Appendix I - 7 CFR Part 252

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Pt. 252

7 CFR Ch. II (1–1–22 Edition)

(i) Farm to Food Bank Projects must
have a purpose of:
(A) Reducing food waste at the agricultural production, processing, or distribution level through the donation of
food;
(B) Providing food to individuals in
need; and
(C) Building relationships between
agricultural producers, processors, and
distributors and emergency feeding organizations through the donation of
food.
(ii) Project funds may only be used
for costs associated with harvesting,
processing, packaging, or transportation of unharvested, unprocessed, or
unpackaged commodities donated by
agricultural producers, processors, or
distributors for use by emergency feeding organizations.
(iii) Project funds cannot be used to
purchase foods or for agricultural production activities such as purchasing
seeds or planting crops.
(4) Matching of funds—(i) State matching requirement. The State must provide
a cash or in-kind contribution at least
equal to the amount of funding received under this paragrpah (j) for a
Farm to Food Bank Project.
(ii) Allowable contributions. States
shall meet the match requirement in
paragraph (a)(4) of this section by providing allowable contributions as described at § 251.9(c); contributions must
only be for costs which would otherwise be allowable as a Farm to Food
Bank Project cost.
(iii) Emergency feeding organization
contributions. Cash or in-kind contributions from emergency feeding organizations that partner with the State agency to administer the Farm to Food
Bank Project are allowable.
(iv) Food donations. Donations of
foods, including the value of foods donated as a part of a Farm to Food Bank
Project, cannot count toward the
match requirement in paragraph (j)(4)
of this section.
(5) Reallocation of funds. If, during the
course of the fiscal year, the Department determines that a State will not
expend all of the funds allocated to the
State for a fiscal year under this paragraph (j), the Department shall reallocate the unexpended funds to other
States that have an approved State

Plan describing a plan of operation for
a Farm to Food Bank Project during
that fiscal year or the subsequent fiscal year.
(6) Reporting requirements. Each State
agency to which Farm to Food Bank
Project funds are allocated for a fiscal
year must submit a report describing
use of the funds. The data must be
identified on Form SF–425, Federal Financial Report, and submitted to the
appropriate FNS Regional Office on a
semiannual basis. The report must be
submitted no later than 30 calendar
days after the end of the period to
which it pertains. The final report
must be submitted no later than 90 calendar days after the end of the fiscal
year to which it pertains.
(7) Cooperative agreements. State agencies that carry out a Farm to Food
Bank Project may enter into cooperative agreements with State agencies of
other States to maximize the use of
commodities
donated
under
the
project.
(Approved by the Office of Management and
Budget under control number 0584–0313)
[51 FR 12823, Apr. 16, 1986. Redesignated and
amended at 52 FR 17934, May 13, 1987; 53 FR
15357, Apr. 29, 1988; 59 FR 16975, Apr. 11, 1994;
62 FR 53731, Oct. 16, 1997; 64 FR 72907, Dec. 29,
1999; 72 FR 24184, May 2, 2007; 81 FR 23115,
Apr. 19, 2016; 81 FR 92556, Dec. 20, 2016; 84 FR
53002, Oct. 4, 2019]

PART
252—NATIONAL
MODITY
PROCESSING
GRAM

Sec.
252.1 Purpose and scope.
252.2 Definitions.
252.3 Administration.
252.4 Application to participate and agreement.
252.5 Recipient agency responsibilities.
252.6 Miscellaneous provisions.
252.7 OMB control number.
AUTHORITY: Sec. 416, Agricutural Act of
1949 (7 U.S.C. 1431).
SOURCE: 51 FR 23518, June 30, 1986, unless
otherwise noted.

