution. Whenever this process indicates that excessive advances have
been authorized, the State agency shall
either demand full repayment or adjust
subsequent payments, including advances.
(4) If, as a result of year end reconciliation as required by the Department’s Uniform Federal Assistance
Regulations (7 CFR part 3015), the
State agency determines that reimbursement earned by an institution
during a fiscal year is less than the

amount paid, including funds advanced
to that institution, the State agency
shall demand repayment of the outstanding balance or adjust subsequent
payments.
(c) Claims for Reimbursement shall
report information in accordance with
the financial management system established by the State agency, and in
sufficient detail to justify the reimbursement claimed and to enable the
State agency to provide the final Report of the Child and Adult Care Food
Program (FNS 44) required under
§ 226.7(d). In submitting a Claim for Reimbursement, each institution shall
certify that the claim is correct and
that records are available to support
that claim. Independent proprietary
title XX child care centers shall submit
the number and percentage of the enrolled participants, or the licensed capacity receiving title XX benefits for
the month claimed for months in which
not less than 25 percent of the enrolled
children or 25 percent of licensed capacity, whichever is less, were title XX
beneficiaries. Sponsoring organizations
of such child care centers shall submit
the number and percentage of the enrolled children or licensed capacity,
whichever is less, receiving title XX
benefits for each center for the claim.
Sponsoring organizations of such centers shall not submit claims for child
care centers in which less than 25 percent of the enrolled children and licensed capacity were title XX beneficiaries for the month claimed. Independent proprietary title XIX or title
XX adult day care centers shall submit
the percentages of enrolled adult participants receiving title XIX or title
XX benefits for the month claimed for
months in which not less than 25 percent of enrolled adult participants were
title XIX or title XX beneficiaries.
Sponsoring organizations of such adult
day care centers shall submit the percentage of enrolled adult participants
receiving title XIX or title XX benefits
for each center for the claim. Sponsoring organizations of such centers
shall not submit claims for adult day
care centers in which less than 25 percent of enrolled adult participants were
title XIX or title XX beneficiaries for
the month claimed.

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§ 226.11

(d) All records to support the claim
shall be retained for a period of three
years after the date of submission of
the final claim for the fiscal year to
which they pertain, except that if audit
findings have not been resolved, the
records shall be retained beyond the
end of the three year period as long as
may be required for the resolution of
the issues raised by the audit. All accounts and records pertaining to the
Program shall be made available, upon
request, to representatives of the State
agency, of the Department, and of the
U.S. General Accounting Office for
audit or review, at a reasonable time
and place.
(e) Unless otherwise approved by
FNS, the Claim for Reimbursement for
any month shall cover only Program
operations for that month except if the
first or last month of Program operations in any fiscal year contains 10 operating days or less, such month may
be added to the Claim for Reimbursement for the appropriate adjacent
month; however, Claims for Reimbursement may not combine operations occurring in two fiscal years. A final
Claim for Reimbursement shall be
postmarked and/or submitted to the
State agency not later than 60 days following the last day of the full month
covered by the claim. State agencies
may establish shorter deadlines at
their discretion. Claims not postmarked and/or submitted within 60
days shall not be paid with Program
funds unless FNS determines that an
exception should be granted. The State
agency shall promptly take corrective
action with respect to any Claim for
Reimbursement as determined necessary through its claim review process
or otherwise. In taking such corrective
action, State agencies may make upward adjustments in Program funds
claimed on claims filed within the 60
day deadline if such adjustments are
completed within 90 days of the last
day of the claim month and are reflected in the final Report of the Child
and Adult Care Food Programs (FNS–
44) for the claim month which is required under 226.7(d). Upward adjustments in Program funds claimed which
are not reflected in the final FNS–44
for the claim month shall not be made
unless authorized by FNS. Downward

adjustments in Program funds claimed
shall always be made without FNS authorization regardless of when it is determined that such adjustments are
necessary.
(f) If a State agency has reason to believe that an institution or food service
management company has engaged in
unlawful acts with respect to Program
Operations, evidence found in audits,
investigations or other reviews shall be
a basis for non-payment of claims for
reimbursement.
[47 FR 36527, Aug. 20, 1982, as amended by
Amdt. 5, 49 FR 18988, May 4, 1984; 50 FR 26975,
July 1, 1985; 53 FR 52590, Dec. 28, 1988; Amdt.
22, 55 FR 1378, Jan. 14, 1990; 62 FR 23618, May
1, 1997]

§ 226.11 Program payments for child
care centers, adult day care centers
and outside-school-hours care centers.
(a) Payments shall be made only to
institutions operating under an agreement with the State agency for the
meal types specified in the agreement
served at approved child care centers,
adult day care centers and outsideschool-hours care centers. A State
agency may make payment for meals
served in accordance with provisions of
the Program in the calendar month
preceding the calendar month in which
the agreement is executed.
(b) Each child care institution shall
report each month to the State agency
the total number of meals, by type
(breakfasts, lunches, suppers, and supplements), served to children, except
that such reports shall be made for a
proprietary title XX center only for
calendar months during which not less
than 25 percent of enrolled children, or
25 percent of licensed capacity, whichever is less, were title XX beneficiaries.
Each adult day care institution shall
report each month to the State agency
the total number of meals, by type
(breakfasts, lunches, suppers, and supplements), served to adult participants,
except that such reports shall be made
for a proprietary title XIX or title XX
center only for calendar months during
which no less than 25 percent of enrolled adult participants were title XIX
or title XX beneficiaries.

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§ 226.12

7 CFR Ch. II (1–1–03 Edition)

(c) Each State agency shall base reimbursement to each child care institution on the number of meals, by
type, served to children multiplied by
the assigned rates of reimbursement,
except that reimbursement shall be
payable to proprietary title XX child
care centers only for calendar months
during which not less than 25 percent
of enrolled children, or 25 percent of licensed capacity, whichever is less, were
title XX beneficiaries. Each State
agency shall base reimbursement to
each adult day care institution on the
number of meals, by type, served to
adult participants multiplied by the assigned rates of reimbursement, except
that reimbursement shall be payable to
proprietary title XIX and title XX
adult day care centers only for calendar months during which not less
than 25 percent of enrolled adult participants were title XIX or Title XX
beneficiaries. In computing reimbursement, the State agency shall either:
(1) Base reimbursement to institutions on actual daily counts of meals
served, and multiply the number of
meals, by type, served to participants
eligible to receive free meals, served to
participants eligible to receive reduced-price meals, and served to participants from families not meeting
such standards by the applicable national average payment rate; or
(2) Apply the applicable claiming percentage or percentages to the total
number of meals, by type, served to
participants and multiply the product
or products by the assigned rate of reimbursement for each meal type; or
(3) Multiply the assigned blended per
meal rate of reimbursement by the
total number of meals, by type, served
to participants.
(d) If the State agency elects to reimburse its institutions according to the
lesser of rates or actual costs, total
Program payments to an institution
during any fiscal year, including any
cash payments in lieu of commodities,
shall not exceed allowable Program operating and administrative costs, less
income to the Program. The State
agency may limit payments for administrative costs to the amount approved
in the annual administrative budget of
the institution. The State agency may
prohibit an institution from using pay-

ments for operating costs to pay for administrative expenses.
(e) Each institution shall maintain
records as prescribed by the State
agency’s financial management system.
[47 FR 36527, Aug. 20, 1982, as amended at 48
FR 21530, May 13, 1983; 52 FR 36907, Oct. 2,
1987; 53 FR 52590, Dec. 28, 1988; 62 FR 23618,
May 1, 1997]

§ 226.12 Administrative payments to
sponsoring organizations for day
care homes.
(a) General. Sponsoring organizations
for day care homes shall receive payments for administrative costs. During
any fiscal year, administrative costs
payments to a sponsoring organization
may not exceed the lesser of (1) actual
expenditures for the costs of administering the Program less income to
the Program, or (2) the amount of administrative costs approved by the
State agency in the sponsoring organization’s budget, or (3) the sum of the
products obtained by multiplying each
month the sponsoring organization’s:
(i) Initial 50 day care homes by 42
dollars;
(ii) Next 150 day care homes by 32
dollars;
(iii) Next 800 day care homes by 25
dollars; and
(iv) Additional day care homes by 22
dollars.
During any fiscal year, administrative
payments to a sponsoring organization
may not exceed 30 percent of the total
amount of administrative payments
and food service payments for day care
home operations.
(b) Start-up and expansion payments.
(1) Prospective sponsoring organizations of day care homes, participating
sponsoring organizations of child care
centers or outside-school-hours care
centers, independent centers, and participating sponsoring organizations of
less than 50 homes which meet the criteria in paragraph (b)(2) of this section
shall be entitled to receive start-up
payments to develop or expand successful Program operations in day care
homes. Participating sponsoring organizations of day care homes which
meet the criteria in paragraph (b)(2) of
this section shall be entitled to receive

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Food and Nutrition Service, USDA

§ 226.12

expansion payments to initiate or expand Program operations in day care
homes in low-income or rural areas.
The State agency shall approve startup payments only once for any eligible
sponsoring organization, but may approve expansion payments for any eligible sponsoring organization more
than once, provided that: the request
must be for expansion into an area(s)
other than that specified in their initial or prior request; and 12 months has
elapsed since the sponsoring organization has satisfied all obligations under
its initial or prior expansion agreement. Eligible sponsoring organizations which have received start-up payments shall be eligible to apply for expansion payments at a date no earlier
than 12 months after it has satisfied all
its obligations under its start-up agreement with the State agency.
(2) Sponsoring organizations which
apply for start-up or expansion payments shall evidence:
(i) Public status or tax exempt status
under the Internal Revenue Code of
1986;
(ii) An organizational history of managing funds and ongoing activities (i.e.,
administering public or private programs);
(iii) An acceptable and realistic plan
for recruiting day care homes to participate in the Program (such as the
method of contacting providers), which
may be based on estimates of the number of day care homes to be recruited
and information supporting their existence, and in the case of sponsoring organizations applying for expansion
payments, documentation that the day
care homes to be recruited are located
in low-income or rural areas; and
(iv) An acceptable preliminary sponsoring organization management plan
including, but not limited to, plans for
preoperational visits and training.
(3) The State agency shall deny startup and expansion payments to applicant sponsoring organizations which
fail to meet the criteria of paragraph
(b)(2) of this section or which have not
been financially responsible in the operation of other programs funded by
Federal, State, or local governments.
The State agency shall notify the sponsoring organization of the reasons for
denial and allow the sponsoring organi-

zation full opportunity to submit evidence on appeal as provided for in
§ 226.6(k). Any sponsoring organization
applying for start-up or expansion
funds shall be notified of approval or
disapproval by the State agency in
writing within 30 calendar days of filing a complete and correct application.
If a sponsoring organization submits an
incomplete application, the State
agency shall notify the sponsoring organization within 15 calendar days of
receipt of the application and shall
provide technical assistance, if necessary, to the sponsoring organization
for the purpose of completing its application.
(4) Sponsoring organizations which
apply for and meet the criteria for
start-up or expansion payments shall
enter into an agreement with the State
agency. The agreement shall specify:
(i) Activities which the sponsoring
organization will undertake to initiate
or expand Program operations in day
care homes;
(ii) The amount of start-up or expansion payments to be issued to the sponsoring organization, together with an
administrative budget detailing the
costs which the sponsoring organization shall incur, document, and claim;
(iii) The time allotted to the sponsoring organization for the initiation
or expansion of Program operations in
family day care homes;
(iv) The responsibility of the applicant sponsoring organization to repay,
upon demand by the State agency,
start-up or expansion payments not expended in accordance with the agreement.
(5) Upon execution of the agreement,
the State agency shall issue a start-up
or expansion payment to the sponsoring organization in an amount equal
to not less than one, but not more than
two month’s anticipated administrative reimbursement to the sponsoring
organization as determined by the
State agency. However, no sponsoring
organization may receive start-up or
expansion payments for more than 50
day care homes. Eligible sponsoring organizations with fewer than 50 homes
under their jurisdiction at the time of
application for start-up payments may
receive such payments for up to 50
homes, less the number of homes under

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§ 226.13

7 CFR Ch. II (1–1–03 Edition)

their jurisdiction. Eligible sponsoring
organizations applying for expansion
funds may receive at a maximum such
payments for up to 50 homes at the
currently assigned administrative payment for the first 50 homes. In determining the amount of start-up or expansion payments to be made to a
sponsoring organization, the State
agency shall consider the anticipated
level of start-up or expansion costs to
be incurred by the sponsoring organization and alternate sources of funds
available to the sponsoring organization.
(6) Upon expiration of the time allotted to the sponsoring organization for
initiating or expanding Program operations in day care homes, the State
agency shall obtain and review documentation of activities performed and
costs incurred by the sponsoring organization under the terms of the startup or expansion agreement. If the sponsoring organization has not made every
reasonable effort to carry out the activities specified in the agreement, the
State agency shall demand repayment
of all or part of the payment. The sponsoring organization may retain startup or expansion payments for all day
care homes which initiate Program operations. However, no sponsoring organization may retain any start-up or expansion payments in excess of its actual costs for the expenditures specified in the agreement.
[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct.
15, 1982, as amended at 53 FR 52590, Dec. 28,
1988; 63 FR 9728, Feb. 26, 1998; 67 FR 43490,
June 27, 2002]

§ 226.13 Food service payments to
sponsoring organizations for day
care homes.
(a) Payments shall be made only to
sponsoring
organizations
operating
under an agreement with the State
agency for the meal types specified in
the agreement served to enrolled nonresident children and eligible enrolled
children of day care home providers, at
approved day care homes.
(b) Each sponsoring organization
shall report each month to the State
agency the total number of meals, by
type (breakfasts, lunches, suppers, and
supplements) and by category (tier I

and tier II), served to children enrolled
in approved day care homes.
(c) Each sponsoring organization
shall receive payment for meals served
to children enrolled in approved day
care homes at the tier I and tier II reimbursement rates, as applicable, and
as established by law and adjusted in
accordance with § 226.4. However, the
rates for lunches and suppers shall be
reduced by the value of commodities
established under § 226.5(b) for all sponsoring organizations for day care
homes which have elected to receive
commodities. For tier I day care
homes, the full amount of food service
payments shall be disbursed to each
day care home on the basis of the number of meals served, by type, to enrolled children. For tier II day care
homes, the full amount of food service
payments shall be disbursed to each
day care home on the basis of the number of meals served to enrolled children
by type, and by category (tier I and
tier II) as determined in accordance
with paragraphs (d)(2) and (d)(3) of this
section. However, the sponsoring organization may withhold from Program
payments to each home an amount
equal to costs incurred for the provision of Program foodstuffs or meals by
the sponsoring organization on behalf
of the home and with the home provider’s written consent.
(d) As applicable, each sponsoring organization for day care homes shall:
(1) Require that tier I day care homes
submit the number of meals served, by
type, to enrolled children.
(2) Require that tier II day care
homes in which the provider elects not
to have the sponsoring organization
identify enrolled children who are eligible for free or reduced price meals
submit the number of meals served, by
type, to enrolled children.
(3) Not more frequently than annually, select one of the methods described in paragraphs (d)(3) (i)–(iii) of
this section for all tier II day care
homes in which the provider elects to
have the sponsoring organization identify enrolled children who are eligible
for free or reduced price meals. In such
homes, the sponsoring organization
shall either:
(i) Require that such day care homes
submit the number and types of meals

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Food and Nutrition Service, USDA

§ 226.14

served each day to each enrolled child
by name. The sponsoring organization
shall use the information submitted by
the homes to produce an actual count,
by type and by category (tier I and tier
II), of meals served in the homes; or
(ii) Establish claiming percentages,
not less frequently than semiannually,
for each such day care home on the
basis of one month’s data concerning
the number of enrolled children determined eligible for free or reduced-price
meals. Sponsoring organizations shall
obtain one month’s data by collecting
either enrollment lists (which show the
name of each enrolled child in the day
care home), or attendance lists (which
show, by days or meals, the rate of participation of each enrolled child in the
day care home). The State agency may
require a sponsoring organization to
recalculate the claiming percentage for
any of its day care homes before the required semiannual calculation if the
State agency has reason to believe that
a home’s percentage of income-eligible
children has changed significantly or
was incorrectly established in the previous calculation. Under this system,
day care homes shall be required to
submit the number of meals served, by
type, to enrolled children; or
(iii) Determine a blended per-meal
rate of reimbursement, not less frequently than semiannually, for each
such day care home by adding the products obtained by multiplying the applicable rates of reimbursement for each
category (tier I and tier II) by the
claiming percentage for that category,
as established in accordance with paragraph (d)(3)(ii) of this section. The
State agency may require a sponsoring
organization to recalculate the blended
rate for any of its day care homes before the required semiannual calculation if the State agency has reason to
believe that a home’s percentage of income-eligible children has changed significantly or was incorrectly established in the previous calculation.
Under this system, day care homes
shall be required to submit the number
of meals served, by type, to enrolled
children.
[47 FR 36527, Aug. 20, 1982, as amended at 62
FR 903, Jan. 7, 1997; 62 FR 5519, Feb. 6, 1997;
63 FR 9105, Feb. 24, 1998]

§ 226.14

Claims against institutions.