§ 252.1 Purpose and scope.
(a) Purpose. This part provides a program whereby the Food and Nutrition
Service (FNS) and private processors of
food may enter into agreements under

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Food and Nutrition Service, USDA

§ 252.3

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which the processor will process and
distribute designated donated food to
eligible recipient agencies. The intent
of the program is to encourage private
industry, acting in cooperation with
the States and FNS, to develop new
markets in which donated food may be
utilized. It is expected that the processors will use their marketing abilities to encourage eligible recipient
agencies to participate in the program.
Additionally, recipient agencies will
benefit by being able to purchase processed end products at a substantially
reduced price.
(b) Scope. The terms and conditions
set forth in this part are those under
which processors may enter into agreements with FNS for the processing of
commodities designated by the Secretary of Agriculture and the minimum
requirements which NCP processors
must meet. Also prescribed are distributing agency and recipient agency responsibilities.
(c) Eligible recipient agencies. Recipient agencies shall be eligible to participate in the NCP Program to the extent
of their eligibility to receive the food
involved in the NCP Program, pursuant
to § 250.8 and part 251.
§ 252.2 Definitions.
The terms used in this part that are
defined in §§ 250.3 and 251.3 shall have
the meanings ascribed to them therein,
except as set forth in this section.
Agreement value of the donated commodity means the price assigned by the
Department to a donated food which
reflects the Department’s current acquisition price, transportation and, if
applicable, processing costs related to
the food.
Distributing agencies means State,
Federal or private agencies which enter
into agreements with the Department
for the distribution of donated food to
eligible recipient agencies and recipients; and FNS when it accepts title to
commodities from the Commodity
Credit Corporation (CCC) for distribution to eligible recipient agencies
under the National Commodity Processing Program. A recipient agency
may also be a distributing agency.
Donated food value return system
means a system used by a processor or
distributor to reduce the price of the

end product by the agreement value of
the donated commodity.
NCP Program means a program under
which FNS and private processors of
food may enter into agreements under
which the processor will process and
distribute designated donated food to
eligible recipient agencies.
Recipient agency means disaster organizations, charitable institutions, nonprofit summer camps for children,
school
food
service
authorities,
schools, service institutions, welfare
agencies, nutrition programs for the elderly, nonresidential child care institutions and emergency feeding organizations.
Refund means (1) a credit or check
issued to a distributor in an amount
equal to the NCP contract value of donated foods contained in an end product sold by the distributor to a recipient agency at a discounted price or (2)
a check issued to a recipient agency in
an amount equal to the NCP contract
value of donated foods contained in an
end product sold to the recipient agency under a refund system.
Substitution means (1) the replacement of donated food with like quantities of domestically produced commercial food of the same generic identity and of equal or better quality (i.e.,
cheddar cheese for cheddar cheese, nonfat dry milk for nonfat dry milk, etc.);
or (2) in the case of donated nonfat dry
milk, substitution as defined under (1)
of this paragraph or replacement with
an equivalent amount, based on milk
solids content, of domestically produced concentrated skim milk.
[51 FR 23518, June 30, 1986, as amended at 52
FR 24977, July 2, 1987; 53 FR 34014, Sept. 2,
1988]

§ 252.3 Administration.
(a) Role of FNS. The Secretary will
designate those commodities which
will be available under the NCP Program. Only commodities made available without charge or credit under
any nutrition program administered by
USDA will be available under NCP.
FNS will act as the distributing agency
and the contracting agency under the
NCP Program. The Department will
pay costs for delivering donated commodities to participating NCP Program
processors.