(a) State agencies shall disallow any
portion of a claim for reimbursement
and recover any payment to an institution not properly payable under this
part. State agencies may consider
claims for reimbursement not properly
payable if an institution does not comply with the recordkeeping requirements contained in this part. The
State agency may permit institutions
to pay overclaims over a period of one
or more years. However, the State
agency must assess interest beginning
with the initial demand for remittance.
Further, when an institution requests
and is granted an administrative review of the State agency’s overpayment demand, the State agency is prohibited from taking action to collect or
offset the overpayment until the administrative review is concluded. The
State agency must maintain searchable records of funds recovery activities. If the State agency determines
that a sponsoring organization of centers has spent more than 15 percent of
its meal reimbursements for a budget
year for administrative costs (or more
than any higher limit established pursuant to a waiver granted under
§ 226.6(f)(3)), the State agency must
take appropriate fiscal action. In addition, except with approval from the appropriate FNSRO, State agencies shall
consider claims for reimbursement not
payable when an institution fails to
comply with the recordkeeping requirements that pertain to records directly supporting claims for reimbursement. Records that directly support
claims for reimbursement include, but
are not limited to, daily meal counts,
menu records, and enrollment and attendance records, as required by
§ 226.15(e). State agencies shall assert
overclaims against any sponsoring organization of day care homes which
misclassifies a day care home as a tier
I
day
care
home
unless
the
misclassification is determined to be
inadvertent under guidance issued by
FNS. However, the State agency shall
notify the institution of the reasons for
any disallowance or demand for repayment, and allow the institution full opportunity to submit evidence on appeal
as provided for in § 226.6(k). Miminum

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§ 226.15

7 CFR Ch. II (1–1–03 Edition)

State agency collection procedures for
unearned payments shall include:
(1) Written demand to the institution
for the return of improper payments;
(2) if, after 30 calendar days, the institution fails to remit full payment or
agree to a satisfactory repayment
schedule, a second written demand for
the return of improper payments sent
by certified mail return receipt requested; and (3) if, after 60 calendar
days, the institution fails to remit full
payment or agree to a satisfactory repayment schedule, the State agency
shall refer the claim against the institution to appropriate State or Federal
authorities for pursuit of legal remedies.
(b) In the event that the State agency finds that an institution which prepares its own meals is failing to meet
the meal requirements of § 226.20, the
State agency need not disallow payment or collect an overpayment arising
out of such failure if the institution
takes such other action as, in the opinion of the State agency, will have a
corrective effect. However, the State
agency shall not disregard any overpayments or waive collection action
arising from the findings of Federal audits.
(c) If FNS does not concur with the
State agency’s action in paying an institution or in failing to collect an
overpayment, FNS shall notify the
State agency of its intention to assert
a claim against the State agency. In all
such cases, the State agency shall have
full opportunity to submit evidence
concerning the action taken. The State
agency shall be liable to FNS for failure to collect an overpayment, unless
FNS determines that the State agency
has conformed with this part in issuing
the payment and has exerted reasonable efforts to recover the improper
payment.
[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct.
15, 1982, as amended at 50 FR 8580, Mar. 4,
1985; 53 FR 52590, Dec. 28, 1988; 62 FR 903, Jan.
7, 1997; 64 FR 72260, Dec. 27, 1999; 67 FR 43490,
June 27, 2002]

Subpart E—Operational Provisions
§ 226.15 Institution provisions.
(a) Tax exempt status. Except for proprietary title XIX and title XX centers,

and sponsoring organizations of such
centers, institutions must be public, or
have tax exempt status under the Internal Revenue Code of 1986.
(b) New applications and renewals.
Each institution must submit to the
State agency with its application all
information required for its approval
as set forth in §§ 226.6(b) and 226.6(f).
Such information must demonstrate
that the institution has the administrative and financial capability to operate the Program in accordance with
this part and with the performance
standards set forth at § 226.6 (b)(18). The
State agency must deny the application of any institution that does not
demonstrate in its application that it
is administratively and financially capable of operating the Program in accordance with this part, and may approve only those applicant institutions
that meet the performance standards.
No institution may submit an application if the institution or any of its
principals is on the National disqualified list, and no sponsoring organization may submit an application on behalf of a facility if the facility or any
of its principals is on the National disqualified list. At a minimum, such information must include:
(1) Except for proprietary title XIX
and title XX centers and sponsoring organizations or proprietary title XIX
and title XX centers, evidence of nonprofit status, in accordance with
§ 226.15(a).
(2) An application for participation,
or application renewal materials, accompanied by all necessary supporting
documentation;
(3) An administrative budget;
(4) If an independent child care center or independent outside-schoolhours care center, documentation that
it meets the licensing/approval requirements of § 226.6(d)(1); or, if an independent adult day care center, the licensing/approval
requirements
of
§ 226.19a(b)(3).
(5) A nondiscrimination and free and
reduced-price policy statement, and information regarding a public release,
in accordance with § 226.23;
(6) For each proprietary title XX
child care center, documentation that
it provides nonresidential day care

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Food and Nutrition Service, USDA

§ 226.15

services for which it receives compensation under title XX of the Social
Security Act, and certification that
not less than 25 percent of the enrolled
children, or 25 percent of the licensed
capacity, whichever is less, during the
most recent calendar month were title
XX beneficiaries. For each proprietary
title XIX or title XX adult day care
center, documentation that it provides
nonresidential day care services for
which it receives compensation under
title XIX or title XX of the Social Security Act, and certification that not
less than 25 percent of the adult participants enrolled during the most recent calendar month were title XIX or
title XX beneficiaries. Sponsoring organizations shall provide documentation and certification for each proprietary title XIX or title XX center
under its jurisdiction;
(7) A list of the publicly funded programs in which the institution and its
principals have participated in the past
seven years and a certification that,
during the preceding seven years, neither the institution nor any of its principals has been declared ineligible to
participate in any publicly funded program by reason of violating that program’s requirements. Instead of such a
certification, the institution may submit 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;
(8) A statement certifying that neither the institution nor any of its principals has been convicted of any activity that occurred during the past seven
years and that indicated a lack of business integrity. A lack of business integrity includes fraud, antitrust violations, embezzlement, theft, forgery,
bribery, falsification or destruction of
records, making false statements, receiving stolen property, making false
claims, obstruction of justice, or any
other activity indicating a lack of
business integrity as defined by the
State agency; and
(9) A statement certifying that all information on the application is true
and correct, along with the name,
mailing address, and date of birth of

the institution’s executive director and
chairman of the board of directors.
(c) Responsibility. Each institution
shall accept final administrative and
financial responsibility for Program
operations. No institution may contract out for management of the Program.
(d) Staffing. Each institution shall
provide adequate supervisory and operational personnel for management and
monitoring of the Program.
(e) Recordkeeping. Each institution
shall establish procedures to collect
and maintain all program records required under this part, as well as any
records required by the State agency.
Failure to maintain such records shall
be grounds for the denial of reimbursement for meals served during the period covered by the records in question
and for the denial of reimbursement for
costs associated with such records. At
a minimum, the following records shall
be collected and maintained:
(1) Copies of all applications and supporting documents submitted to the
State agency;
(2) Documentation of the enrollment
of each participant at child care centers, adult day care centers and outside-school-hours care centers including information used to determine eligibility for free or reduced price meals
in accordance with § 226.23(e)(1).
(3) Documentation of: The enrollment of each child at day care homes;
information used to determine the eligibility of enrolled providers’ children
for free or reduced price meals; information used to classify day care homes
as tier I day care homes, including official source documentation obtained
from school officials when the classification is based on elementary school
data; and information used to determine the eligibility of enrolled children in tier II day care homes that
have been identified as eligible for free
or reduced price meals in accordance
with § 226.23(e)(1).
(4) Daily records indicating the number of participants in attendance and
the number of meals, by type (breakfast, lunch, supper, and supplements),
served to participants.
(5) For child care centers and outside-school-hours care centers claiming
reimbursement for two meals and two

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§ 226.15

7 CFR Ch. II (1–1–03 Edition)

supplements or three meals and one
supplement per child per day, either:
(i) Documentation of total time-inattendance for each child at the center
for each day for which the fourth meal
service was claimed, including a timein/time-out form which records timein-attendance for each child at the center; or, at the discretion of the State
agency,
(ii)
Documentation
which
demonstrates that at least eight hours
elapse between the end of the first
meal service and the beginning of the
fourth meal service on any day in
which reimbursement is claimed for a
fourth meal; service.
(6) Except at day care homes, daily
records indicating the number of
meals, by type, served to adults performing labor necessary to the food
service;
(7) Copies of invoices, receipts, or
other records required by the State
agency financial management instruction to document:
(i) Administrative costs claimed by
the institution;
(ii) Operating costs claimed by the
institution except sponsoring organizations of day care homes; and
(iii) Income to the Program.
(8) Copies of all claims for reimbursement submitted to the State agency;
(9) Receipts for all Program payments received from the State agency;
(10) If applicable, information concerning the dates and amounts of disbursement to each child care facility
or adult day care facility under its auspices;
(11) Copies of menus, and any other
food service records required by the
State agency;
(12) If applicable, information concerning the location and dates of each
child care or adult day care facility review, any problems noted, and the corrective action prescribed and effected;
(13) Information on training session
date(s) and location(s), as well as topics presented and names of participants; and
(14) Documentation of nonprofit food
service to ensure that all Program reimbursement funds are used: (i) Solely
for the conduct of the food service operation; or (ii) to improve such food

service operations, principally for the
benefit of the enrolled participants.
(f) Day care home classifications. Each
sponsoring organization of day care
homes shall determine which of the
day care homes under its sponsorship
are eligible as tier I day care homes. A
sponsoring organization may use current school or census data provided by
the State agency or free and reduced
price applications collected from day
care home providers in making a determination for each day care home. When
using elementary school or census data
for making tier I day care home determinations, a sponsoring organization
shall first consult school data, except
in cases in which busing or other bases
of attendance, such as magnet or charter schools, result in school data not
being representative of an attendance
area’s household income levels. In
these cases, census data should generally be consulted instead of school
data. A sponsoring organization may
also use census data if, after reasonable
efforts are made, as defined by the
State agency, the sponsoring organization is unable to obtain local elementary school attendance area information. A sponsoring organization may
also consult census data after having
consulted school data which fails to
support a tier I day care home determination for rural areas with geographically large elementary school attendance areas, for other areas in
which an elementary school’s free and
reduced price enrollment is above 40
percent, or in other cases with State
agency approval. However, if a sponsoring organization believes that a segment of an otherwise eligible elementary school attendance area is above
the criteria for free or reduced price
meals, then the sponsoring organization shall consult census data to determine whether the homes in that area
qualify as tier I day care homes based
on census data. If census data does not
support a tier I classification, then the
sponsoring organization shall reclassify homes in segments of such areas as
tier II day care homes unless the individual providers can document tier I
eligibility on the basis of their household income. When making tier I day
care home determinations based on
school data, a sponsoring organization

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Food and Nutrition Service, USDA

§ 226.16

shall use attendance area information
that it has obtained, or verified with
appropriate school officials to be current, within the last school year. Determinations of a day care home’s eligibility as a tier I day care home shall
be valid for one year if based on a provider’s household income, three years
if based on school data, or until more
current data are available if based on
census data. However, a sponsoring organization, State agency, or FNS may
change the determination if information becomes available indicating that
a home is no longer in a qualified area.
The State agency shall not routinely
require annual redeterminations of the
tiering status of tier I day care homes
based on updated elementary school
data.
(g) Claims submission. Each institution shall submit claims for reimbursement to the State agency in accordance with § 226.10.
(h) Program agreement. Each institution shall enter into a Program agreement with the State agency in accordance with § 226.6(f)(1).
(i) Commodities. Each institution receiving commodities shall ensure proper commodity utilization.
(j) Special Milk Program. No institution may participate in both the Child
and Adult Care Food Program and the
Special Milk Program at the same
time.
(k) Elderly feeding programs. Institutions which are school food authorities
(as defined in part 210 of this chapter)
may use facilities, equipment and personnel supported by funds provided
under this part to support a nonprofit
nutrition program for the elderly, including a program funded under the
Older Americans Act of 1965 (42 U.S.C.
3001 et seq.).
[47 FR 36527, Aug. 20, 1982, as amended at 48
FR 21530, May 13, 1983; 50 FR 8580, Mar. 4,
1985; 52 FR 15298, Apr. 28, 1987; 52 FR 36907,
Oct. 2, 1987; 53 FR 52590, Dec. 28, 1988; 54 FR
26724, June 26, 1989; Amdt. 22, 55 FR 1378, Jan.
14, 1990; 56 FR 58174, Nov. 16, 1991; 61 FR 25554,
May 22, 1996; 62 FR 903, Jan. 7, 1997; 62 FR
23619, May 1, 1997; 63 FR 9105, Feb. 24, 1998; 64
FR 72260, Dec. 27, 1999; 67 FR 43490, June 27,
2002]

§ 226.16 Sponsoring organization provisions.
(a) Each sponsoring organization
shall comply with all provisions of
§ 226.15.
(b) A sponsoring organization is prohibited from submitting an application
on behalf of a facility if either the facility or any of its principals is on the
National disqualified list. Each sponsoring organization shall submit to the
State agency all information required
for its approval and the approval of all
child care and adult day care facilities
under its jurisdiction, including:
(1) A sponsoring organization management plan and administrative budget, in accordance with § 226.6(f)(2),
which includes information sufficient
to document the sponsoring organization’s compliance with the performance
standards
set
forth
at
§ 226.6(b)(18). As part of its management
plan, a sponsoring organization of day
care homes must document that, to
perform monitoring, it will employ the
equivalent of one full-time staff person
for each 50 to 150 day care homes it
sponsors. As part of its monitoring
plan, a sponsoring organization of centers must document that, to perform
monitoring, it will employ the equivalent of one full-time staff person for
each 25 to 150 centers it sponsors. It is
the State agency’s responsibility to determine the appropriate level of staffing for monitoring for each sponsoring
organization, consistent with the specified ranges and the factors established
by the State agency in accordance with
§ 226.6(f)(2). The monitoring staff equivalent may include the employee’s time
spent on scheduling, travel time, review time, follow-up activity, and report writing. Sponsoring organizations
that are participating in the Program
on July 29, 2002 must submit a management plan or plan amendment that
meets the monitoring staffing requirement no later than July 29, 2003. For
sponsoring organizations of centers,
the portion of the administrative costs
to be charged to the Program as shown
on the administrative budget and the
actual administrative costs charged to
the Program may not exceed 15 percent
of the meal reimbursements estimated
or actually earned during the budget
year, unless the State agency grants a

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§ 226.16

7 CFR Ch. II (1–1–03 Edition)

waiver in accordance with § 226.6(f)(3).
A sponsoring organization of centers
must include in its administrative
budget all administrative costs, whether incurred by the sponsoring organization or its sponsored centers. If at any
point a sponsoring organization determines that the meal reimbursements
estimated to be earned during the
budget year will be lower than that estimated in its administrative budget,
the sponsoring organization must
amend its administrative budget to
stay within the 15 percent limitation
(or any higher limit established pursuant to a waived granted under
§ 226.6(f)(3)) or seek a waiver. Failure to
do so will result in appropriate fiscal
action in accordance with § 226.14(a).
(2) An application for participation,
or renewal materials, for each child
care and adult day care facility accompanied by all necessary supporting documentation;
(3) Timely information concerning
the eligibility status of child care and
adult day care facilities (such as licensing/approval actions);
(4) For sponsoring organizations applying for initial participation on or
after June 20, 2000, if required by State
law, regulation, or policy, a bond in the
form prescribed by such law, regulation, or policy;
(5) A copy of the sponsoring organization’s notice to parents, in a form and,
to the maximum extent practicable,
language easily understandable by the
participant’s parents or guardians. The
notice must inform them of their facility’s participation in CACFP, the
Program’s benefits, the name and telephone number of the sponsoring organization, and the name and telephone
number of the State agency responsible
for administration of CACFP;
(6) If the sponsoring organization
chooses to establish procedures for determining a day care home seriously
deficient that supplement the procedures in paragraph (l) of this section, a
copy of those supplemental procedures.
If the State agency has made the sponsoring organization responsible for the
administrative review of a proposed
termination of a day care home’s
agreement for cause, pursuant to
§ 226.6(l)(1), a copy of the sponsoring organization’s administrative review pro-

cedures. The sponsoring organization’s
supplemental serious deficiency and
administrative review procedures must
comply with paragraph (l) of this section and § 226.6(l);
(7) A copy of their outside employment policy. The policy must restrict
other employment by employees that
interferes with an employee’s performance of Program-related duties and responsibilities, including outside employment that constitutes a real or apparent conflict of interest; and
(8) For sponsoring organizations of
day care homes, the name, mailing address, and date of birth of each provider.
(c) Each sponsoring organization
shall accept final administrative and
financial responsibility for food service
operations in all child care and adult
day care facilities under its jurisdiction.
(d) Each sponsoring organization
must provide adequate supervisory and
operational personnel for the effective
management and monitoring of the
program at all facilities it sponsors.
Each sponsoring organization must employ monitoring staff sufficient to
meet the requirements of paragraph
(b)(1) of this section. At a minimum,
Program assistance must include:
(1) Pre-approval visits to each child
care and adult day care facility for
which application is made to discuss
Program benefits and verify that the
proposed food service does not exceed
the capability of the child care facility;
(2) Staff training for all child care
and adult day care facilities in Program duties and responsibilities prior
to beginning Program operations;
(3) Additional training sessions, to be
provided not less frequently than annually; and
(4) Reviews of food service operations
to assess compliance with meal pattern, recordkeeping, and other Program requirements.
(i) Reviews of sponsored centers. Reviews must be made at least three
times each year at each center. In addition:
(A) At least two of the three reviews
must be unannounced;
(B) At least one unannounced review
must include observation of a meal
service;

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Food and Nutrition Service, USDA

§ 226.16

(C) At least one review must be made
during the center’s first six weeks of
Program operation; and
(D) Not more than six months may
elapse between reviews.
(ii) Reviews of day care homes. Reviews must be made at least three
times each year at each day care home,
except as described at paragraph
(d)(4)(iii) of this section. In addition:
(A) At least two of the three reviews
must be unannounced;
(B) At least one unannounced review
must include observation of a meal
service;
(C) At least one review must be made
during the day care home’s first four
weeks of Program operation; and
(D) Not more than six months may
elapse between reviews.
(iii) Variation for sponsoring organizations of day care homes. If the State
agency believes that improved efficiency and more effective management
will result, and subject to FNSRO approval, the State agency may allow a
sponsoring organization to conduct reviews an average of at least three times
each year per day care home, provided
that:
(A) Each day care home receives at
least two unannounced reviews;
(B) At least one review is made during each day care home’s first four
weeks of Program operations; and
(C) No more than six months elapse
between reviews;
(iv) Follow-up reviews. If, in a review
of a facility, a sponsoring organization
detects one or more serious deficiency,
the next review of that facility must be
unannounced. Serious deficiencies are
those set forth at paragraph (l)(2) of
this section, regardless of the type of
sponsored facility.
(v) Notification. Sponsoring organizations must provide each sponsored center written notification of the right of
the sponsoring organization, the State
agency, the Department, and other
State and Federal officials to make announced or unannounced reviews of
their operations during the center’s
normal hours of child or adult care operations, and must also notify sponsored centers that anyone making such
reviews must show photo identification
that demonstrates that they are employees of one of these entities. For

sponsored centers participating July
29, 2002, the sponsoring organization
must provide this notice sent no later
than August 29, 2002. For sponsored
centers that are approved after July 29,
2002, the sponsoring organization must
provide the notice before meal service
under the Program begins. Sponsoring
organizations must provide day care
homes notification of unannounced visits in accordance with § 226.18(b)(1).
(vi) Other requirements pertaining to
unannounced reviews. Unannounced reviews must be made only during the facility’s normal hours of child or adult
care operations, and monitors making
such reviews must show photo identification that demonstrates that they
are employees of the sponsoring organization.
(e) Each sponsoring organization
shall comply with the recordkeeping
requirements established in § § 226.10(d)
and 226.15(e) and any recordkeeping requirements established by the State
agency in order to justify the administrative payments made in accordance
with § 226.12(a). Failure to maintain
such records shall be grounds for the
denial of reimbursement.
(f) The State agency may require a
sponsoring organization to enter into
separate agreements for the administration of separate types of facilities
(child care centers, day care homes,
adult day care centers, and outsideschool-hours care centers).
(g) Each sponsoring organization
electing to receive advance payments
of program funds for day care homes
shall disburse the full amount of such
payments within five working days of
receipt from the State agency. If the
sponsor requests the full operating advance to which it is entitled, the advances to day care homes shall be the
full amount which the sponsor expects
the home to earn based on the number
of meals projected to be served to enrolled children during the period covered by the advance multiplied by the
applicable payment rate as specified in
§ 226.13(c). If a sponsor elects to receive
only a part of the operating advance to
which it is entitled, or if the full operating advance is insufficient to provide
a full advance to each home, the advance shall be disbursed to its homes in
a manner and an amount the sponsor

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§ 226.16

7 CFR Ch. II (1–1–03 Edition)

deems appropriate. Each sponsor shall
disburse any reimbursement payments
for food service due to each day care
home within five working days of receipt from the State agency. Such payment shall be based on the number of
meals served to enrolled children at
each day care home, less any payments
advanced to such home. However, the
sponsoring organization may withhold
from Program payments to each home
an amount equal to food service operating costs incurred by the sponsoring
organization in behalf of the home and
with the home provider’s written consent. If payments from the State agency are not sufficient to provide all day
care homes under the sponsoring organization’s jurisdiction with advance
payments and reimbursement payments, available monies shall be used
to provide all due reimbursement payments before advances are disbursed.
(h) Sponsoring organizations shall
make payments of program funds to
child care centers, adult day care centers or outside-school-hours care centers within five working days of receipt
from the State agency, on the basis of
the management plan approved by the
State agency, and may not exceed the
Program costs documented at each facility during any fiscal year; except in
those States where the State agency
has chosen the option to implement a
meals times rates payment system. In
those States which implement this optional method of reimbursement, such
disbursements may not exceed the
rates times the number of meals documented at each facility during any fiscal year.
(i) Disbursements of advance payments may be withheld from child and
adult day care facilities which fail to
submit reports required by § 226.15(e).
(j) A for-profit organization shall be
eligible to serve as a sponsoring organization for proprietary title XIX or title
XX centers which have the same legal
identity as the organization, but shall
not be eligible to sponsor proprietary
title XIX or title XX centers which are
legally distinct from the organization,
day care homes, or public or private
nonprofit centers.
(k) Before sponsoring organizations
expend administrative funds to assist
family day care homes in becoming li-

censed, they shall obtain the following
information from each such home: a
completed free and reduced price application which documents that the provider meets the Program’s income
standards; evidence of its application
for licensing and official documentation of the defects that are impeding
its licensing approval; and a completed
CACFP application. These funding requests are limited to $300 per home and
are only available to each home once.
(l) Termination of agreements for cause.
(1) General. The sponsoring organization must initiate action to terminate
the agreement of a day care home for
cause if the sponsoring organization
determines the day care home has committed one or more serious deficiency
listed in paragraph (l)(2) of this section.
(2) List of serious deficiencies for day
care homes. Serious deficiencies for day
care homes are:
(i) Submission of false information
on the application;
(ii) Submission of false claims for reimbursement;
(iii)
Simultaneous
participation
under more than one sponsoring organization;
(iv) Non-compliance with the Program meal pattern;
(v) Failure to keep required records;
(vi) Conduct or conditions that
threaten the health or safety of a
child(ren) in care, or the public health
or safety;
(vii) A determination that the day
care home has been convicted of any
activity that occurred during the past
seven years and that indicated a lack
of business integrity. A lack of business integrity includes fraud, antitrust
violations, embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, receiving stolen property, making false claims, obstruction of justice,
or any other activity indicating a lack
of business integrity as defined by the
State agency, or the concealment of
such a conviction; or
(viii) Any other circumstance related
to non-performance under the sponsoring organization-day care home
agreement, as specified by the sponsoring organization or the State agency.

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Food and Nutrition Service, USDA

§ 226.16

(3) Serious deficiency notification procedures. If the sponsoring organization
determines that a day care home has
committed one or more serious deficiency listed in paragraph (l)(2) of this
section, the sponsoring organization
must use the following procedures to
provide the day care home notice of the
serious deficiency(ies) and offer it an
opportunity to take corrective action.
However, if the serious deficiency(ies)
constitutes an imminent threat to the
health or safety of participants, or the
day care home has engaged in activities that threaten the public health or
safety, the sponsoring organization
must follow the procedures in paragraph (l)(4) of this section instead of
those in this paragraph (l)(3).
(i) Notice of serious deficiency. The
sponsoring organization must notify
the day care home that it has been
found to be seriously deficient. The
sponsoring organization must provide a
copy of the serious deficiency notice to
the State agency. The notice must
specify:
(A) The serious deficiency(ies);
(B) The actions to be taken by the
day care home to correct the serious
deficiency(ies);
(C) The time allotted to correct the
serious deficiency(ies) (as soon as possible, but not to exceed 30 days);
(D) That the serious deficiency determination is not subject to administrative review.
(E) That failure to fully and permanently correct the serious deficiency(ies) within the allotted time
will result in the institution’s proposed
termination of the day care home’s
agreement and the proposed disqualification of the day care home and its
principals; and
(F) That the day care home’s voluntary termination of its agreement
with the institution after having been
notified that it is seriously deficient
will still result in the day care home’s
formal termination by the State institution and placement of the day care
home and its principals on the National disqualified list.
(ii) Successful corrective action. If the
day care home corrects the serious deficiency(ies) within the allotted time
and to the sponsoring organization’s
satisfaction, the sponsoring organiza-

tion must notify the day care home
that it has rescinded its determination
of serious deficiency. The sponsoring
organization must also provide a copy
of the notice to the State agency.
(iii) Proposed termination of agreement
and proposed disqualification. If timely
corrective action is not taken to fully
and permanently correct the serious
deficiency(ies) cited, the sponsoring organization must issue a notice proposing to terminate the day care
home’s agreement for cause. The notice
must explain the day care home’s opportunity for an administrative review
of the proposed termination in accordance with § 226.6(l). The sponsoring organization must provide a copy of the
notice to the State agency. The notice
must:
(A) Inform the day care home that it
may continue to participate and receive Program reimbursement for eligible meals served until its administrative review is concluded;
(B) Inform the day care home that
termination of the day care home’s
agreement will result in the day care
home’s termination for cause and disqualification; and
(C) State that if the day care home
seeks to voluntarily terminate its
agreement after receiving the notice of
intent to terminate, the day care home
will still be placed on the National disqualified list.
(iv) Program payments. The sponsoring organization must continue to
pay any claims for reimbursement for
eligible meals served until the serious
deficiency(ies) is corrected or the day
care home’s agreement is terminated,
including the period of any administrative review.
(v) Agreement termination and disqualification. The sponsoring organization
must immediately terminate the day
care home’s agreement and disqualify
the day care home when the administrative review official upholds the
sponsoring organization’s proposed termination and proposed disqualification, or when the day care home’s opportunity to request an administrative
review expires. At the same time the
notice is issued, the sponsoring organization must provide a copy of the termination and disqualification letter to
the State agency.

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§ 226.17

7 CFR Ch. II (1–1–03 Edition)

(4) Suspension of participation for day
care homes.
(i) General. If State or local health or
licensing officials have cited a day care
home for serious health or safety violations, the sponsoring organization
must immediately suspend the home’s
CACFP participation prior to any formal action to revoke the home’s licensure or approval. If the sponsoring organization determines that there is an
imminent threat to the health or safety of participants at a day care home,
or that the day care home has engaged
in activities that threaten the public
health or safety, and the licensing
agency cannot make an immediate onsite visit, the sponsoring organization
must immediately notify the appropriate State or local licensing and
health authorities and take action that
is consistent with the recommendations and requirements of those authorities. An imminent threat to the
health or safety of participants and engaging in activities that threaten the
public health or safety constitute serious deficiencies; however, the sponsoring organization must use the procedures in this paragraph (l)(4) (and not
the procedures in paragraph (l)(3) of
this section) to provide the day care
home notice of the suspension of participation, serious deficiency, and proposed termination of the day care
home’s agreement.
(ii) Notice of suspension, serious deficiency, and proposed termination. The
sponsoring organization must notify
the day care home that its participation has been suspended, that the day
care home has been determined seriously deficient, and that the sponsoring organization proposes to terminate the day care home’s agreement for
cause, and must provide a copy of the
notice to the State agency. The notice
must:
(A) Specify the serious deficiency(ies)
found and the day care home’s opportunity for an administrative review of
the proposed termination in accordance with § 226.6(l);
(B) State that participation (including all Program payments) will remain
suspended until the administrative review is concluded;
(C) Inform the day care home that if
the administrative review official over-

turns the suspension, the day care
home may claim reimbursement for eligible meals served during the suspension;
(D) Inform the day care home that
termination of the day care home’s
agreement will result in the placement
of the day care home on the National
disqualified list; and
(E) State that if the day care home
seeks to voluntarily terminate its
agreement after receiving the notice of
proposed termination, the day care
home will still be terminated for cause
and disqualified.
(iii) Agreement termination and disqualification. The sponsoring organization must immediately terminate the
day care home’s agreement and disqualify the day care home when the administrative review official upholds
the sponsoring organization’s proposed
termination, or when the day care
home’s opportunity to request an administrative review expires.
(iv) Program payments. A sponsoring
organization is prohibited from making
any Program payments to a day care
home that has been suspended until
any administrative review of the proposed termination is completed. If the
suspended day care home prevails in
the administrative review of the proposed termination, the sponsoring organization must reimburse the day
care home for eligible meals served
during the suspension period.
[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct.
15, 1982, as amended at 48 FR 21530, May 13,
1983; 50 FR 8580, Mar. 4, 1985; 50 FR 26975,
July 1, 1985; 53 FR 52591, Dec. 28, 1988; 63 FR
9729, Feb. 26, 1998; 64 FR 72260, Dec. 27, 1999;
67 FR 43490, June 27, 2002]

§ 226.17 Child care center provisions.
(a) Child care centers may participate in the Program either as independent centers or under the auspices
of a sponsoring organization; provided,
however, that public and private nonprofit centers shall not be eligible to
participate in the Program under the
auspices of a for-profit sponsoring organization. Child care centers participating as independent centers shall
comply with the provisions of § 226.15.
(b) All child care centers, independent or sponsored, shall meet the
following requirements

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Food and Nutrition Service, USDA

§ 226.17

(1) Child care centers shall have Federal, State, or local licensing or approval to provide day care services to
children. Child care centers which are
complying with applicable procedures
to renew licensing or approval may
participate in the Program during the
renewal process, unless the State agency has information which indicates
that renewal will be denied. If licensing
or approval is not available, a center
may participate if:
(i) It receives title XX funds for child
care; or
(ii) It demonstrates compliance with
the CACFP child care standards or any
applicable State or local child care
standards to the State agency.
(2) Except for proprietary title XX
centers, child care centers shall be public, or have tax exempt status under
the Internal Revenue Code of 1986.
(3) Each child care center participating in the Program shall serve one
or more of the following meal types: (i)
Breakfast, (ii) lunch, (iii) supper, and
(iv) supplemental food. Reimbursement
shall not be claimed for more than two
meals and one supplement provided
daily to each child, except that reimbursement may be claimed for two
meals and two supplements or three
meals and one supplement served to a
child for each day in which that child
is maintained in care for eight or more
hours.
(4) Each child care center participating in the Program shall claim only
the meal types specified in its approved
application in accordance with the
meal pattern requirements specified in
§ 226.20. Reimbursement may not be
claimed for meals served to children
who are not enrolled, or for meals
served to children at any one time in
excess of the child care center’s authorized capacity, or for any meal
served at a proprietary title XX center
during a calendar month when less
than 25 percent of enrolled children or
25 percent of licensed capacity, whichever is less, were title XX beneficiaries.
Menus and any other nutritional records required by the State agency shall
be maintained to document compliance
with such requirements.
(5) A child care center with preschool children may also be approved
to serve a breakfast, supplement, and

supper to school-age children enrolled
in an outside-school-hours care program meeting the criteria of § 226.19(b)
which is distinct from its day care program for preschool-age children. The
State agency may authorize the service
of lunch to such enrolled children who
attend a school which does not offer a
lunch program provided the limit of
not more than two meals and one supplement per child per day is not exceeded. If the majority of children
served by the center are participating
in an outside-school-hours care program, the center shall comply with reporting requirements of § 226.19 and, if
it is a facility, shall be monitored by
the sponsoring organization at the frequency specified in § 226.16(d)(4)(iii).
(6) A child care center may utilize existing school food service facilities or
obtain meals from a school food service
facility, and the pertinent requirements of this part shall be embodied in
a written agreement between the child
care center and school. The center
shall maintain responsibility for all
Program requirements set forth in this
part.
(7) Child care centers shall collect
and maintain documentation of the enrollment of each child, including information used to determine eligibility
for free and reduced price meals in accordance with § 226.23(e)(1). In addition,
Head Start participants need only have
a Head Start statement of income eligibility, or a statement of Head Start
enrollment from an authorized Head
Start representative, to be eligible for
free meal benefits under the CACFP.
(8) Each child care center shall maintain daily records of the number of
meals by type (breakfast, lunch, supper, and supplements) served to enrolled children, and to adults performing labor necessary to the food
service.
(c) Each child care center shall comply with the recordkeeping requirements established in § 226.10(d), in paragraph (b) of this section and, if applicable, in § 226.15(e). Failure to maintain
such records shall be grounds for the
denial of reimbursement.
(d) If so instructed by its sponsoring
organization, a sponsored center must
distribute to parents a copy of the

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§ 226.18

7 CFR Ch. II (1–1–03 Edition)

sponsoring
parents.

organization’s

notice

to

[47 FR 36527, Aug. 20, 1982, as amended at 52
FR 36907, Oct. 2, 1987; 53 FR 52591, Dec. 28,
1988; 54 FR 26724, June 26, 1989; Amdt. 22, 55
FR 1378, Jan. 14, 1990; 61 FR 25554, May 22,
1996; 62 FR 23619, May 1, 1997; 63 FR 9729, Feb.
26, 1998; 64 FR 72261, Dec. 27, 1999; 67 FR 43493,
June 27, 2002]

§ 226.18

Day care home provisions.

(a) Day care homes shall have current Federal, State or local licensing
or approval to provide day care services to children. Day care homes which
cannot obtain their license because
they lack the funding to comply with
licensing standards may request a total
limit per home of $300 in administrative funds from a sponsoring organization to assist them in obtaining their
license. Day care homes that, at the
option of their sponsoring organization, receive administrative funds for
licensing-related expenses must complete documentation requested by their
sponsor as described in § 226.16(k) prior
to receiving any funds. The agreement
must be signed by the sponsoring organization and the provider and must include the provider’s full name, mailing
address, and date of birth. Day care
homes which are complying with applicable procedures to renew licensing or
approval may participate in the Program during the renewal process, unless the State agency has information
which indicates that renewal will be
denied. If licensing or approval is not
available, a day care home may participate in the Program if:
(1) The right of the sponsoring organization, the State agency, the Department, and other State and Federal officials to make announced or unannounced reviews of the day care home’s
operations and to have access to its
meal service and records during its
normal hours of child care operations.
For day care homes participating July
29, 2002, the sponsoring organization
must amend the current agreement no
later than August 29, 2002;
(2) It demonstrates compliance with
CACFP child care standards or applicable State or local child care standards
to the State agency.
(b) Day care homes participating in
the program shall operate under the

auspices of a public or private nonprofit sponsoring organization. Sponsoring organizations shall enter into a
written agreement with each sponsored
day care home which specifies the
rights and responsibilities of both parties. This agreement shall be developed
by the State agency, unless the State
agency elects, at the request of the
sponsor, to approve an agreement developed by the sponsor. At a minimum,
the agreement shall embody:
(1) The right of the sponsoring organization, the State agency, and the Department to visit the day care home
and review its meal service and records
during its hours of child care operations;
(2) The responsibility of the sponsoring organization to train the day
care home’s staff in program requirements;
(3) The responsibility of the day care
home to prepare and serve meals which
meet the meal patterns specified in
§ 226.20;
(4) The responsibility of the day care
home to maintain records of menus,
and of the number of meals, by type,
served to enrolled children;
(5) The responsibility of the day care
home to promptly inform the sponsoring organization about any change
in the number of children enrolled for
care or in its licensing or approval status;
(6) The meal types approved for reimbursement to the day care home by the
State agency;
(7) The right of the day care home to
receive in a timely manner the full
food service rate for each meal served
to enrolled children for which the sponsoring organization has received payment from the State agency. However,
if, with the home provider’s consent,
the sponsoring organization will incur
costs for the provision of program foodstuffs or meals in behalf of the home,
and subtract such costs from Program
payments to the home, the particulars
of this arrangement shall be specified
in the agreement;
(8) The right of the sponsoring organization or the day care home to terminate the agreement for cause or, subject to stipulations by the State agency, convenience;

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Food and Nutrition Service, USDA

§ 226.18

(9) A prohibition of any sponsoring
organization fee to the day care home
for its Program administrative services;
(10) If the State agency has approved
a time limit for submission of meal
records by day care homes, that time
limit shall be stated in the agreement;
(11) The responsibility of the sponsoring organization to inform tier II
day care homes of all of their options
for receiving reimbursement for meals
served to enrolled children. These options include: electing to have the
sponsoring organization attempt to
identify all income-eligible children
enrolled in the day care home, through
collection of free and reduced price applications and/or possession by the
sponsoring organization or day care
home of other proof of a child or household’s participation in a categorically
eligible program, and receiving tier I
rates of reimbursement for the meals
served to identified income-eligible
children; electing to have the sponsoring organization identify only those
children for whom the sponsoring organization or day care home possess documentation of the child or household’s
participation in a categorically eligible
program, under the expanded categorical eligibility provision contained in
§ 226.23(e)(1), and receiving tier I rates
of reimbursement for the meals served
to these children; or receiving tier II
rates of reimbursement for all meals
served to enrolled children;
(12) The responsibility of the sponsoring organization, upon the request
of a tier II day care home, to collect
applications and determine the eligibility of enrolled children for free or
reduced price meals;
(13) The State agency’s policy to restrict transfers of day care homes between sponsoring organizations;
(14) The responsibility of the day care
home to notify their sponsoring organization in advance whenever they are
planning to be out of their home during
the meal service period. The agreement
must also state that, if this procedure
is not followed and an unannounced review is conducted when the children
are not present in the day care home,
claims for meals that would have been
served during the unannounced review
will be disallowed;

(15) The day care home’s opportunity
to request an administrative review if
a sponsoring organization issues a notice of proposed termination of the day
care home’s Program agreement, or if a
sponsoring organization suspends participation due to health and safety concerns, in accordance with § 226.6(1)(2);
and
(16) If so instructed by its sponsoring
organization, the day care home’s responsibility to distribute to parents a
copy of the sponsoring organization’s
notice to parents.
(c) Each day care home shall serve
one or more of the following meal
types:
(1) Breakfast,
(2) Lunch,
(3) Supper and
(4) Supplemental food.
Reimbursement shall not be claimed
for more than two meals and one supplement provided daily to each child.
(d) Each day care home participating
in the program shall serve the meal
types specified in its approved application in accordance with the meal pattern requirements specified in § 226.20.
Menu records shall be maintained to
document compliance with these requirements. Meals shall be served at no
separate charge to enrolled children;
(e) Each day care home shall maintain daily records of the number of
children in attendance and the number
of meals, by type, served to enrolled
children. Each tier II day care home in
which the provider elects to have the
sponsoring organization identify enrolled children who are eligible for free
or reduced price meals, and in which
the sponsoring organization employs a
meal counting and claiming system in
accordance with § 226.13(d)(3)(i), shall
maintain and submit each month to
the sponsoring organization daily
records of the number and types of
meals served to each enrolled child by
name. Payment may be made for meals
served to the provider’s own children
only when (1) such children are enrolled and participating in the child
care program during the time of the
meal service, (2) enrolled nonresident
children are present and participating
in the child care program and (3) providers’ children are eligible to receive

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§ 226.19

7 CFR Ch. II (1–1–03 Edition)

free or reduced-price meals. Reimbursement may not be claimed for
meals served to children who are not
enrolled, or for meals served at any one
time to children in excess of the
home’s authorized capacity or for
meals served to providers’ children who
are not eligible for free or reducedprice meals.
(f) The State agency may not require
a day care home or sponsoring organization to maintain documentation of
home operating costs.
(g) Each day care home shall comply
with the recordkeeping requirements
established in § 226.10(d) and in this section. Failure to maintain such records
shall be grounds for the denial of reimbursement.
[47 FR 36527, Aug. 20, 1982, as amended by
Amdt. 5, 49 FR 18989, May 4, 1984; 50 FR 8580,
Mar. 4, 1985; 52 FR 36907, Oct. 2, 1987; Amdt.
22, 55 FR 1378, Jan. 14, 1990; 61 FR 25554, May
22, 1996; 62 FR 903, Jan. 7, 1997; 63 FR 9105,
Feb. 24, 1998; 63 FR 9729, Feb. 26, 1998; 64 FR
72261, Dec. 27, 1999; 67 FR 43493, June 27, 2002]