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§ 252.4

7 CFR Ch. II (1–1–22 Edition)

(b) Food orders. When NCP Program
processors request donated food, FNS
will determine whether the quantities
ordered are consistent with the processor’s ability to sell end products and/
or the processor’s past demonstrated
performance under the Program. If the
quantities are appropriate, FNS will
request from CCC the donated food for
transfer of title to FNS and delivery to
a mutually agreed upon location for
use by the NCP Program processor.
The title to these commodities transfers to FNS upon their acceptance by
the processor. FNS retains title to such
commodities until:
(1) They are distributed to eligible
recipient agencies in processed form, at
which time the recipient agency takes
title;
(2) They are disposed of because they
are damaged or out-of-condition; or
(3) Title is transferred to the NCP
Program processor upon termination of
the agreement.
(c) Substituted food. When the processor substitutes commercial food for
donated food in accordance with
§ 252.4(c)(7) of this part, title to the substituted food shall transfer to FNS
upon the initiation of the processing of
the end product containing the substituted food. Title to the equivalent
amount of donated food shall transfer
to the processor at the same time (except when the substitution is necessary
to meet the 100 percent yield requirement or to otherwise replace missing
or out-of-condition donated food). Once
title has transferred, the processor
shall use the substituted food in accordance with the terms and conditions
of this part.
(d) Inventory levels. FNS will monitor
the inventory of each food processor to
ensure that the quantity of donated
food for which a processor is accountable is at the lowest cost-efficient
level. In no event shall a processor hold
in inventory more than a six-month
supply, based on average monthly
usage under the NCP Program, unless a
higher level has been specifically approved by FNS on the basis of justification submitted by the processor. Under
no circumstances should the amount of
donated food requested by the processor be more than the processor can
accept and store at any one time. FNS

will make no further distribution to a
processor whose inventory exceeds
these limits until such time as the inventory is reduced.
(e) Recipient agency registration. FNS
will register, upon request, eligible recipient agencies. FNS will make available to food processors a listing of registered eligible recipient agencies for
marketing purposes. Any processor desiring additional listings will be
charged a fee for the listing which is
commensurate with the Department’s
policy on user fees.
[51 FR 23518, June 30, 1986, as amended at 52
FR 24978, July 2, 1987; 59 FR 62986, Dec. 7,
1994]

§ 252.4 Application to participate and
agreement.
(a) Application by processors to participate. Any food processor is eligible to
apply for participation in the NCP Program. Agreement applications may be
filed with FNS at any time on an FNSapproved form. FNS will accept or reject the application of each individual
food processor within 30 days from the
date of receipt, except that FNS may,
at its discretion, extend such period if
it needs more information in order to
make its determination. In determining whether to accept or reject an
application, FNS shall take into consideration at least the following matters: the financial responsibility of the
applicant; the ability of the applicant
to meet the terms and conditions of
the regulations and the NCP agreement; ability to accept and store commodities in minimum truckload quantities; historical performance under the
State and NCP processing programs;
anticipated new markets for NCP end
products; geographic areas served by
the processor; the ability of the applicant to distribute processed products
to eligible recipient agencies; and a
satisfactory record of integrity, business ethics and performance. In addition, the processors must demonstrate
their ability to sell end products under
NCP by submitting supporting documentation such as written intent to
purchase, bids awarded, or historical
sales performance. FNS will make a
final determination based on all available documentation submitted.

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Food and Nutrition Service, USDA

§ 252.4

(b) Agreement between FNS and Participating Food Processors. Upon approval
of an application for participating in
the NCP Program, FNS shall enter into
an agreement with the applicant food
processor. All agreements under the
NCP Program will terminate on the
June 30th following the agreement approval date. However, FNS may extend
processing contracts for two 1-year periods, provided that any changed information must be updated before any
contract extension is granted, including the information in paragraphs (c)(1)
and (c)(5) of this section.
(c) Processor requirements and responsibilities. In accordance with the following provisions and the NCP agreement, any processor participating in
the NCP Program may sell to any eligible recipient agency nationwide a processed product containing the donated
food received from FNS.
(1) The processor shall submit to FNS
end product data schedules which include a description of each end product
to be processed, the quantity of each
donated food and any other ingredient
which is needed to yield a specific
number of units of each end product.
FNS may permit processors to specify
the total quantity of any flavorings or
seasonings which may be used without
identifying the ingredients which are,
or may be, components of seasonings or
flavorings. The end product data schedule shall provide pricing information
supplied by the processor as requested
by FNS and a thorough explanation of
what this pricing information represents. The end product data schedule
shall be made a part of the NCP agreement.
(2) When determining the value of the
donated food, the processor shall use
the agreement value of the donated
food which shall be the price assigned
by the Department to a donated food
which reflects the Department’s current acquisition price, transportation
and, if applicable, processing costs related to the food.
(3) The processor shall demonstrate
to the satisfaction of FNS that internal controls are in place to insure that
duplicate reporting of sales under the
NCP Program and any other food distribution program does not occur.