§ 226.19 Outside-school-hours care center provisions.
(a) Outside-school-hours care centers
may participate in the Program either
as independent centers or under the
auspices of a sponsoring organization;
Provided, however, That public and private nonprofit centers shall not be eligible to participate in the Program
under the auspices of a for-profit sponsoring organization. Outside-schoolhours care centers participating as
independent centers shall comply with
the provisions of § 226.15.
(b) All outside-school-hours care centers, independent or sponsored, shall
meet the following requirements:
(1) Outside-school-hours care centers
shall have current Federal, State or
local licensing or approval to provide
organized child care services to enrolled school-age children outside of
school hours. The main purpose of the
Program shall be the care and supervision of children. Outside-schoolhours care centers which are complying with applicable procedures to
renew licensing or approval may participate in the Program during the renewal process, unless the State agency
has information which indicates the renewal will be denied. If licensing or ap-

proval is not available, an outsideschool-hours care center may participate in the Program if:
(i) It receives title XX funds for providing child care; or
(ii) It demonstrates compliance with
CACFP child care standards or any applicable State or local child care standards to the State agency.
(2) Except for proprietary title XX
centers, outside-school-hours care centers shall be public, or have tax-exempt
status under the Internal Revenue
Code of 1986.
(3) Nonresidential public or private
nonprofit schools which provide organized child care programs for school
children may participate in the Program as outside-school-hours care centers if:
(i) Children are enrolled in a regularly scheduled child care program
which meets the criteria of paragraph
(b)(1) of this section. The program is
organized for the purpose of providing
child care services and is distinct from
any extracurricular programs organized primarily for scholastic, cultural,
and athletic purposes; and
(ii) Separate Program records are
maintained.
(4) Outside-school-hours care centers
shall be eligible to serve one or more of
the following meal types: breakfasts,
supplements and suppers. In addition,
outside-school-hours care centers shall
be eligible to serve lunches to enrolled
children during periods of school vacation, including weekends and holidays,
and to enrolled children attending
schools which do not offer a lunch program. Notwithstanding the eligibility
of outside-school-hours care centers to
serve Program meals to children on
school vacation, including holidays and
weekends, such centers shall not operate under the Program on weekends
only.
(5) Each outside-school-hours care
center participating in the Program
shall claim only the meal types specified in its approved application and
served in compliance with the meal
pattern requirements of § 226.20. Reimbursement shall not be claimed for
more than two meals and one supplement provided daily to each child, except that reimbursement may be

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Food and Nutrition Service, USDA

§ 226.19a

claimed for two meals and two supplements or three meals and one supplement served to a child for each day in
which that child is maintained in care
for eight or more hours. In addition, reimbursement shall not be claimed for
meals served to children who are not
enrolled, for meals served to children
at any one time in excess of authorized
capacity, or for any meal served at a
proprietary title XX center during a
calendar month when less than 25 percent of enrolled children or 25 percent
of licensed capacity, whichever is less,
were title XX beneficiaries.
(6) Three hours shall elapse between
the beginning of one meal service and
the beginning of another, except that 4
hours shall elapse between the service
of a lunch and supper when no supplement is served between lunch and supper. The service of a supper shall begin
no later than 7 p.m. and end no later
than 8 p.m. The duration of the meal
service shall be limited to 2 hours for
lunches and supper and 1 hour for other
meals.
(7) Each outside-school-hours care
center shall ensure that each meal
service is supervised by an adequate
number
of
operational
personnel
trained in Program requirements.
Operational personnel shall ensure
that:
(i) Meals are served only to children
enrolled for care and adults who perform necessary food service labor; (ii)
meals served to children meet the meal
pattern requirements specified in
§ 226.20; (iii) each meal service is consistent with the meal time requirements of paragraph (b)(7) of this section; (iv) meals served are consumed on
the premises of the centers; (v) accurate records are maintained; and (vi)
the number of meals prepared or ordered is promptly adjusted on the basis
of participation trends.
(8) Each outside-school-hours care
center shall accurately maintain the
following records:
(i) Documentation of enrollment for
all children, including information
used to determine eligibility for free or
reduced price meals in accordance with
§ 226.23(e)(1);
(ii) Number of meals prepared or delivered for each meal service;

(iii) Daily menu records for each
meal service;
(iv) Number of meals served to enrolled children at each meal service;
(v) Number of enrolled children in attendance during each meal service;
(vi) Number of meals served to adults
performing necessary food service
labor for each meal service; and
(vii) All other records required by the
State agency financial management
system.
(9) An outside-school-hours care center may utilize existing school food
service facilities or obtain meals from
a school food service facility, and the
pertinent requirements of this part
shall be embodied in a written agreement between the outside-school-hours
care center and the school. The center
shall maintain responsibility for all
Program requirements set forth in this
part.
(c) Each outside-school-hours care
center shall comply with the recordkeeping requirements established in
§ 226.10(d), in paragraph (b) of this section and, if applicable, in § 226.15(e).
Failure to maintain such records shall
be grounds for the denial of reimbursement.
[47 FR 36527, Aug. 20, 1982, as amended at 52
FR 36907, Oct. 2, 1987; 54 FR 26724, June 26,
1989; Amdt. 22, 55 FR 1378, Jan. 14, 1990; 56 FR
58175, Nov. 16, 1991; 61 FR 25554, May 22, 1996;
62 FR 23619, May 1, 1997; 64 FR 72261, Dec. 27,
1999; 67 FR 43493, June 27, 2002]

§ 226.19a Adult day care center provisions.
(a) Adult day care centers may participate in the Program either as independent centers or under the auspices
of a sponsoring organization; provided,
however, that public and private nonprofit centers shall not be eligible to
participate in the Program under the
auspices of a for-profit sponsoring organization. Adult day care centers participating as independent centers shall
comply with the provisions of § 226.15.
(b) All adult day care centers, independent or sponsored, shall meet the
following requirements:
(1) Adult day care centers shall provide a community-based group program
designed to meet the needs of functionally impaired adults through an individual plan of care. Such a program

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§ 226.19a

7 CFR Ch. II (1–1–03 Edition)

shall be a structured, comprehensive
program that provides a variety of
health, social and related support services to enrolled adult participants.
(2) Adult day care centers shall provide care and services directly or under
arrangements made by the agency or
organization whereby the agency or organization
maintains
professional
management responsibility for all such
services.
(3) Adult day care centers shall have
Federal, State or local licensing or approval to provide day care services to
functionally impaired adults (as defined in § 226.2) or individuals 60 years
of age or older in a group setting outside their home or a group living arrangement on a less than 24-hour basis.
Adult day care centers which are complying with applicable procedures to
renew licensing or approval may participate in the Program during the renewal process, unless the State agency
has information which indicates that
renewal will be denied.
(4) Except for proprietary title XIX
or title XX centers, adult day care centers shall be public, or have tax-exempt
status under the Internal Revenue
Code of 1986.
(5) Each adult day care center participating in the Program shall serve
one or more of the following meal
types:
(i) Breakfast,
(ii) Lunch,
(iii) Supper, and
(iv) Supplemental food.
Reimbursement shall not be claimed
for more than two meals and one supplement provided daily to each adult
participant.
(6) Each adult day care center participating in the Program shall claim
only the meal types specified in its approved application in accordance with
the meal pattern requirements specified in § 226.20. Participating centers
may not claim CACFP reimbursement
for meals claimed under part C of title
III of the Older Americans Act of 1965.
Reimbursement may not be claimed for
meals served to persons who are not
enrolled, or for meals served to participants at any one time in excess of the
center’s authorized capacity, or for any
meal served at a proprietary title XIX
or title XX center during a calendar

month when less than 25 percent of enrolled participants were title XIX or
title XX beneficiaries. Menus and any
other nutritional records required by
the State agency shall be maintained
to document compliance with such requirements.
(7) An adult day care center may obtain meals from a school food service
facility, and the pertinent requirements of this part shall be embodied in
a written agreement between the center and school. The center shall maintain responsibility for all Program requirements set forth in this part.
(8) Adult day care centers shall collect and maintain documentation of
the enrollment of each adult participant including information used to determine eligibility for free and reduced
price meals in accordance with
§ 226.23(e)(1).
(9) Each adult day care center shall
maintain daily records of the number
of meals by type (breakfast, lunch, supper, and supplements) served to enrolled participants, and to adults performing labor necessary to the food
service.
(10) Each adult day care center shall
maintain records on the age of each enrolled person. In addition, each adult
day care center shall maintain records
which demonstrate that each enrolled
person under the age of 60 meets the
functional impairment eligibility requirements established under the definition of ‘‘functionally impaired adult’’
contained in this part. Finally, each
adult day care center shall maintain
records which document that qualified
adult day care participants reside in
their own homes (whether alone or
with spouses, children or guardians) or
in group living arrangements as defined in § 226.2.
(c) Each adult day care center shall
comply with the recordkeeping requirements established in § 226.10(d), in
paragraph (b) of this section and, if applicable, in § 226.15(e). Failure to maintain such records shall be grounds for
the denial of reimbursement.
[53 FR 52591, Dec. 28, 1988, as amended by
Amdt. 22, 55 FR 1378, Jan. 14, 1990; 61 FR
25554, May 22, 1996; 62 FR 23619, May 1, 1997;
64 FR 72261, Dec. 27, 1999; 67 FR 43493, June
27, 2002]

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Food and Nutrition Service, USDA

§ 226.20

§ 226.20 Requirements for meals.
(a) Except as otherwise provided in
this section, each meal served in the
Program shall contain, as a minimum,
the indicated food components:
(1) A breakfast shall contain: (i)
Fluid milk as a beverage or on cereal,
or used in part for each purpose;
(ii) Vegetable(s) or fruit(s) or fullstrength vegetable or fruit juice, or
any combination of these foods;
(iii) Whole-grain or enriched bread;
or cornbread, biscuits, rolls, muffins,
etc., made with whole-grain or enriched meal or flour; or whole-grain or
enriched or fortified cereal; or cooked
whole-grain or enriched pasta or noodle
products such as macaroni, or cereal
grains such as rice, bulgur, or corn
grits; or any combination of these
foods.
(2) Lunch shall contain: (i) Fluid
milk as a beverage;
(ii)(A) Lean meat, poultry or fish; alternate protein products; or cheese; or
an egg; or cooked dry beans or peas; or
peanut butter; or any combination of
these foods. These foods must be served
in a main dish, or in a main dish and
one other menu item, to meet this requirement. Cooked dry beans or dry
peas may be used as the meat alternate
or as part of the vegetable/fruit component but not as both food components
in the same meal;
(B) Nuts and seeds and their butters
listed in program guidance are nutritionally comparable to meat or other
meat alternates based on available nutritional data. Acorns, chestnuts, and
coconuts shall not be used as meat alternates due to their low protein content. Nut or seed meals or flours may
be used as an ingredient in a bread/
bread alternate, but shall not be used
as a meat alternate except as defined
in this part under Appendix A: Alternate Foods for Meals, and in program
guidance materials. As noted in paragraph (c)(2) of this section, nuts or
seeds may be used to meet no more
than one-half of the meat/meat alternate requirements. Therefore, nuts or
seeds must be combined with another
meat/meat alternate to fulfill the requirement;
(C) Yogurt may be used to meet all or
part of the meat/meat alternate requirement. Yogurt served may be ei-

ther plain or flavored, unsweetened or
sweetened. Noncommercial and/or nonstandardized yogurt products, such as
frozen yogurt, homemade yogurt, yogurt flavored products, yogurt bars, yogurt covered fruit and/or nuts or similar products shall not be credited. Four
ounces (weight) or 1⁄2 cup (volume) of
yogurt fulfills the equivalent of one
ounce of the meat/meat alternate requirement in the meal pattern.
(iii) Two or more vegetables or fruits,
or a combination of both. Full-strength
vegetable or fruit juice may be counted
to meet not more than one-half of this
requirement;
(iv) Whole-grain or enriched bread; or
cornbread, biscuits, rolls, muffins, etc.,
made with whole-grain or enriched
meal or flour; or whole-grain or enriched pasta or noodle products such as
macaroni, or cereal grains such as rice,
bulgur, or corn grits; or any combination of these foods.
(3) Supper shall contain the food
components and servings listed for
lunch in § 226.20(a)(2), except that, for
adult participants in adult day care
centers, it does not require a serving of
fluid milk.
(4) Supplemental food shall contain
two of the following four components:
(i) Fluid milk as a beverage, or on cereal, or used in part for each purpose;
(ii) Meat or meat alternate. Nuts and
seeds and their butters listed in program guidance are nutritionally comparable to meat or other meat alternates based on available nutritional
data. Acorns, chestnuts, and coconuts
are excluded and shall not be used as
meat alternates due to their low protein content. Nut or seed meals or
flours shall not be used as a meat alternate except as defined in this part
under Appendix A: Alternate Foods for
Meals;
(iii) Vegetable(s) or fruit(s) or fullstrength vegetable or fruit juice, or
any combination of these foods. For
children, juice may not be served when
milk is served as the only other component;
(iv) Whole-grain or enriched bread; or
cornbread, biscuits, rolls, muffins, etc.,
made with whole-grain or enriched
meal or flour; or cooked whole-grain or
enriched pasta or noodle products such
as macaroni, or cereal grains such as

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§ 226.20

7 CFR Ch. II (1–1–03 Edition)

rice, bulgar, or corn grits; or any combination of these foods.
(b) What are the requirements for the
infant meal pattern?
(1) Feeding meals to infants. Meals
served to infants ages birth through 11
months must meet the requirements
described in paragraph (b)(6) of this
section. Foods included in the infant
meal must be of a texture and a consistency that are appropriate for the
age of the infant being served. The
foods must be served during a span of
time consistent with the infant’s eating habits. For those infants whose dietary needs are more individualized, exceptions to the meal pattern must be
made in accordance with the requirements found in paragraph (h) of this
section.
(2) Breastmilk and iron-fortified formula. Either breastmilk or iron-fortified infant formula, or portions of
both, must be served for the entire first
year. Meals containing breastmilk and
meals containing iron-fortified infant
formula supplied by the facility are eligible for reimbursement. However, infant formula provided by a parent (or
guardian) and breastmilk fed directly
by the infant’s mother, during a visit
to the facility, contribute to a reimbursable meal only when the facility
supplies at least one component of the
infant’s meal.
(3) Fruit juice. Juice should not be offered to infants until they are 6 months
of age and ready to drink from a cup.
Feeding fruit juice only from a cup will
help develop behaviors that may prevent early childhood caries. Fruit juice
served as part of the meal pattern for
infants 8 through 11 months must be
full-strength.
(4) Solid foods. Solid foods of an appropriate texture and consistency are
required only when the infant is developmentally ready to accept them. The
facility should consult with the infant’s parent (or guardian) in making
the decision to introduce solid foods.
Solid foods should be introduced one at
a time on a gradual basis with the intent of ensuring the infant’s health and
nutritional well-being.
(5) Infant meal pattern. Infant meals
must have, at a minimum, each of the
food components indicated, in the
amount that is appropriate for the in-

fant’s age. For some breastfed infants
who regularly consume less than the
minimum amount of breastmilk per
feeding, a serving of less than the minimum amount of breastmilk may be offered. In these situations, additional
breastmilk must be offered if the infant is still hungry. Meals may include
portions of breastmilk and iron-fortified infant formula as long as the
total number of ounces meets, or exceeds, the minimum amount required
of this food component. Similarly, to
meet the component requirements for
vegetables and fruit, portions of both
may be served.
(i) Birth through 3 months. Only
breastmilk or iron-fortified formula is
required to meet the infant’s nutritional needs.
(A) Breakfast—4 to 6 fluid ounces of
breastmilk or iron-fortified infant formula.
(B) Lunch or supper—4 to 6 fluid
ounces of breastmilk or iron-fortified
infant formula.
(C) Snack—4 to 6 fluid ounces of
breastmilk or iron-fortified infant formula.
(ii) 4 through 7 months. Breastmilk or
iron-fortified formula is required.
Some infants may be developmentally
ready for solid foods of an appropriate
texture and consistency. Meals are reimbursable when facilities provide all
of the components in the meal pattern
that the infant is developmentally
ready to accept.
(A) Breakfast—4 to 8 fluid ounces of
breastmilk or iron-fortified infant formula; and 0 to 3 tablespoons of ironfortified dry infant cereal.
(B) Lunch or supper—4 to 8 fluid
ounces of breastmilk or iron-fortified
infant formula; and 0 to 3 tablespoons
of iron-fortified dry infant cereal; and 0
to 3 tablespoons of fruit or vegetable.
(C) Snack—4 to 6 fluid ounces of
breastmilk or iron-fortified infant formula.
(iii) 8 through 11 months. Breastmilk
or iron-fortified formula and solid
foods of an appropriate texture and
consistency are required. Meals are reimbursable when facilities provide all
of the components in the meal pattern
that the infant is developmentally
ready to accept.

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Food and Nutrition Service, USDA

§ 226.20

(A) Breakfast—6 to 8 fluid ounces of
breastmilk or iron-fortified infant formula; 2 to 4 tablespoons of iron-fortified dry infant cereal; and 1 to 4 tablespoons of fruit or vegetable.
(B) Lunch or supper—6 to 8 fluid
ounces of breastmilk or iron-fortified
infant formula; 2 to 4 tablespoons of
iron-fortified dry infant cereal; and/or 1
to 4 tablespoons of meat, fish, poultry,
egg yolk, or cooked dry beans or peas;
or 1⁄2 to 2 ounces (weight) of cheese; or
1 to 4 ounces (volume) of cottage
cheese; or 1 to 4 ounces (weight) of

cheese food or cheese spread; and 1 to 4
tablespoons of fruit or vegetable.
(C) Snack—2 to 4 fluid ounces of
breastmilk, iron-fortified infant formula, or full strength fruit juice; and 0
to 1⁄2 slice of crusty bread (if developmentally ready) or 0 to 2 cracker type
products (if developmentally ready),
which are made from whole-grain or
enriched meal or flour, and suitable as
a finger food for an infant.
(6) Infant meal pattern table. The minimum amounts of food components to
serve to infants, as described in paragraph (b)(5) of this section, are:

CHILD CARE INFANT MEAL PATTERN
Type of meal service

Birth through 3 months

4 through 7 months

8 through 11 months

Breakfast ..................................

4–6 fluid ounces of formula1
or breastmilk 2 3.

4–8 fluid ounces of formula1
or breastmilk2 3; and.
0–3 tablespoons of infant cereal1 4.

Lunch or Supper ......................

4–6 fluid ounces of formula1
or breastmilk2 3.

4–8 fluid ounces of formula1
or breastmilk2 3; and.
0–3 tablespoons of infant cereal 1 4; and.
0–3 tablespoons of fruit or
vegetable or both 4.

Snack .......................................

4–6 fluid ounces of formula1
or breastmilk2 3.

4–6 fluid ounces of formula1
or breastmilk2 3.

6–8 fluid ounces of formula1
or breastmilk2 3; and
2–4 tablespoons of infant cereal 1; and
1–4 tablespoons of fruit or
vegetable or both.
6–8 fluid ounces of formula1
or breastmilk2 3; and
2–4 tablespoons of infant cereal 1; and/or
1–4 tablespoons of meat, fish,
poultry, egg yolk, cooked
dry beans or peas; or
1⁄2–2 ounces of cheese; or
1–4 ounces (volume) of cottage cheese; or
1–4 ounces (weight) of
cheese food or cheese
spread; and
1–4 tablespoons of fruit or
vegetable or both.
2–4 fluid ounces of formula1,
breastmilk2 3, or fruit juice5;
and
0–1⁄2 slice of bread4 6 or 0–2
crackers4 6.

1 Infant

formula and dry infant cereal must be iron-fortified.
2 Breastmilk or formula, or portions of both, may be served; however, it is recommended that breastmilk be served in place of
formula from birth through 11 months.
3 For some breastfed infants who regularly consume less than the minimum amount of breastmilk per feeding, a serving of less
than the minimum amount of breastmilk may be offered, with additional breastmilk offered if the infant is still hungry.
4 A serving of this component is required only when the infant is developmentally ready to accept it.
5 Fruit juice must be full-strength.
6 A serving of this component must be made from whole-grain or enriched meal or flour.

(c) Meal patterns for children age one
through 12 and adult participants. When
individuals over age one participate in
the Program, the total amount of food
authorized in the meal patterns set
forth below shall be provided in order
to qualify for reimbursement.

(1) Breakfast. The minimum amount
of food components to be served as
breakfast as set forth in paragraph
(a)(1) of this section are as follows:

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VerDate Dec<13>2002
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Milk, fluid .............................................................................................................
Vegetables and Fruits or .....................................................................................
Full-strength vegetable or fruit juice or an equivalent quantity of any combination of vegetable(s), fruit(s), and juice.

Age 1 and 2

Age 3 through 5

Age 6 through 12 1

Adult participants

⁄ cup 2 ..........................
1⁄4 cup .............................
1⁄4 cup .............................

34

⁄ cup .............................
1⁄2 cup .............................
1⁄2 cup .............................

1 cup ..............................
1⁄2 cup .............................
1⁄2 cup .............................

1 cup.2
1⁄2 cup.
1⁄2 cup.

12

12

1 slice .............................
1 serving .........................
3⁄4 cup or 1 ounce ..........
1⁄2 cup .............................
1⁄2 cup .............................
1⁄2 cup .............................

2 slices (servings).
2 servings.
11⁄2 cup or 2 ounces.
1 cup.
1 cup.
1 cup.

12

§ 226.20

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Food components

Bread and Bread Alternates 3

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Bread or ..............................................................................................................
Cornbread, biscuits, rolls, muffins, etc.4 or .........................................................
Cold dry cereal 5 or .............................................................................................
Cooked cereal or .................................................................................................
Cooked pasta or noodle products or ..................................................................
Cooked cereal grains or an equivalent quantity of any combination of bread/
bread alternate.

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⁄
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1⁄4
1⁄4
1⁄4
12

slice ...........................
serving .......................
cup or 1⁄3 ounce ........
cup .............................
cup .............................
cup .............................

⁄
⁄
⁄
1⁄4
1⁄4
1⁄4
12
13

slice ...........................
serving .......................
cup or 1⁄2 ounce ........
cup .............................
cup .............................
cup .............................

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226

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1 Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than the minimum quantities specified in
this section for children age 6 up to 12.
2 For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
3 Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with whole grain or enriched meal or flour; cereal shall be whole grain or enriched or fortified.
4 Serving sizes and equivalents to be published in guidance materials by FNS.
5 Either volume (cup) or weight (ounces) whichever is less.

200013T

7 CFR Ch. II (1–1–03 Edition)

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Food and Nutrition Service, USDA

§ 226.20

(2) Lunch. The minimum amount of
food components to be served as lunch

as set forth in paragraph (a)(2) of this
section are as follows:

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VerDate Dec<13>2002
Age 3 through 5

Age 6 through 12 1

⁄ cup .............................

Age 1 and 2
⁄ cup 2 ..........................

Adult participants

Jkt 200013

12

34

1 cup ..............................

1 cup 2.

Vegetables(s) and/or fruit(s) ................................................................................

14

12

34

1 cup total.

slice ...........................
serving .......................
cup .............................
cup .............................

1 slice .............................
1 serving .........................
1⁄2 cup .............................
1⁄2 cup .............................

2
2
1
1

11⁄2 ounces .....................
11⁄2 ounces .....................
11⁄2 ounces .....................
3⁄4 ....................................
3⁄8 cup .............................
3 tablespoons .................
3⁄4 ounce 9=50% .............
6 ounces or 3⁄4 cup ........

2 ounces .........................
2 ounces .........................
2 ounces .........................
1 .....................................
1⁄2 cup .............................
4 tablespoons .................
1 ounce 9=50% ...............
8 ounces or 1 cup ..........

2 ounces.
2 ounces.
2 ounces.
1.
1⁄2 cup.
4 tablespoons.
1 ounce 9=50%.
8 ounces or 1 cup.

⁄ cup total .....................

⁄ cup total .....................

⁄ cup total .....................

Bread and Bread Alternates 4
Bread or ..............................................................................................................
Cornbread, biscuits, rolls, muffins, etc.5 or .........................................................
Cooked pasta or noodle products or ..................................................................
Cooked cereal grains or an equivalent quantity of any combination of bread/
bread alternate.

PO 00000

12

⁄
⁄
1⁄4
1⁄4
12

slice ...........................
serving .......................
cup .............................
cup .............................

12

⁄
⁄
⁄
1⁄4
12
14

slices (servings).
servings.
cup.
cup.

Meat and Meat Alternates

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228

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Milk, fluid .............................................................................................................
Vegetables and Fruits 3

§ 226.20

03:49 Jan 19, 2003

Food components

Lean meat or poultry or fish 6 or .........................................................................
Alternate protein products 7 or ............................................................................
Cheese or ............................................................................................................
Egg (large) or ......................................................................................................
Cooked dry beans or peas or .............................................................................
Peanut butter or soynut butter or other nut or seed butters or ..........................
Peanuts or soynuts or tree nuts or seeds 8 or ....................................................
Yogurt, plain or flavored, unsweetened or sweetened or an equivalent quantity of any combination of the above meat/meat alternates.

1 ounce ..........................
1 ounce ..........................
1 ounce ..........................
1⁄2 ....................................
1⁄4 cup .............................
2 tablespoons .................
1⁄2 ounce 9=50% .............
4 ounces or 1⁄2 cup ........

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1 Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than the minimum quantities specified in
this section for children age 6 up to 12.
2 For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
3 Serve 2 or more kinds of vegetable(s) and/or fruit(s). Full-strength vegetable or fruit juice may be counted to meet not more than one-half of this requirement.
4 Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with whole grain or enriched meal or flour.
5 Serving sizes and equivalents to be published in guidance materials by FNS.
6 Edible portion as served.
7 Must meet the requirements in appendix A of this part.
8 Tree nuts and seeds that may be used as meat alternates are listed in program guidance.
9 No more than 50% of the requirement shall be met with nuts or seeds. Nuts or seeds shall be combined with another meat/meat alternate to fulfill the requirement. For purpose of determining combinations, 1 ounce of nuts or seeds is equal to 1 ounce of cooked lean meat, poultry, or fish.

Food and Nutrition Service, USDA

§ 226.20

(3) Supper. The minimum amount of
food components to be served as supper

as set forth in paragraph (a)(3) of this
section are as follows:

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Age 3 through 5

Age 6 through 12 1

⁄ cup 2 ..........................

Age 1 and 2
⁄ cup 2 ..........................

Adult participants

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12

34

1 cup ..............................

None.

Vegetables(s) and/or fruit(s) ................................................................................

14

12

34

1 cup total.

12

⁄ slice ...........................
⁄ serving .......................
1⁄4 cup .............................

12

12

12

⁄ slice ...........................
⁄ serving .......................
1⁄4 cup .............................

1 slice .............................
1 serving .........................
1⁄2 cup .............................

2 slices (servings).5
2 servings.
1 cup.

1 ounce ..........................
1 ounce ..........................
1 ounce ..........................
1⁄2 ....................................
1⁄4 cup .............................
2 tablespoons .................
1⁄2 ounce 9=50% .............
4 ounces or 1⁄2 cup ........

11⁄2 ounces .....................
11⁄2 ounces .....................
11⁄2 ounces .....................
3⁄4 ....................................
3⁄8 cup .............................
3 tablespoons .................
3⁄4 ounce 9=50% .............
6 ounces or 3⁄4 cup ........

2 ounces .........................
2 ounces .........................
2 ounces .........................
1 .....................................
1⁄2 cup .............................
4 tablespoons .................
1 ounce 9=50% ...............
8 ounces or 1 cup ..........

2 ounces.
2 ounces.
2 ounces.
1.
1⁄2 cup.
4 tablespoons.
1 ounce 9=50%.
8 ounces or 1 cup.

⁄ cup total ......................

⁄ cup total .....................

⁄ cup total .....................

Bread and Bread Alternates 4
Bread or ..............................................................................................................
Cornbread, biscuits, rolls, muffins, etc.5 or .........................................................
Cooked cereal grains or an equivalent quantity of any combination of bread/
bread alternate.

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Meat and Meat Alternates

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Milk, fluid .............................................................................................................
Vegetables and Fruits 3

§ 226.20

03:49 Jan 19, 2003

Food components

Lean meat or poultry or fish 6 or .........................................................................
Alternate protein products 7 or ............................................................................
Cheese or ............................................................................................................
Egg (large) or ......................................................................................................
Cooked dry beans or peas or .............................................................................
Peanut butter or soynut butter or other nut or seed butters or ..........................
Peanuts or soynuts or tree nuts or seeds 8 or ....................................................
Yogurt, plain or flavored, unsweetened or sweetened or an equivalent quantity of any combination of the above meat/meat alternates.

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7 CFR Ch. II (1–1–03 Edition)

Y:\SGML\200013T.XXX

1 Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than the minimum quantities specified in
this section for children age 6 up to 12.
2 For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
3 Serve 2 or more kinds of vegetable(s) and/or fruit(s). Full-strength vegetable or fruit juice may be counted to meet not more than one-half of this requirement.
4 Bread, pasta or noodle products, and cereal grains, shall be whole grain or enriched; cornbread, biscuits, rolls, muffins, etc., shall be made with whole grain or enriched meal or flour.
5 Serving sizes and equivalents to be published in guidance materials by FNS.
6 Edible portion as served.
7 Must meet the requirements in appendix A of this part.
8 Tree nuts and seeds that may be used as meat alternates are listed in program guidance.
9 No more than 50% of the requirement shall be met with nuts or seeds. Nuts or seeds shall be combined with another meat/meat alternate to fulfill the requirement. For purpose of determining combinations, 1 ounce of nuts or seeds is equal to 1 ounce of cooked lean meat, poultry, or fish.

Food and Nutrition Service, USDA

§ 226.20

(4) Snack. The minimum amounts of
food components to be served as snack
as set forth in paragraph (a)(4) of this
section are as follow. Select two of the

following four components. (For children, juice may not be served when
milk is served as the only other component.)

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VerDate Dec<13>2002
Age 3 through 5

Age 6 through 12 1

⁄ cup ...............................

1 cup .................................

1 cup.

Age 1 and 2

Adult participants 1

MILK

Jkt 200013

Milk, fluid ....................................................................................................

12

⁄

cup 2

.............................

12

§ 226.20

03:49 Jan 19, 2003

Food components

VEGETABLES AND FRUIT

PO 00000

Vegetable(s) and/or fruit(s) or ...................................................................
Full-strength vegetable or fruit juice or an equivalent quantity of any
combination of vegetable(s), fruit(s), and juice.

12

34

12

1 slice ...............................
1 serving ...........................
3⁄4 cup or ...........................
1 ounce .............................
1⁄2 cup ...............................
1⁄2 cup ...............................

1 slice (serving).
1 serving.
3⁄4 cup or.
1 ounce.
1⁄2 cup.
1⁄2 cup.

1 ounce .............................
1 ounce .............................
1 ounce .............................
1⁄2 egg ...............................
1⁄4 cup ...............................
2 tablespoons ...................
1 ounce .............................
4 ounces or 1⁄2 cup ...........

1 ounce.
1 ounce.
1ounce.
1⁄2 egg.
1⁄4 cup.
2 tablespoons.
1 ounce.
4 ounces or 1⁄2 cup.

⁄ cup ...............................
⁄ cup ...............................

⁄ cup ...............................
⁄ cup ...............................

⁄ cup.
⁄ cup.

BREAD AND BREAD ALTERNATES 3
Bread or .....................................................................................................
Cornbread, biscuits, rolls, muffins, etc.4 or ...............................................
Cold dry cereal 5 ........................................................................................
Cooked pasta or noodle products or .........................................................
Cooked cereal or grains or an equivalent quantity of any combination of
bread/bread alternates.

12

⁄
⁄
1⁄4
1⁄3
1⁄4
1⁄4
12

slice ..............................
serving .........................
cup or ...........................
ounce ...........................
cup ...............................
cup ...............................

12

⁄
⁄
⁄
1⁄2
1⁄4
1⁄4
12
13

slice ..............................
serving .........................
cup or ...........................
ounce ...........................
cup ...............................
cup ...............................

MEAT AND MEAT ALTERNATES
Lean meat or poultry or fish 6 or ................................................................
Alternate protein products 7 or ...................................................................
Cheese or ..................................................................................................
Egg (large) 8 or ..........................................................................................
Cooked dry beans or peas or ...................................................................
Peanut butter or soynut butter or other nut or seed butters or ................
Peanuts or soynuts or tree nuts or seeds 9 or ..........................................
Yogurt, plain or flavored, unsweetened or sweetened, or an equivalent
quantity of any combination of meat/meat alternates.

12

⁄ ounce ...........................
1⁄2 ounce ...........................
1⁄2 ounce ...........................
1⁄2 egg ...............................
1⁄8 cup ...............................
1 tablespoon .....................
1⁄2 ounce ...........................
2 ounces or 1⁄4 cup ...........

12

⁄ ounce ...........................
⁄ ounce ...........................
1⁄2 ounce ...........................
1⁄2 egg ...............................
1⁄8 cup ...............................
1 tablespoon .....................
1⁄2 ounce ...........................
2 ounces or 1⁄4 cup ...........
12

200013T

1 Children age 12 and up may be served adult size portions based on the greater food needs of older boys and girls, but shall be served not less than the minimum quantities specified in
this section for children age 6 up to 12.
2 For purposes of the requirements outlined in this subsection, a cup means a standard measuring cup.
3 Bread, pasta or noodle products, and cereal grains shall be whole-grain or enriched; cornbread, biscuits, rolls, muffins, etc. shall be made with whole-grain or enriched meal or flour; cereal shall be whole-grain or enriched or fortified.
4 Serving size and equivalents to be published in guidance materials by FNS.
5 Either volume (cup) or weight (ounce), whichever is less.
6 Edible portion as served.
7 Must meet the requirements in Appendix A of this part.
8 One-half egg meets the required minimum amount (one ounce or less) of meat alternate.
9 Tree nuts and seeds that may be used as meat alternates are listed in program guidance.

7 CFR Ch. II (1–1–03 Edition)

Y:\SGML\200013T.XXX

34

12

⁄ cup ...............................
⁄ cup ...............................

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12

12

.

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12

Food and Nutrition Service, USDA

§ 226.20

(d) Additional food. To improve the
nutrition of participating children over
1 year of age additional foods may be
served with each meal as follows:
(1) Breakfast. Include as often as practical one-half egg; or a 1-ounce serving
(edible portion as served) of meat,
poultry or fish; or 1-ounce of cheese; or
2 tablespoons of peanut butter; or 4 oz.
of yogurt; or an equivalent quantity of
any combination of these foods. Additional foods may be served as desired.
(2) Lunch, supper or supplemental food.
Additional foods may be served as desired.
(e) Temporary unavailability of milk. If
emergency conditions prevent an institution normally having a supply of
milk from temporarily obtaining milk
deliveries, the State agency may approve the service of breakfasts,
lunches, or suppers without milk during the emergency period.
(f) Continuing unavailability of milk.
The inability of an institution to obtain a supply of milk on a continuing
basis shall not bar it from participation in the Program. In such cases, the
State agency may approve service of
meals without milk, provided that an
equivalent amount of canned, whole
dry or nonfat dry milk is used in the
preparation of the components of the
meal set forth in paragraphs (a)(1), (2)
and (3) of this section.
(g) Statewide substitutions. In American Samoa, Puerto Rico, Guam, the
Virgin Islands, the Trust Territory of
the Pacific Islands, and the Northern
Mariana Islands the following variations from the meal requirements are
authorized: A serving of a starchy vegetable, such as yams, plantains, or
sweet potatoes may be substituted for
the bread requirements.
(h) Individual substitutions. Substitutions may be made in food listed in
paragraphs (b) and (c) of this section if
individual participants are unable, because of medical or other special dietary needs, to consume such foods.
Substitutions because of medical needs
shall be made only when supported by
a statement from a recognized medical
authority which includes recommended
alternate foods.
(i) Special variations. FNS may approve variations in the food components of the meals on an experimental

or a continuing basis in any institution
where there is evidence that such variations are nutritionally sound and are
necessary to meet ethnic, religious,
economic, or physical needs.
(j) Meal planning. Institutions shall
plan for and order meals on the basis of
current participation trends, with the
objective of providing only one meal
per participant at each meal service.
Records of participation and of ordering or preparing meals shall be maintained to demonstrate positive action
toward this objective. In recognition of
the fluctuation in participation levels
which makes it difficult to estimate
precisely the number of meals needed
and to reduce the resultant waste, any
excess meals that are ordered may be
served to participants and may be
claimed for reimbursement, unless the
State agency determines that the institution has failed to plan and prepare or
order meals with the objective of providing only one meal per participant at
each meal service.
(k) Sanitation. Institutions shall ensure that in storing, preparing, and
serving food, proper sanitation and
health standards are met which conform with all applicable State and
local laws and regulations. Institutions
shall ensure that adequate facilities
are available to store food or hold
meals.
(l) Donated commodities. Institutions
shall efficiently use in the Program
any foods donated by the Department
and accepted by the institution.
(m) Plentiful foods. Institutions shall,
insofar as practical, purchase and efficiently use in the Program foods designated as plentiful by the Department.
(n) Additional provision. The State
agency may allow institutions which
serve meals prepared in schools participating in the National School Lunch
and School Breakfast Programs to substitute the meal pattern requirements
of the regulations governing those Programs (7 CFR part 210 and 7 CFR part
220, respectively) for the meal pattern
requirements contained in this section.
(o) Family-style meal service. Meals
may be served in a family-style setting.