(4) The processor shall use a method
of selling end products to recipient
agencies which ensures that the price
of each case of end product is reduced
by the agreement value of the donated
commodity and ensures proper accountability. In line with FNS guidelines and subject to FNS approval, the
processor shall select one or more of
the following donated food value return
systems to use during the term of the
agreement. Regardless of the method
used, processors shall provide pricing
information summaries to recipient
agencies as soon as possible after contract approval by FNS. If the pricing
information changes during the contract period, processors shall provide
updated pricing information to FNS
and the recipient agencies 30 days prior
to the effective date. Regardless of the
method chosen for selling end products,
the processor shall reduce his inventory only by the amount of donated
food represented by the discount or refund placed on the end product.
(i) Direct sale. A direct sale is a sale
by the processor directly to the eligible
recipient agency. The following two
methods of direct sales are allowed:
(A) Discount system. When the recipient agency pays the processor directly
for an end product purchased, the processor shall invoice the recipient agency
at the net case price which shall reflect
the value of the discount established in
the agreement.
(B) Refund system. The processor shall
invoice the recipient agency for the
commercial/gross price of the end product. The recipient agency shall submit
a refund application to the processor
within 30 days of receipt of the processed end product, except that recipient agencies may submit refund applications to a single processor on a Federal fiscal quarterly basis if the total
anticipated refund due for all purchases of end product from that processor during the quarter is 25 dollars or
less. The processor shall pay directly
to the eligible recipient agency within
30 days of receipt of the refund application from the recipient agency, an
amount equal to the established agreement value of donated food per case of
end product multiplied by the number
of cases delivered to and accepted by

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§ 252.4

7 CFR Ch. II (1–1–22 Edition)

the recipient agency, except that processors may group together refund applications for a single recipient agency
on a Federal fiscal quarterly basis if
the total anticipated refund due that
recipient agency during the quarter is
25 dollars or less. In no event shall refund applications for purchases during
the period of agreement be accepted by
the processor later than 60 days after
the close of the agreement period.
(ii) Indirect sale. An indirect sale is a
sale by the processor through a distributor to an eligible recipient agency. Indirect sales can be made with or
without dual billing. Dual billing involves the processor billing the recipient agency for the end product and the
distributor billing the recipient agency
for the cost of services rendered in the
handling and delivery of the end product. The following three methods of indirect sales are allowed:
(A) Sale through distributor with dual
billing. When end products are sold to
recipient agencies through a distributor under a system utilizing dual
billing, the processor shall invoice the
recipient agencies directly for the end
products purchased at the net case
price which reflects the value of the
discount established in the agreement.
The processor shall ensure that the distributor bills the recipient agencies
only for the services rendered in the
handling and delivery of the end product. The processor shall maintain delivery and/or billing invoices to substantiate the quantity of end product
delivered to each recipient agency and
the net case price charged by the processor which reflects the discount established by the agreement.
(B) Sale through distributor without
dual billing. When end products are sold
to recipient agencies through a distributor without dual billing, processors shall provide refunds to the distributor and ensure that the distributor provides discounts of equal
value to recipient agencies. Under this
system, the processor shall sell end
products to a distributor at the processor’s commercial/gross price for the
end product. The processor’s invoice
shall reflect the value of commodities
contained in the end product as established by the agreement. The processor
shall ensure that the distributor sub-