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§ 226.21

7 CFR Ch. II (1–1–03 Edition)

(p) Offer versus serve. (1) Each adult
day care center shall offer its adult participants all of the required food
servings as set forth in paragraph
(c)(1), (c)(2) and (c)(3) of this section.
However, at the discretion of the adult
day care center, adult participants
may be permitted to decline:
(i) One of the four food items (one
serving of milk, one serving of vegetable and/or fruit, and two servings of
bread or bread alternate) required at
breakfast;
(ii) Two of the six food items (one
serving of milk, two servings of vegetable and/or fruit, two servings of bread
or bread alternate, and one serving of
meat or meat alternate) required at
lunch;
(iii) Two of the five food items (two
servings of vegetables and/or fruit, two
servings of bread or bread alternate,
and one serving of meat or meat alternate) required at supper.
(2) The price of a reimbursable meal
shall not be affected if an adult participant declines a food item.
[47 FR 36527, Aug. 20, 1982; 48 FR 40197, Sept.
16, 1983, as amended at 50 FR 8581, Mar. 4,
1985; 51 FR 16811, May 7, 1986; 51 FR 23515,
June 30, 1986; 53 FR 25308, July 6, 1988; 53
48632, Dec. 2, 1988; 53 FR 52592, Dec. 28, 1988;
54 FR 27153, June 28, 1989; 58 FR 37850, July
14, 1993; 62 FR 10191, Mar. 6, 1997; 64 FR 61775,
Nov. 15, 1999; 64 FR 72261, Dec. 27, 1999; 65 FR
12439, Mar. 9, 2000; 66 FR 65597, Dec. 20, 2001;
67 FR 36786, May 28, 2002]

§ 226.21 Food
service
management
companies.
(a) Any institution may contract
with a food service management company. An institution which contracts
with a food service management company shall remain responsible for ensuring that the food service operation
conforms to its agreement with the
State agency. All procurements of
meals from food service management
companies shall adhere to the procurement standards set forth in § 226.22.
Public institutions shall follow applicable State or local laws governing bid
procedures. In the absence of any applicable State or local laws, and in addition to the procurement provisions set
forth in § 226.22, the State agency may
mandate that each institution with
Program meal contracts of an aggregate value in excess of $10,000 formally

advertise such contracts and comply
with the following procedures intended
to prevent fraud, waste, and Program
abuse:
(1) All proposed contracts shall be
publicly announced at least once 14 calendar days prior to the opening of bids.
The announcement shall include the
time and place of the bid opening;
(2) The institution shall notify the
State agency at least 14 calendar days
prior to the opening of the bids of the
time and place of the bid opening;
(3) The invitation to bid shall not
provide for loans or any other monetary benefit or terms or conditions to
be made to institutions by food service
management companies;
(4) Nonfood items shall be excluded
from the invitation to bid, except
where such items are essential to the
conduct of the food service;
(5) The invitation to bid shall not
specify special meal requirements to
meet ethnic or religious needs unless
special requirements are necessary to
meet the needs of the participants to
be served;
(6) The bid shall be publicly opened;
(7) All bids totaling $50,000 or more
shall be submitted to the State agency
for approval before acceptance. All bids
shall be submitted to the State agency
for approval before accepting a bid
which exceeds the lowest bid. State
agencies shall respond to any request
for approval within 10 working days of
receipt;
(8) The institutions shall inform the
State agency of the reason for selecting the food service management company chosen. State agencies may require institutions to submit copies of
all bids submitted under this section.
(b) The institution and the food service management company shall enter
into a standard contract as required by
§ 226.6(i). However, public institutions
may, with the approval of the State
agency, use their customary form of
contract if it incorporates the provisions of § 226.6(i).
(c) A copy of the contract between
each institution and food service management company shall be submitted
to the State agency prior to the beginning of Program operations under the
subject contract.

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Food and Nutrition Service, USDA

§ 226.22

(d) Each proposed additional provision to the standard form of contract
shall be submitted to the State agency
for approval.
(e) A food service management company may not subcontract for the total
meal, with or without milk, or for the
assembly of the meal.
[47 FR 36527, Aug. 20, 1982, as amended at 53
FR 52594, Dec. 28, 1988]

§ 226.22 Procurement standards.
(a) This section establishes standards
and guidelines for the procurement of
foods, supplies, equipment, and other
goods and services. These standards are
furnished to ensure that such materials
and services are obtained efficiently
and economically and in compliance
with the provisions of applicable Federal law and Executive orders.
(b) These standards shall not relieve
the institution of any contractual responsibilities under its contracts. The
institution is responsible, in accordance with good administrative practice
and sound business judgment, for the
settlement of all contractual and administrative issues arising out of procurements entered into in support of
the Program. These include, but are
not limited to: source evaluation, protests of award, disputes, and claims.
Violations of the law shall be referred
to the local, State, or Federal authority having proper jurisdiction.
(c) Institutions may use their own
procurement procedures which reflect
applicable State or local laws and regulations, provided that procurements
made with Program payments conform
to the standards set forth in this section and in Attachment O of Office of
Management and Budget Circulars A–
102 and A–110, as well as to procurement requirements which may be established by the State agency, with the
approval of FNS to prevent fraud,
waste, and Program abuse.
(d) Institutions shall maintain a
written code of standards of conduct
which shall govern the performance of
their officers, employees or agents engaged in the award and administration
of contracts supported by Program
payments. No employee, officer or
agent of the grantee shall participate
in selection, or in the award or administration of a contract supported by

Federal funds if a conflict of interest,
real or apparent, would be involved.
Such a conflict would arise when:
(1) The employee, officer or agent;
(2) Any member of his immediate
family;
(3) His or her partner; or
(4) An organization which employs,
or is about to employ, any of the
above, has a financial or other interest
in the firm selected for award.
The institution’s officers, employees or
agents shall neither solicit nor accept
gratuities, favors or anything of monetary value from contractors, potential
contractors, or parties to subagreements. Institutions may set minimum
rules where the financial interest is
not substantial or the gift is an unsolicited item of nominal intrinsic value.
To the extent permitted by State or
local law or regulations, such standards of conduct shall provide for penalties, sanctions, or other disciplinary
actions for violations of such standards
by the institution’s officers, employees, or agents, or by contractors or
their agents.
(e) The institution shall establish
procurement procedures which provide
that proposed procurement actions
shall be reviewed by institution officials to avoid the purchase of unnecessary or duplicative items. Where appropriate, an analysis shall be made of
lease versus purchase alternatives, and
any other appropriate analysis to determine which approach would be the
most economical.
(f) Affirmative steps shall be taken
to assure that small and minority businesses are utilized when possible. Affirmative steps shall include the following:
(1) Including qualified small and minority businesses on solicitation lists;
(2) Assuring that small and minority
businesses are solicited whenever they
are potential sources;
(3) When economically feasible, dividing total requirements into smaller
tasks or quantities so as to permit
maximum small and minority business
participation;
(4) Where the requirement permits,
establishing delivery schedules which
will encourage participation by small
and minority businesses;

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§ 226.22

7 CFR Ch. II (1–1–03 Edition)

(5) Using the services and assistance
of the Small Business Administration
and the Minority Business Enterprise
of the Department of Commerce as required;
(6) If any subcontracts are to be let,
requiring the prime contractor to take
the affirmative steps in paragraphs (b)
(1) through (5) of this section; and
(7) Taking similar appropriate affirmative action in support of women’s
business enterprises.
(g) All procurement transactions, regardless of whether by sealed bids or by
negotiation and without regard to dollar value, shall be conducted in a manner that provides maximum open and
free competition consistent with this
section. Procurement procedures shall
not restrict or eliminate competition.
Examples of what is considered to be
restrictive of competition include, but
are not limited to (1) placing unreasonable requirements on firms in order for
them to qualify to do business, (2) noncompetitive practices between firms,
(3) organizational conflicts of interest,
and (4) unnecessary experience and
bonding requirements.
(h) The institution shall have written
selection procedures which shall provide, as a minimum, the following procedural requirements:
(1) Solicitations of offers, whether by
competitive sealed bids or competitive
negotiation, shall:
(i) Incorporate a clear and accurate
description of the technical requirements for the material, product, or
service to be procured. Such description shall not, in competitive procurements, contain features which unduly
restrict competition. The description
may include a statement of the qualitative nature of the material, product
or service to be procured, and when
necessary, shall set forth those minimum essential characteristics and
standards to which it must conform if
it is to satisfy its intended use. Detailed product specifications should be
avoided if at all possible. When it is
impractical or uneconomical to make a
clear and accurate description of the
technical requirements, a ‘‘brand name
or equal’’ description may be used as a
means to define the performance or
other salient requirements of a procurement. The specific features of the

named brand which must be met by
offerors shall be clearly stated; and
(ii) Clearly set forth all requirements
which offerors must fulfill and all
other factors to be used in evaluating
bids or proposals.
(2) Awards shall be made only to responsible contractors that possess the
potential ability to perform successfully under the terms and conditions of
a proposed procurement. Consideration
shall be given to such matters as contractor integrity, compliance with public policy, record of past performance,
and financial and technical resources.
(i) Program procurements shall be
made by one of the following methods:
(1) Small purchase procedures are
those relatively simple and informal
procurement methods that are sound
and appropriate for the procurement of
services, supplies or other property,
costing in the aggregate not more than
$10,000. Institutions shall comply with
State or local small purchase dollar
limits under $10,000. If small purchase
procedures are used for a procurement
under the Program, price or rate
quotation shall be obtained from an
adequate number of qualified sources;
or
(2) In competitive sealed bids (formal
advertising), sealed bids are publicly
solicited and a firm-fixed-price contract (lump sum or unit price) is
awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the invitation for bids, is lowest in price.
(i) In order for formal advertising to
be feasible, appropriate conditions
must be present, including as a minimum, the following:
(A) A complete, adequate and realistic specification or purchase description is available.
(B) Two or more responsible suppliers
are willing and able to compete effectively for the institution’s business.
(C) The procurement lends itself to a
firm-fixed price contract, and selection
of the successful bidder can appropriately be made principally on the
basis of price.
(ii) If formal advertising is used for a
procurement under the Program, the
following requirements shall apply:
(A) A sufficient time prior to the
date set for opening of bids, bids shall

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§ 226.22

be solicited from an adequate number
of known suppliers. In addition, the invitation shall be publicly advertised.
(B) The invitation for bids, including
specifications and pertinent attachments, shall clearly define the items or
services needed in order for the bidders
to properly respond to the invitation.
(C) All bids shall be opened publicly
at the time and place stated in the invitation for bids.
(D) A firm-fixed-price contract award
shall be made by written notice to that
responsible bidder whose bid, conforming to the invitation for bids, is
lowest. Where specified in the bidding
documents, factors such as discounts,
transportation costs and life cycle
costs shall be considered in determining which bid is lowest. Payment
discounts may only be used to determine low bid when prior experience of
the grantee indicates that such discounts are generally taken.
(E) Any or all bids may be rejected
when there are sound documented business reasons in the best interest of the
Program.
(3) In competitive negotiation, proposals are requested from a number of
sources and the Request for Proposal is
publicized. Negotiations are normally
conducted with more than one of the
sources submitting offers, and either a
fixed-price or cost-reimbursable type
contract is awarded, as appropriate.
Competitive negotiation may be used if
conditions are not appropriate for the
use of formal advertising. If competitive negotiation is used for a procurement under a grant, the following requirements shall apply:
(i) Proposals shall be solicited from
an adequate number of qualified
sources to permit reasonable competition consistent with the nature and requirements of the procurement. The
Request for Proposals shall be publicized and reasonable requests by
other sources to compete shall be honored to the maximum extent practicable:
(ii) The Request for Proposal shall
identify all significant evaluation factors, including price or cost where required and their relative importance;
(iii) The institution shall provide
mechanisms for technical evaluation of
the proposal received, determinations

of responsible offerors for the purpose
of written or oral discussions, and selection for contract award; and
(iv) Award may be made to the responsible offeror whose proposal will be
most advantageous to the procuring
party, price and other factors considered. Unsuccessful offerors should be
notified promptly.
(4) Noncompetitive negotiation is
procurement through solicitation of a
proposal from only one source, or after
solicitation of a number of sources,
competition is determined inadequate.
Noncompetitive negotiation may be
used when the award of a contract is
infeasible under small purchase, competitive bidding (formal advertising),
or competitive negotiation procedures.
Circumstances under which a contract
may be awarded by noncompetitive negotiation are limited to the following:
(i) The item is available only from a
single source;
(ii) Public exigency or emergency
when the urgency for the requirement
will not permit a delay incident to
competitive solicitation;
(iii) FNS authorizes noncompetitive
negotiation; or
(iv) After solicitation of a number of
sources, competition is determined inadequate.
(j) The cost plus a percentage of cost
method of contracting shall not be
used. Instructions shall perform some
form of cost or price analysis in connection with every procurement action
including contract modifications. Costs
or prices based on estimated costs for
contracts under the Program shall be
allowed only to the extent that costs
incurred or cost estimates included in
negotiated prices are consistent with
Federal cost principles.
(k) Institutions shall maintain records sufficient to detail the significant
history of a procurement. These
records shall include, but are not necessarily limited to information pertinent to the following: rationale for the
method of procurement, selection of
contract type, contractor selection or
rejection, and the basis for the cost or
price.
(l) In addition to provisions defining
a sound and complete procurement
contract, institutions shall include the

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§ 226.22

7 CFR Ch. II (1–1–03 Edition)

following contract provisions or conditions in all procurement contracts and
subcontracts as required by the provision, Federal Law or FNS:
(1) Contracts other than small purchases shall contain provisions or conditions which will allow for administrative, contractual, or legal remedies
in instances where contractors violate
or breach contract terms, and provide
for such sanctions and penalties as
may be appropriate;
(2) All contracts in excess of $10,000
shall contain suitable provisions for
termination by the institution including the manner by which it will be effected and the basis for settlement. In
addition, such contracts shall describe
conditions under which the contract
may be terminated for default as well
as conditions where the contract may
be
terminated
because
of
circumstances beyond the control of the
contractor;
(3) All contracts awarded in excess of
$10,000 by institutions and their contractors shall contain a provision requiring compliance with Executive
Order 11246, entitled ‘‘Equal Employment Opportunity,’’ as amended by Executive Order 11375, and as supplemented in Department of Labor regulations (41 CFR part 60);
(4) Where applicable, all contracts
awarded by institutions in excess of
$2,500 which involve the employment of
mechanics or laborers shall include a
provision for compliance with section
103 of the Contract Work Hours and
Safety Standards Act (40 U.S.C. 327
through 330) as supplemented by Department of Labor regulations (29 CFR
part 5). Under section 103 of the Act,
each contractor shall be required to
compute the wages of every mechanic
and laborer on the basis of a standard
work day of 8 hours and a standard
work week of 40 hours. Work in excess
of the standard work day or week is
permissible provided that the worker is
compensated at a rate of not less than
11⁄2 times the basic rate of pay for all
hours worked in excess of 8 hours in
any calendar day or 40 hours in the
work week. These requirements do not
apply to the purchases of supplies or
materials or articles ordinarily available on the open market, or contracts

for transportation or transmission of
intelligence;
(5) The contract shall include notice
of USDA requirements and regulations
pertaining to reporting and patent
rights under any contract involving research, developmental, experimental or
demonstration work with respect to
any discovery or invention which
arises or is developed in the course of
or under such contract, and of USDA
requirements and regulations pertaining to copyrights and rights in
data. These requirements are in
§ 3015.175 of the USDA Uniform Federal
Assistance Regulations 7 CFR part
3015. All negotiated contracts (except
those awarded by small purchases procedures) awarded by institutions shall
include a provision to the effect that
the institution, FNS, the Comptroller
General of the United States or any of
their duly authorized representatives,
shall have access to any books, documents, papers, and records of the contractor which are directly pertinent to
that specific contract, for the purpose
of making audit, examination, excerpts, and transcriptions. Institutions
shall require contractors to maintain
all required records for three years
after institutions make final payment
and all other pending matters are
closed;
(6) Contracts and subcontracts of
amounts in excess of $100,000 shall contain a provision which requires compliance with all applicable standards, orders, or requirements issued under section 306 of the Clean Air Act (42 U.S.C.
1837(h)), section 508 of the Clean Water
Act (33 U.S.C. 1368), Executive Order
11738, and Environmental Protection
Agency regulations (40 CFR part 15),
which prohibit the use under nonexempt Federal contracts, grants or
loans of facilities included on the EPA
List of Violating Facilities. The provision shall require reporting of violations to FNS and to the U.S. EPA Assistant Administrator for Enforcement
(EN–329); and
(7) Contracts shall recognize mandatory standards and policies relating to
energy efficiency which are contained
in the State energy efficiency conservation plan issued in compliance
with the Energy Policy and Conservation Act (Pub. L. 94–163).

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Food and Nutrition Service, USDA

§ 226.23

(m) Institutions shall maintain a
contract administration system insuring that contractors perform in accordance with the terms, conditions, and
specifications of their contracts or purchase orders.
§ 226.23 Free and reduced-price meals.
(a) The State agency shall require
each institution to submit, at the time
the institution applies for Program
participation, a written policy statement concerning free and reduced-price
meals to be used uniformly in all child
care and adult day care facilities under
its jurisdiction as required in this section. Institutions shall not be approved
for participation nor agreements renewed unless the free and reduced-price
policy statement has been approved.
Pending approval of a revision of a policy statement, the existing policy shall
remain in effect.
(b) Sponsoring organizations of day
care homes (which may not serve meals
at a separate charge to children) and
other institutions which elect to serve
meals at no separate charge, shall develop a policy statement consisting of
an assurance to the State agency that
all participants are served the same
meals at no separate charge, regardless
of race, color, national origin, sex, age,
or handicap and that there is no discrimination in the course of the food
service. This statement shall also contain an assurance that there will be no
identification of children in day care
homes in which meals are reimbursed
at both the tier I and tier II reimbursement rates, and that the sponsoring organization will not make any free and
reduced price eligibility information
concerning
individual
households
available to day care homes and will
otherwise limit the use of such information to persons directly connected
with the administration and enforcement of the Program.
(c) Independent centers and sponsoring organizations of centers which
charge separately for meals shall develop a policy statement for determining eligibility for free and reducedprice meals which shall include the following:
(1) The specific criteria to be used in
determining eligibility for free and reduced-price meals. The institution’s

standards of eligibility shall conform
to the Secretary’s income standards;
(2) A description of the method or
methods to be used in accepting applications from families for free and reduced-price meals. Such methods will
ensure that applications are accepted
from households on behalf of children
who are members of AFDC assistance
units or food stamp or FDPIR households or, for adult participants, who
are members of a food stamp or FDPIR
household or SSI or Medicaid participants;
(3) A description of the method or
methods to be used to collect payments
from those participants paying the full
or reduced price of the meal which will
protect the anonymity of the participants receiving a free or reduced-price
meal;
(4) An assurance which provides that
the institution will establish a hearing
procedure for use when benefits are denied or terminated as a result of
verification:
(i) A simple, publicly announced
method for a family to make an oral or
written request for a hearing;
(ii) An opportunity for the family to
be assisted or represented by an attorney or other person in presenting its
appeal;
(iii) An opportunity to examine, prior
to and during the hearing, the documents and records presented to support
the decision under appeal;
(iv) That the hearing shall be held
with reasonable promptness and convenience to the family and that adequate notice shall be given to the family as to the time and place of the hearing;
(v) An opportunity for the family to
present oral or documentary evidence
and arguments supporting its position;
(vi) An opportunity for the family to
question or refute any testimony or
other evidence and to confront and
cross-examine any adverse witnesses;
(vii) That the hearing shall be conducted and the determination made by
a hearing official who did not participate in making the initial decision;
(viii) The determination of the hearing official shall be based on the oral
and documentary evidence presented at
the hearing and made a part of that
hearing record;

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§ 226.23

7 CFR Ch. II (1–1–03 Edition)

(ix) That the family and any designated representatives shall be notified in writing of the decision of the
hearing official;
(x) That a written record shall be
prepared with respect to each hearing,
which shall include the decision under
appeal, any documentary evidence and
a summary of any oral testimony presented at the hearing, the decision of
the hearing official, including the reasons therefor, and a copy of the notification to the family of the decision of
the hearing official; and
(xi) That such written record of each
hearing shall be preserved for a period
of three years and shall be available for
examination by the family or its representatives at any reasonable time
and place during such period;
(5) An assurance that there will be no
overt identification of free and reduced-price meal recipients and no discrimination against any participant on
the basis of race, color, national origin,
sex, age, or handicap;
(6) An assurance that the charges for
a reduced-price lunch or supper will
not exceed 40 cents, that the charge for
a reduced-price breakfast will not exceed 30 cents, and that the charge for a
reduced-price supplement will not exceed 15 cents.
(d) Each institution shall annually
provide the information media serving
the area from which the institution
draws its attendance with a public release. All media releases issued by institutions other than sponsoring organizations of day care homes, shall include the Secretary’s Income Eligibility Guidelines for Free and ReducedPrice Meals. The release issued by all
sponsoring organizations of day care
homes, and by other institutions which
elect not to charge separately for
meals, shall announce the availability
of meals at no separate charge. The release issued by child care institutions
which charge separately for meals shall
announce the availability of free and
reduced-price meals to children meeting the approved eligibility criteria.
The release issued by child care institutions shall also announce that children who are members of AFDC assistance units, food stamp or FDPIR
households, or are Head Start participants are automatically eligible to re-

ceive free meal benefits. The release
issued by adult day care centers which
charge separately for meals shall announce the availability of free and reduced-price meals to participants
meeting the approved eligibility criteria. The release issued by adult day
care centers shall also announce that
adult participants who are members of
food stamp or FDPIR households or
who are SSI or Medicaid participants
are automatically eligible to receive
free meal benefits. All releases shall
state that meals are available to all
participants without regard to race,
color, national origin, sex, age or handicap.
(e)(1) Application for free and reducedprice meals. (i) For the purpose of determining eligibility for free and reduced
price meals, institutions shall distribute applications for free and reduced price meals to the families of
participants enrolled in the institution. Sponsoring organizations of day
care homes shall distribute applications for free and reduced price meals
to day care home providers who wish to
enroll their own eligible children in the
Program. At the request of a provider
in a tier II day care home, sponsoring
organizations of day care homes shall
distribute applications for free and reduced price meals to the households of
all children enrolled in the home, except that applications need not be distributed to the households of enrolled
children that the sponsoring organization determines eligible for free and reduced price meals under the circumstances described in paragraph
(e)(1)(vi) of this section. These applications, and any other descriptive material distributed to such persons, shall
contain only the family-size income
levels for reduced price meal eligibility
with an explanation that households
with incomes less than or equal to
these levels are eligible for free or reduced price meals. Such forms and descriptive materials may not contain
the income standards for free meals.
However, such forms and materials distributed by child care institutions
other than sponsoring organizations of
day care homes shall state that, if a
child is a member of a food stamp or
FDPIR household or AFDC assistance
unit, the child is automatically eligible

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Food and Nutrition Service, USDA

§ 226.23

to receive free Program meal benefits,
subject to the completion of the application as described in paragraph
(e)(1)(ii) of this section; such forms and
materials distributed by sponsoring organizations of day care homes shall
state that, if a child or a child’s parent
is participating in or subsidized under
a Federally or State supported child
care or other benefit program with an
income eligibility limit that does not
exceed the eligibility standard for free
or reduced price meals, meals served to
the child are automatically eligible for
tier I reimbursement, subject to the
completion of the application as described in paragraph (e)(1)(ii) of this
section, and shall list any programs
identified by the State agency as meeting this standard; such forms and materials distributed by adult day care
centers shall state that, if an adult
participant is a member of a food
stamp or FDPIR household or is a SSI
or Medicaid participant, the adult participant is automatically eligible to receive free Program meal benefits, subject to the completion of the application as described in paragraph (e)(1)(iii)
of this section. Sponsoring organizations of day care homes shall not make
free and reduced price eligibility information concerning individual households available to day care homes and
shall otherwise limit the use of such
information to persons directly connected with the administration and enforcement of the Program. However,
sponsoring organizations may inform
tier II day care homes of the number of
identified income-eligible enrolled children. If a State agency distributes, or
chooses to permit its sponsoring organizations to distribute, applications to
the households of children enrolled in
tier II day care homes which include
household confidentiality waiver statements, such applications shall include
a statement informing households that
their participation in the program is
not dependent upon signing the waivers. Furthermore, such forms and materials distributed by child care institutions shall state that if a child is a
Head Start participant, the child is
automatically eligible to receive free
Program meal benefits, subject to submission by Head Start officials of a
Head Start statement of income eligi-

bility or income eligibility documentation.
(ii) Except as provided in paragraph
(e)(1)(iv) of this section, the application for children shall contain a request for the following information:
(A) The names of all children for
whom application is made;
(B) The names of all other household
members;
(C) The social security number of the
adult household member who signs the
application, or an indication that he/
she does not possess a social security
number;
(D) The income received by each
household member identified by source
of income (such as earnings, wages,
welfare, pensions, support payments,
unemployment compensation, social
security, and other cash income received or withdrawn from any other
source, including savings, investments,
trust accounts, and other resources);
(E) A statement to the effect that
‘‘In certain cases, foster children are
eligible for free and reduced-price
meals regardless of household income.
If such children are living with you and
you wish to apply for such meals,
please contact us.’’;
(F) A statement that includes substantially the following information:
‘‘Unless you include your child’s case
number for the Food Stamp Program,
the Food Distribution Program on Indian Reservations (or other identifier
for the Food Distribution Program on
Indian Reservations) or the Temporary
Assistance for Needy Families Program, you must include the social security number of the adult household
member signing the application or indicate that the household member does
not have a social security number. This
is required by section 9 of the National
School Lunch Act. The social security
number is not mandatory, but the application cannot be approved if a social
security number is not given or an indication is not made that the signer
does not have a social security number.
The social security number will be used
in the administration and enforcement
of the program.’’ State agencies and institutions must ensure that the notice
complies with section 7(b) of the Privacy Act of 1974 (5 U.S.C. 552a note);
and

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§ 226.23

7 CFR Ch. II (1–1–03 Edition)

(G) The signature of an adult member
of the household which appears immediately below a statement that the person signing the application certifies
that all information furnished is true
and correct; that the application is
being made in connection with the receipt of Federal funds; that Program
officials may verify the information on
the application; and that the deliberate
misrepresentation of any of the information on the application may subject
the applicant to prosecution under applicable State and Federal criminal
statutes.
(iii) Except as provided in paragraph
(e)(1)(v) of this section, the application
for adults shall contain a request for
the following information:
(A) The names of all adults for whom
application is made;
(B) The names of all other household
members;
(C) The social security number of the
adult household member who signs the
application, or an indication that he/
she does not possess a social security
number;
(D) The income received by source of
income (such as earnings, wages, welfare, pensions, support payments, unemployment compensation, social security, and other cash income received
or withdrawn from any other source,
including savings, investments, trust
accounts and other resources);
(E) A statement which includes substantially the following information:
‘‘Section 9 of the National School
Lunch Act requires that, unless a food
stamp, or FDPIR case number or SSI
or Medicaid assistance identification
number is provided for the adult for
whom benefits are sought, you must include a social security number on the
application. This must be the social security number of the adult household
member signing the application. If the
adult household member signing the
application does not possess a social security number, he/she must indicate so
on the application. Provision of a social security number is not mandatory,
but if a social security number is not
provided or an indication is not made
that the adult household member signing the application does not have one,
the application cannot be approved.
This notice must be brought to the at-

tention of the household member
whose social security number is disclosed. The social security number may
be used to identify the household member in carrying out efforts to verify the
correctness of information stated on
the application. These verification efforts may be carried out through program reviews, audits and investigations and may include contacting employers to determine income, contacting a food stamp, Indian tribal organization or welfare office to determine current certification for receipt
of food stamps or FDPIR benefits, contacting the issuing office of SSI or
Medicaid benefits to determine current
certification for receipt of these benefits, contacting the State employment
security office to determine the
amount of benefits received, and
checking the documentation produced
by household members to provide the
amount of income received. These efforts may result in loss or reduction of
benefits, administrative claims or legal
action if incorrect information is reported.’’ State agencies and institutions shall ensure that the notice complies with section 7 of Pub. L. 93–579. If
a State or local agency plans to use the
social security numbers for CCFP
verification purposes in a manner not
described by this notice, the notice
shall be altered to include a description of those uses; and
(F) The signature of an adult member
of the household which appears immediately below a statement that the person signing the application certifies
that all information furnished is true
and correct; that the application is
being made in connection with the receipt of Federal funds; that Program
officials may verify the information on
the application; and that the deliberate
misrepresentation of any of the information on the application may subject
the applicant to prosecution under applicable State and Federal criminal
statutes.
(iv) If they so desire, households applying on behalf of children who are
members of food stamp or FDPIR
households or AFDC assistance units
may apply under this paragraph rather
than under the procedures described in
paragraph (e)(1)(ii) of this section. In

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Food and Nutrition Service, USDA

§ 226.23

addition, households of children enrolled in tier II day care homes who are
participating in a Federally or State
supported child care or other benefit
program with an income eligibility
limit that does not exceed the eligibility standard for free and reduced
price meals may apply under this paragraph rather than under the procedures
described in paragraph (e)(1)(ii) of this
section. Households applying on behalf
of children who are 0members of food
stamp or FDPIR households; AFDC assistance units; or for children enrolled
in tier II day care homes, other qualifying Federal or State program, shall
be required to provide:
(A) For the child(ren) for whom automatic free meal eligibility is claimed,
their names and food stamp, FDPIR, or
AFDC case number; or for the households of children enrolled in tier II day
care homes, their names and other program case numbers (if the program utilizes case numbers); and
(B) The signature of an adult member
of the household as provided for in
paragraph (e)(1)(ii)(G) of this section.
In
accordance
with
paragraph
(e)(1)(ii)(F) of this section, if a case
number is provided, it may be used to
verify the current certification for the
child(ren) for whom free meal benefits
are claimed. Whenever households
apply for children not receiving food
stamp, FDPIR, or AFDC benefits; or
for tier II homes, other qualifying Federal or State program benefits, they
must apply in accordance with the requirements set forth in paragraph
(e)(1)(ii) of this section.
(v) If they so desire, households applying on behalf of adults who are
members of food stamp or FDPIR
households or SSI or Medicaid participants may apply for free meal benefits
under this paragraph rather than under
the procedures described in paragraph
(e)(1)(iii) of this section. Households
applying on behalf of adults who are
members of food stamp or FDPIR
households or SSI or Medicaid participants shall be required to provide:
(A) The names and food stamp or
FDPIR case numbers or SSI or Medicaid assistance identification numbers
of the adults for whom automatic free
meal eligibility is claimed; and

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

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§ 226.23

7 CFR Ch. II (1–1–03 Edition)

complete ‘‘documentation’’ as defined
in § 226.2.
(iv) The statement: ‘‘In the operation
of child feeding programs, no person
will be discriminated against because
of race, color, national origin, sex, age,
or handicap’’;
(v) A statement to the effect that
participants having family members
who become unemployed are eligible
for free or reduced-price meals during
the period of unemployment, provided
that the loss of income causes the family income during the period of unemployment to be within the eligibility
standards for those meals;
(vi) Except in the case of adult participants, a statement to the effect
that in certain cases foster children are
eligible for free or reduced-price meals
regardless of the income of such household with whom they reside and that
households wishing to apply for such
benefits for foster children should contact the institution; and
(vii) An explanation that households
receiving free and reduced-price meals
must notify appropriate institution officials during the year of any decreases
in household size or increases in income of over $50 per month or $600 per
year or—
(A) In the case of households of enrolled children that provide a food
stamp, FDPIR or AFDC case number to
establish a child’s eligibility for free
meals, any termination in the child’s
certification to participate in the Food
Stamp, FDPIR or AFDC Programs, or
(B) In the case of households of adult
participants that provide a food stamp
or FDPIR case number or an SSI or
Medicaid
assistance
identification
number to establish an adult’s eligibility for free meals, any termination
in the adult’s certification to participate in the Food Stamp, FDPIR, SSI or
Medicaid Programs.
(3) In addition to the information
listed in paragraph (e)(2) of this section
pricing institutions must include in
their letter to household an explanation that indicates that: (i) The information in the application may be
verified at any time during the year;
and (ii) how a family may appeal a decision of the institution to deny, reduce, or terminate benefits as de-

scribed under the hearing procedure set
forth in paragraph (c)(4) of this section.
(4) Determination of eligibility. The institution shall take the income information provided by the household on
the application and calculate the
household’s total current income.
When a completed application furnished by a family indicates that the
family meets the eligibility criteria for
free or reduced-price meals, the participants from that family shall be determined eligible for free or reducedprice meals. Institutions that are pricing programs shall promptly provide
written notice to each family informing them of the results of the eligibility determinations. When the information furnished by the family is not
complete or does not meet the eligibility criteria for free or reduced-price
meals, institution officials must consider the participants from that family
as not eligible for free or reduced-price
meals, and must consider the participants as eligible for ‘‘paid’’ meals.
When information furnished by the
family of participants enrolled in a
pricing program does not meet the eligibility criteria for free or reducedprice meals, pricing program officials
shall provide written notice to each
family denied free or reduced-price
benefits. At a minimum, this notice
shall include:
(i) The reason for the denial of benefits, e.g., income in excess of allowable
limits or incomplete application;
(ii) Notification of the right to appeal;
(iii) Instructions on how to appeal;
and
(iv) A statement reminding the
household that they may reapply for
free or reduced-price benefits at any
time during the year,
The reasons for ineligibility shall be
properly documented and retained on
file at the institution.
(5) Appeals of denied benefits. A family
that wishes to appeal the denial of an
application in a pricing program shall
do so under the hearing procedures established under paragraph (c)(4) of this
section. However, prior to initiating
the hearing procedures, the household
may request a conference to provide all
affected parties the opportunity to discuss the situation, present information

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and obtain an explanation of the data
submitted on the application or the decision rendered. The request for a conference shall not in any way prejudice
or diminish the right to a fair hearing.
The institution shall promptly schedule a fair hearing, if requested.
(f) Free, reduced-price and paid meal
eligibility figures must be reported by
institutions to State agencies at least
once each year and shall be based on
current family-size and income information of enrolled participants. Such
information shall be no more than 12
months old.
(g) Sponsoring organizations for family day care homes shall ensure that no
separate charge for food service is imposed on families of children enrolled
in participating family day care
homes.
(h) Verification of eligibility. State
agencies shall conduct verification of
eligibility for free and reduced-price
meals on an annual basis, in accordance with the verification procedures
outlined in paragraphs (h) (1) and (2) of
this section. Verification may be conducted in accordance with Program assistance requirements of § 226.6(m);
however,
the
performance
of
verification for individual institutions
shall occur no less frequently than
once every three years. Any State may,
with the written approval of FNSRO,
use alternative approaches in the conduct of verification, provided that the
results achieved meet the requirements
of this part. If the verification process
discloses deficiencies with the determination of eligibility and/or application procedures which exceed maximum levels established by FNS, State
agencies shall conduct follow-up reviews for the purpose of determining
that corrective action has been taken
by the institution. These reviews shall
be conducted within one year of the
date the verification process was completed. The verification effort shall be
applied without regard to race, color,
national origin, sex, age, or handicap.
State agencies shall maintain on file
for review a description of the annual
verification to be accomplished in
order to demonstrate compliance with
paragraphs (h) (1) and (2) of this section.

(1) Verification procedures for nonpricing programs. Except for sponsoring
organizations of family day care
homes, State agency verification procedures for nonpricing programs shall
consist of a review of all approved free
and reduced price applications on file.
For sponsoring organizations of family
day
care
homes,
State
agency
verification procedures shall consist of
a review only of the approved free and
reduced price applications (or other
documentation, if vouchers or other
documentation are used in lieu of free
and reduced price applications) on file
for those day care homes that are required to be reviewed when the sponsoring organization is reviewed, in accordance with the review requirements
set forth in § 226.6(m). However, the
State agency shall ensure that the day
care homes selected for review are representative of the proportion of tier I,
tier II, and tier II day care homes with
a mix of income-eligible and non-income-eligible children in the sponsorship, and shall ensure that at least 10
percent of all free and reduced price applications (or other documentation, if
applicable) on file for the sponsorship
are verified. The review of applications
shall ensure that:
(i) The application has been correctly
and completely executed by the household;
(ii) The institution has correctly determined and classified the eligibility
of enrolled participants for free or reduced price meals or, for family day
care homes, for tier I or tier II reimbursement, based on the information
included on the application submitted
by the household;
(iii) The institution has accurately
reported to the State agency the number of enrolled participants meeting
the criteria for free or reduced price
meal eligibility or, for day care homes,
the number of participants meeting the
criteria for tier I reimbursement, and
the number of enrolled participants
that do not meet the eligibility criteria for those meals; and
(iv) In addition, the State agency
may conduct further verification of the
information provided by the household
on the approved application for program meal eligibility. If this effort is
undertaken, the State agency shall

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7 CFR Ch. II (1–1–03 Edition)

conduct this further verification for
nonpricing programs in accordance
with the procedures described in paragraph (h)(2) of this section.
(2) Verification procedures for pricing
programs. (i) For pricing programs, in
addition to the verification procedures
described in paragraph (h)(1) of this
section, State agencies shall also conduct verification of the income information provided on the approved application for free and reduced price meals
and, at State agency discretion,
verification may also include confirmation of other information required on
the application. However,
(A) If a food stamp, FDPIR or AFDC
case number is provided for a child,
verification for such child shall include
only confirmation that the child is included in a currently certified food
stamp or FDPIR household or AFDC
assistance unit; or
(B) If a food stamp or FDPIR case
number or SSI or Medicaid assistance
identification number is provided for
an adult, verification for such adult
shall include only confirmation that
the adult is included in a currently certified food stamp or FDPIR household
or is currently certified to receive SSI
or Medicaid benefits.
(ii) State agencies shall perform
verification on a random sample of no
less than 3 percent of the approved free
and reduced price applications in an institution which is a pricing program.
(iii) Households shall be informed in
writing that they have been selected
for verification and they are required
to submit the requested verification information to confirm their eligibility
for free or reduced-price benefits by
such date as determined by the State
agency. Those households shall be informed of the type or types of information and/or documents acceptable to
the State agency and the name and
phone number of an official who can
answer questions and assist the household in the verification effort. This information must include a social security number for each adult household
member or an indication that he/she
does not have one. State agencies shall
inform selected households that:
(A) Section 9 of the National School
Lunch Act requires that, unless households provide the child’s food stamp,

FDPIR or AFDC case number, or the
adult participant’s food stamp or
FDPIR case number or SSI or Medicaid
assistance identification number, those
selected for verification must provide
the social security number of each
adult household member;
(B) In lieu of providing a social security number, an adult household member may indicate that he/she does not
possess one;
(C) Provision of a social security
number is not mandatory, but if a social security number is not provided
for each adult household member or an
indication is not made that he/she does
not possess one, benefits will be terminated;
(D) The social security number may
be used to identify household members
in carrying out efforts to verify the
correctness of information stated on
the application and continued eligibility
for
the
program.
These
verification efforts may be carried out
through program reviews, audits, and
investigations and may include contacting employers to determine income, contacting Federal, State or
local agencies to determine current
certification for receipt of food stamps
or FDPIR, AFDC, SSI or Medicaid benefits, contacting the State employment
security office to determine the
amount of benefits received, and
checking the documentation produced
by household members to prove the
amount of income received. These efforts may result in loss or reduction of
benefits, administrative claims or legal
actions if incorrect information was reported; and
(E) This information must be provided to the attention of each adult
household member disclosing his/her
social security number. State agencies
shall ensure that the notice complies
with section 7 of Pub. L. 93–579 (Privacy Act of 1974). These households
shall be provided with the name and
phone number of an official who can assist in the verification effort.
(iv) Households of enrolled children
selected for verification shall also be
informed that if they are currently certified to participate in the Food
Stamp, FDPIR, or AFDC Program they
may submit proof of that certification
in lieu of income information. In those

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Food and Nutrition Service, USDA