mits a refund application to the processor within 30 days after the eligible
recipient agency receives the processed
end product. The processor shall ensure
that the refund application includes
documentation of the purchase of end
products by the eligible recipient agency through substantiating invoices and
that the recipient agency has purchased the end product at the net case
price which reflects the value of the
discount established by the agreement.
Within 30 days of the receipt of the refund application, the processor shall
issue payment directly to the distributor in an amount equal to the
stated agreement value of the donated
food contained in the purchased end
products covered by the application. In
no event shall refund applications for
purchases during the period of agreement be accepted by the processors
later than 60 days after the close of the
agreement period. The processor shall
verify a statistically valid sample of
discount sales made by distributors
without dual billing in a manner which
ensures a 95 percent confidence level.
All such sales reported during a quarter shall be verified at the end of that
quarter. Processors shall verify that
sales were made only to eligible recipient agencies and that the value of donated commodities was passed through
to those recipient agencies. The processor shall report to FNS the level of
invalid or inaccurate sales identified in
each quarter within 60 days after the
close of each quarter. At the same time
such report is submitted, the processor
shall submit to FNS a corrective action plan designed to correct problems
identified in the verification effort.
The processor shall adjust performance
reports to reflect the invalid sales
identified during the verification effort
required by this paragraph. If, as a result of this verification, FNS determines that the value of donated food
has not been passed on the recipient
agencies or that end products have
been improperly distributed, FNS may
assert a claim against the processor.
(C) Sale through distributor with a refund. Under the refund system, processors shall sell end products to distributors at the commercial/gross price
of the end product. Distributors shall
sell end products to recipient agencies

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Food and Nutrition Service, USDA

§ 252.4

at the commercial/gross price of the
end products. Processors shall ensure
that their invoices and the invoices of
distributors identify the discount established by the agreement. Recipient
agencies shall submit refund applications to processors within 30 days of receipt of the processed end product.
Within 30 days of the receipt of the refund application from the recipient
agency certifying actual purchases of
end product from substantiating invoices maintained by the recipient
agency, the processor shall compute
the amount and issue payment of the
refund directly to the recipient agency.
In no event shall refund applications
for purchases during the period of the
agreement be accepted by the processor
later than 60 days after the close of the
agreement period.
(iii) Other value pass-through systems.
Processors may submit to FNS for approval any proposed value pass-through
(VPT) system not identified in this section. The ‘‘other’’ VPT system must, in
the judgment of FNS, be verifiable and
easily monitored. Any VPT system approved under this part must comply
with the sales verification requirements
specified
in
paragraph
(c)(4)(ii)(B) of this section or an alternative system approved by FNS. If an
alternative system is approved, FNS
will notify the States in which the system will be used. The Department retains the authority to inspect and review all pertinent records under all
VPT
systems,
including
the
verification of a required statistically
valid sample of sales. FNS may consider the paperwork and resource burden associated with alternative value
pass-through systems when considering
approval and reserves the right to deny
approval of systems which are labor-intensive and provide no greater accountability than those systems permitted
under paragraph (c)(4) of this section.
(5) The processor shall furnish to
FNS prior to the ordering of any donated food for processing, a performance supply and surety bond obtained
from surety companies listed in the
current Department of Treasury Circular 570 or an irrevocable letter of
credit to cover the amount of inventory on hand and on order.

(6) The processor shall draw down inventory only for the amount of donated
food used to produce the end product.
In instances in which concentrated
skim milk is substituted for nonfat dry
milk, the processor shall draw down
donated nonfat dry milk inventory
only in an amount equal to the amount
of concentrated skim milk, based on
milk solids content, used to produce
the end product. Processors shall ensure that an amount equivalent to 100
percent of the donated food provided to
the processor under the NCP Program
is physically contained in end products. Additional commodities required
to account for loss of donated food during production shall be obtained from
non-donated food.
(7)(i) Only butter, cheese, corn grits,
cornmeal, flour, macaroni, nonfat dry
milk, peanut butter, peanut granules,
roasted peanuts, rice, rolled oats,
rolled wheat, shortening, vegetable oil,
and spaghetti may be substituted as
defined in § 252.2 and such other food as
FNS specifically approves as substitutable under paragraph (c)(7)(i)(A) of this
section (substitution of meat and poultry items shall not be permitted).
(A) Processors may request approval
to substitute commercial foods for donated foods not listed in paragraph
(c)(7)(i) of this section by submitting
such request to FNS in writing and satisfying the requirements of paragraph
(c)(7) of this section. FNS will notify
the processor in writing of authorization to substitute commercial foods for
donated foods not listed in paragraph
(c)(7)(i) of this section and such authorization shall apply for the duration of
all current contracts entered into by
the processor pursuant to this section.
(B) The processor shall maintain
records to substantiate that it continues to acquire on the commercial
market amounts of substitutable food
consistent with their levels of non-NCP
Program production and to document
the receipt and disposition of the donated food.
(C) FNS shall withhold deliveries of
donated food from processors that FNS
determines have reduced their level of
non-NCP Program production because
of participation in the NCP Program.
(ii) When the processor seeks FNS approval to substitute donated nonfat dry