§ 226.23

cases, such proof shall consist of a current ‘‘Notice of Eligibility’’ for Food
Stamp, FDPIR, or AFDC Program benefits or equivalent official documentation issued by a food stamp, Indian
Tribal Organization, or welfare office
which shows that the children are
members of households or assistance
units currently certified to participate
in the Food Stamp, FDPIR, or AFDC
Programs. An identification card for
any of these programs is not acceptable
as verification unless it contains an expiration date. Households of enrolled
adults selected for verification shall
also be informed that if they are currently certified to participate in the
Food Stamp Program or FDPIR or SSI
or Medicaid Programs, they may submit proof of that certification in lieu
of income information. In those cases,
such proof shall consist of:
(A) A current ‘‘Notice of Eligibility’’
for Food Stamp or FDPIR benefits or
equivalent
official
documentation
issued by a food stamp, Indian Tribal
Organization, or welfare office which
shows that the adult participant is a
member of a household currently certified to participate in the Food Stamp
Program or FDPIR. An identification
card is not acceptable as verification
unless it contains an expiration date;
or
(B) Official documentation issued by
an appropriate SSI or Medicaid office
which shows that the adult participant
currently receives SSI or Medicaid assistance. An identification card is not
acceptable as verification unless it
contains an expiration date. All households selected for verification shall be
advised that failure to cooperate with
verification efforts will result in a termination of benefits.
(v) Sources of information for
verification may include written evidence, collateral contacts, and/or systems of records.
(A) Written evidence shall be used as
the primary source of information for
verification. Written evidence includes
written confirmation of a household’s
circumstances, such as wage stubs,
award letters, letters from employers,
and, for enrolled children, current certification to participate in the Food
Stamp, FDPIR or AFDC Programs, or,
for adult participants, current certifi-

cation to participate in the Food
Stamp, FDPIR, SSI or Medicaid Programs. Whenever written evidence is
insufficient to confirm eligibility, the
State agency may use collateral contacts.
(B) Collateral contact is a verbal confirmation
of
a
household’s
circumstances by a person outside of the
household. The collateral contact may
be made in person or by phone and
shall be authorized by the household.
The verifying official may select a collateral contact if the household fails to
designate one or designates one which
is unacceptable to the verifying official. If the verifying official designates
a collateral contact, the contact shall
not be made without providing written
or oral notice to the household. At the
time of this notice, the household shall
be informed that it may consent to the
contact
or
provide
acceptable
verification in another form. The
household shall be informed that its
eligibility for free or reduced price
meals shall be terminated if it refuses
to choose one of these options. Termination shall be made in accordance
with paragraph (h)(2)(vii) of this section. Collateral contacts could include
employers, social service agencies, and
migrant agencies.
(C) Systems of records to which the
State agency may have routine access
are not considered collateral contacts.
Information concerning income, family
size, or food stamp/FDPIR/AFDC certification for enrolled children, or food
stamp/FDPIR/SSI/
Medicaidcertification
for
enrolled
adults, which is maintained by other
government agencies and to which a
State agency can legally gain access
may be used to confirm a household’s
eligibility for Program meal benefits.
One possible source could be wage and
benefit information maintained by the
State unemployment agency, if that
information is available. The use of
any information derived from other
agencies must be used with applicable
safeguards concerning disclosure.
(vi) Verification by State agencies of
receipt of food stamps, FDPIR, AFDC,
SSI or Medicaid benefits shall be limited to a review to determine that the
period of eligibility is current. If the
benefit period is found to have expired,

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7 CFR Ch. II (1–1–03 Edition)

or if the household’s certification has
been terminated, the household shall
be required to document their income
eligibility.
(vii) The State agency may work
with the institution to verify the documentation submitted by the household
on the application; however, the responsibility
to
complete
the
verification process may not be delegated to the institution.
(viii) If a household refuses to cooperate with efforts to verify, or the
verification of income indicates that
the household is ineligible to receive
benefits or is eligible to receive reduced benefits, the State agency shall
require the pricing program institution
to terminate or adjust eligibility in accordance with the following procedures. Institution officials shall immediately notify families of the denial of
benefits in accordance with paragraphs
(e)(4) and (e)(5) of this section. Advance
notification shall be provided to families which receive a reduction or termination of benefits 10 calendar days
prior to the actual reduction or termination. The 10-day period shall begin
the day the notice is transmitted to
the family. The notice shall advise the
household of: (A) The change; (B) the
reasons for the change; (C) notification
of the right to appeal the action and
the date by which the appeal must be
requested in order to avoid a reduction
or termination of benefits; (D) instructions on how to appeal; and (E) the
right to reapply at any time during the
year. The reasons for ineligibility shall
be properly documented and retained
on file at the institution.
(ix) When a household disagrees with
an adverse action which affects its benefits and requests a fair hearing, benefits shall be continued as follows while
the household awaits the hearing:
(A) Households which have been approved for benefits and which are subject to a reduction or termination of
benefits later in the same year shall receive continued benefits if they appeal
the adverse action within the 10-day
advance notice period; and
(B) Households which are denied benefits upon application shall not received benefits.
(3) State agencies shall inform institution officials of the results of the

verification effort and the action which
will be taken in response to the
verification findings. This notification
shall be made in accordance with the
procedures outlined in § 226.14(a).
(4) If the verification results disclose
that an institution has inaccurately
classified or reported the number of
participants eligible for free, reducedprice or paid meals, the State agency
shall adjust institution rates of reimbursement retroactive to the month in
which the incorrect eligibility figures
were reported by the institution to the
State agency.
(5) If the verification results disclose
that a household has not reported accurate documentation on the application which would support continued
eligibility for free or reduced-price
meals, the State agency shall immediately adjust institution rates of reimbursement. However, this rate adjustment shall not become effective
until the affected households have been
notified in accordance with the procedures of paragraph (h)(2)(vi) of this section and any ensuing appeals have been
heard as specified in paragraph
(h)(2)(viii) of this section.
(6) Verification procedures for sponsoring organizations of day care homes.
Prior to approving an application for a
day care home that qualifies as tier I
day care home on the basis of the provider’s household income, sponsoring
organizations of day care homes shall
conduct verification of such income in
accordance with the procedures contained in paragraph (h)(2)(i) of this section. Sponsoring organizations of day
care homes may verify the information
on applications submitted by households of children enrolled in day care
homes in accordance with the procedures contained in paragraph (h)(2)(i)
of this section.
(i) Disclosure of program eligibility information to State Medicaid (Medicaid)
and the State Children’s Health Insurance Program (SCHIP) Program eligibility information about children eligible for free and reduced price meals
may be disclosed to Medicaid and
SCHIP as described in this section.
(1) Who decides whether to disclose program eligibility information to Medicaid
and/or SCHIP? The State agency may
elect to allow institutions to disclose

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Food and Nutrition Service, USDA

§ 226.23

children’s free and reduced price meal
eligibility information to Medicaid and
SCHIP. Institutions may then elect to
do so. Children’s program eligibility information may only be disclosed to
Medicaid or SCHIP when both the
State agency and the institution so
elect, the parent/guardian does not decline to have their eligibility information disclosed as described in paragraph (i)(5), and the requirements in
this paragraph (i) are met.
(2) What information may we disclose
for use by Medicaid and SCHIP? The
State agency or institution, as appropriate, may disclose children’s names,
eligibility status (whether they are eligible for free or reduced price meals),
and any other eligibility information
obtained through the free and reduced
price meal application to persons directly connected with the administration of Medicaid or SCHIP.
(3) Who are persons ‘‘directly connected’’ with the administration of Medicaid and SCHIP? State employees and
persons authorized under Federal and
State Medicaid and SCHIP requirements to carry out initial processing of
Medicaid or SCHIP applications or to
make eligibility determinations are
persons directly connected with the administration of Medicaid and SCHIP
for purposes of disclosure of children’s
free and reduced price meal eligibility
information.
(4) What are the restrictions on how
Medicaid and SCHIP use children’s free
and reduced price meal eligibility information? Medicaid and SCHIP agencies and
health insurance program operators receiving children’s free and reduced
price meal eligibility information may
only use the information to seek to enroll children in Medicaid or SCHIP.
The Medicaid and SCHIP enrollment
process may include targeting and
identifying children from low-income
households who are potentially eligible
for Medicaid or SCHIP for the purpose
of seeking to enroll them in Medicaid
or SCHIP.
(5) What are the requirements for notifying households of potential disclosure to
Medicaid or SCHIP? The State agency
or institution, as appropriate, must notify parents/guardians that children’s
free or reduced price meal eligibility
information will be disclosed to Med-

icaid and/or SCHIP unless the parent/
guardian elects not to have their information disclosed. Additionally, the
State agency or institution, as appropriate, must give parents/guardians an
opportunity to elect not to have their
information disclosed to Medicaid or
SCHIP. Only the parent or guardian
who is a member of the household or
family for purposes of the free and reduced price meal or free milk application may decline the disclosure of eligibility information. The notification
must inform parents/guardians that
they are not required to consent to the
disclosure, that the information, if disclosed, will be used to identify children
eligible for and to seek to enroll children in a health insurance program,
and that their decision will not affect
their children’s eligibility for free or
reduced price meals. The notification
may be included in the letter/notice to
parents/guardians that accompanies
the free and reduced price application,
on the application itself or in a separate notice provided to parents/guardians. The notice must give parents/
guardians adequate time to respond.
For
children
determined
eligible
through direct certification, the notice
of potential disclosure may be included
in the document informing parents/
guardians of their children’s eligibility
for free meals through direct certification.
(6) May social security numbers be disclosed? The State agency or institution,
as appropriate, may disclose social security numbers to any programs or
persons authorized to receive all program eligibility information under this
paragraph (i), provided parents/guardians have not declined to have their information disclosed. However, State
agencies and institutions that plan to
disclose social security numbers must
give notice of the planned use of the social security numbers. This notice
must be in accordance with section 7(b)
of the Privacy Act of 1974 (5 U.S.C. 552a
note). The application must include
substantially the following language
for disclosures of social security numbers to Medicaid or SCHIP: ‘‘The social
security number may also be disclosed
to Medicaid and the State Children’s

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7 CFR Ch. II (1–1–03 Edition)

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

stitution acting in accordance with
that option:
(i) Has a written agreement with the
State or local agency or agencies administering health insurance programs
for children under titles XIX and XXI
of the Social Security Act (42 U.S.C.
1396 et seq. and 1397aa et seq.) that requires the health agencies to use children’s free and reduced price meal eligibility information to seek to enroll
children in those health insurance programs; and
(ii) Notifies each household of the information that will be disclosed, that
the information disclosed will be used
only to seek to enroll children in Medicaid or SCHIP and provides each parent/guardian with an opportunity to
elect not to have the information disclosed.
[47 FR 36527, Aug. 20, 1982, as amended at 49
FR 14078, Apr. 10, 1984; 50 FR 19310, May 8,
1985; 50 FR 20197, May 15, 1985; 52 FR 36907,
Oct. 2, 1987; 53 FR 52594, Dec. 28, 1988; Amdt.
22, 55 FR 1378, Jan. 14, 1990; 61 FR 25555, May
22, 1996; 62 FR 904, Jan. 7, 1997; 62 FR 5519,
Feb. 6, 1997; 62 FR 23619, May 1, 1997; 63 FR
9105, Feb. 24, 1998; 63 FR 9729, Feb. 26, 1998; 66
FR 2203, Jan. 11, 2001; 67 FR 43494, June 27,
2002]

Subpart F—Food Service
Equipment Provisions
§ 226.24 Property
management
requirements.
Institutions and administering agencies shall follow the policies and procedures governing title, use, and disposition of equipment obtained by purchase, whose cost was acquired in
whole or part with food service equipment assistance funds in accordance
with the Department’s Uniform Federal Assistance Regulations (7 CFR
part 3015).
[48 FR 41142, Sept. 14, 1983]

Subpart G—Other Provisions
§ 226.25 Other provisions.
(a) Grant closeout procedures. Grant
closeout procedures for the Program
shall be in accordance with the Uniform Federal Assistance Regulations.
(b) State requirements. Nothing contained in this part shall prevent a
State agency from imposing additional

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§ 226.25

requirements for participation in the
Program which are not inconsistent
with the provisions of this part; however, any additional requirements shall
be approved by FNSRO and may not
deny the Program to an eligible institution.
(c) Value of assistance. The value of
assistance to participants under the
Program shall not be considered to be
income or resources for any purposes
under any Federal or State laws, including, but not limited to laws relating to taxation, welfare, and public assistance programs.
(d) Maintenance of effort. Expenditure
of funds from State and local sources
for the maintenance of food programs
for children shall not be diminished as
a result of funds received under the
Act.
(e) Fraud penalty. Whoever embezzles,
willfully misapplies, steals, or obtains
by fraud any funds, assets, or property
that are the subject of a grant or other
form of assistance under this part,
whether received directly or indirectly
from the Department or whoever receives, conceals, or retains such funds,
assets, or property to his use or gain,
knowing such funds, assets, or property
have been embezzled, willfully misapplied, stolen, or obtained by fraud
shall, if such funds, assets, or property
are of the value of $100 or more, be
fined not more than $10,000 or imprisoned not more than five years, or both,
or, if such funds, assets, or property are
of value of less than $100, shall be fined
not more than $1,000 or imprisoned for
not more than one year, or both.
(f) Claims adjustment authority. The
Secretary shall have the authority to
determine the amount of, to settle, and
to adjust any claim arising under the
Program, and to compromise or deny
such claim or any part thereof. The
Secretary shall also have the authority
to waive such claims if the Secretary
determines that to do so would serve
the purposes of the program. This provision shall not diminish the authority
of the Attorney General of the United
States under section 516 of title 28, U.S.
Code, to conduct litigation on behalf of
the United States.
(g) Special retroactivity provisions. Notwithstanding any other provisions con-

tained in this part, the following shall
apply:
(1) State agencies shall provide reimbursement for meals served by any
adult day care center between October
1, 1987 and the date of the initial Program agreement between the State
agency and the center under the following conditions, provided that:
(i) The center can document that, for
any meals claimed:
(A) Meals served met all requirements including items and quantities
served;
(B) Free and reduced-price applications were on file if reimbursement for
free or reduced-price meals is sought;
(C) Meal counts by category (free, reduced-price and paid) and type served
(breakfast, lunch, supper and supplement) are available;
(D) Appropriate food service revenue
and expenditure records are available;
(E) Reimbursement has not been received under title III of the Older
Americans Act for the claimed meals
and CCFP reimbursement does not duplicate other funding for the claimed
meals; and
(ii) The application for Program participation is postmarked or submitted
to the State agency no later than April
17, 1989, and the claims for reimbursement for the meals served between October 1, 1987 and the date of the initial
agreement between the State agency
and the center are postmarked or submitted to the State agency no later
than April 17, 1989 or the date set by
§ 226.10(e), whichever is later.
(2) Alternative documentation for
free meal eligibility for adult participants shall be based on the following:
(i) Beginning with October 1, 1987,
documentation of membership in a
food stamp household;
(ii) For the period October 1, 1987
through September 30, 1988, documentation of membership in an AFDC
assistance unit; and
(iii) Beginning October 1, 1988, documentation of receipt of assistance
under Medicaid or SSI.
(3) For the period October 1, 1987
through September 30, 1988, the family
of an adult participant applying for
free or reduced-price meals shall include a group of related or nonrelated
individuals, who are not residents of an

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§ 226.26

7 CFR Ch. II (1–1–03 Edition)

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

(g) In the States of Alaska, American
Samoa, Arizona, California, Guam, Hawaii, Idaho, Nevada, Oregon, the Commonwealth of the Northern Mariana Islands, and Washington: Western Regional Office, FNS, U.S. Department of
Agriculture, 550 Kearney Street, Room
400, San Francisco, CA 94108.

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

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

§ 226.26

Program information.

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

§ 226.27 Information collection/recordkeeping—OMB assigned control
numbers.
7 CFR section where requirements are described

Current
OMB control
number

226.3–226.4 .......................................................
226.6–226.10 .....................................................
226.14–226.16 ...................................................
226.23–226.24 ...................................................

[50 FR 53258, Dec. 31, 1985]

APPENDIX A TO PART 226—ALTERNATE
FOODS FOR MEALS
ALTERNATE PROTEIN PRODUCTS
A. What are the criteria for alternate protein
products used in the Child and Adult Care
Food Program?
1. An alternate protein product used in
meals planned under the provisions in § 226.20
must meet all of the criteria in this section.
2. An alternate protein product whether
used alone or in combination with meat or
meat alternate must meet the following criteria:
a. The alternate protein product must be
processed so that some portion of the nonprotein constituents of the food is removed.
These alternate protein products must be
safe and suitable edible products produced
from plant or animal sources.
b. The biological quality of the protein in
the alternate protein product must be at
least 80 percent that of casein, determined
by performing a Protein Digestibility Corrected Amino Acid Score (PDCAAS).
c. The alternate protein product must contain at least 18 percent protein by weight
when fully hydrated or formulated. (‘‘When
hydrated or formulated’’ refers to a dry alternate protein product and the amount of
water, fat, oil, colors, flavors or any other
substances which have been added).
d. Manufacturers supplying an alternate
protein product to participating schools or
institutions must provide documentation
that the product meets the criteria in paragraphs A.2. through c of this appendix.

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

cially prepared product that contains only
alternate protein products.
[65 FR 12442, Mar. 9, 2000]

APPENDIX B TO PART 226 [RESERVED]
APPENDIX C TO PART 226—CHILD
NUTRITION (CN) LABELING PROGRAM

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

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

(c) The CN label statement includes the following:

(1) The product identification number (assigned by FNS),

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

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EC17SE91.009

253

(2) The statement of the product’s contribution toward meal pattern requirements
of 7 CFR 210.10, 220.8, 225.21, and 226.20. The
statement shall identify the contribution of
a specific portion of a meat/meat alternate
product toward the meat/meat alternate,
bread/bread alternate, and/or vegetable/fruit
component of the meal pattern requirements. For juice drinks and juice drink prod-

ucts the statement shall identify their contribution toward the vegetable/fruit component of the meal pattern requirements,
(3) Statement specifying that the use of
the CN logo and CN statement was authorized by FNS, and
(4) The approval date.
For example:

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

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

(d) Yields for determining the product’s
contribution toward meal pattern requirements must be calculated using the Food
Buying Guide for Child Nutrition Programs
(Program Aid Number 1331).
5. In the event a company uses the CN logo
and CN label statement inappropriately, the

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EC17SE91.010

Pt. 226, App. C

Food and Nutrition Service, USDA

§ 227.2

Service, Nutrition and Technical Services
Division, 3101 Park Center Drive, Alexandria,
Virginia 22302.
[49 FR 18457, May 1, 1984; 49 FR 45109, Nov. 15,
1984]

§ 227.2

PART 227—NUTRITION EDUCATION
AND TRAINING PROGRAM
Subpart A—General
Sec.
227.1
227.2
227.3
227.4
227.5

activities in schools and child care institutions. To the maximum extent
possible, the Program shall fully utilize the child nutrition programs as a
learning experience.

General purpose and scope.
Definitions.
Administration.
Application and agreement.
Program funding.

Subpart B—State Agency Provisions
227.30 Responsibilities of State agencies.
227.31 Audits, management reviews, and
evaluations.

Subpart C—State Coordinator Provisions
227.35 Responsibilities of State coordinator.
227.36 Requirements of needs assessment.
227.37 State plan for nutrition education
and training.

Subpart D—Miscellaneous
227.40 Program information.
227.41 Recovery of funds.
227.42 Grant closeout procedures.
227.43 Participation of adults.
227.44 Management evaluations and reviews.
APPENDIX TO PART 227—APPORTIONMENT OF
FUNDS FOR NUTRITION EDUCATION AND
TRAINING
AUTHORITY: Sec. 15, Pub. L. 95–166, 91 Stat.
1340 (42 U.S.C. 1788), unless otherwise noted.
SOURCE: 44 FR 28282, May 15, 1979, unless
otherwise noted.

Subpart A—General
§ 227.1 General purpose and scope.
The purpose of these regulations is to
implement section 19 of the Child Nutrition Act (added by Pub. L. 95–166, effective November 10, 1977) which authorizes the Secretary to formulate
and carry out a nutrition information
and education program through a system of grants to State agencies to provide for (a) the nutritional training of
educational and foodservice personnel,
(b) the foodservice management training of school foodservice personnel, and
(c) the conduct of nutrition education

Definitions.

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

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