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§ 252.4

7 CFR Ch. II (1–1–22 Edition)

milk with concentrated skim milk
under paragraph (c)(7)(i)(A) of this section, an addendum must be added to
the request which states:
(A) The percent of milk solids that,
at a minimum, must be contained in
the concentrated skim milk;
(B) The weight ratio of concentrated
skim milk to donated nonfat dry milk:
(1) The weight ratio is the weight of
concentrated skim milk which equals
one pound of donated nonfat dry milk,
based on milk solids;
(2) In calculating this weight, nonfat
dry milk shall be considered as containing 96.5 percent milk solids;
(3) If more than one concentration of
concentrated skim milk is to be used, a
separate weight ratio must be specified
for each concentration;
(C) The processor’s method of
verifying that the milk solids content
in the concentrated skim milk is as
stated in the request;
(D) A requirement that the concentrated skim milk shall be produced
in a USDA approved plant or in a plant
approved by an appropriate regulatory
authority for the processing of Grade A
milk products; and
(E) A requirement that the contact
value of donated food for a given
amount of concentrated skim milk
used to produce an end product is the
value of the equivalent amount of donated nonfat dry milk, based on the
weight ratio of the two foods.
(iii) Substitution must not be made
solely for the purpose of selling or disposing of the donated commodity in
commercial channels for profit.
(8) The processor shall be liable for
all donated food provided under the
agreement. The processor shall immediately report to FNS any loss or damage to donated food and shall dispose of
damaged or out-of-condition food in accordance with § 250.7.
(9) The processor shall submit to FNS
monthly performance reports reflecting the sale and delivery of end products during the month.
(i) The processor shall ensure that
the monthly performance report is
postmarked no later than the last day
of the month following the month
being reported. The processor shall
identify the month of delivery for each
sale reported. The sale and delivery of

end products for any prior month may
be included on the monthly performance report. The processor monthly
performance report shall include:
(A) The donated food inventory at
the beginning of the reporting month;
(B) Amount of donated food received
from the Department during the reporting month;
(C) Amount of donated food transferred to and/or from existing inventory;
(D) A list of all recipient agencies
purchasing end products and the number of units of end products delivered
to each during the report month;
(E) The net price paid for each unit of
end product and whether the sale was
made under a discount or refund system;
(F) When the sale is made through a
distributor, the name of the distributor;
(G) The amount of inventory drawdown represented by reported sales;
and
(H) The donated food inventory at
the end of the reporting month.
(ii) In addition to reporting the information identified in paragraph (c)(9)(i)
of this section, processors substituting
concentrated skim milk for donated
nonfat dry milk shall report the following information for the reporting
period:
(A) The number of pounds of nonfat
dry milk used in commercial products
sold to outlets which are not recipient
agencies; and
(B) The number of pounds of concentrated skim milk and the percent of
milk solids contained therein, used in
end products sold to recipient agencies.
(iii) At the end of each agreement period, there will be a final 90 day reconciliation period in which processors
may adjust NCP sales for any month.
(10) The processor shall maintain
complete and accurate records of the
receipt, disposal and inventory of donated food including end products processed from donated food.
(i) The processor shall keep production records, formulae, recipes, daily or
batch production records, loadout
sheets, bills of lading, and other processing and shipping records to substantiate the use of the donated food and

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Food and Nutrition Service, USDA

§ 252.4

the subsequent redelivery to an eligible
recipient agency.
(ii) The processor shall document
that sales reported on monthly performance reports, specified in paragraph (c)(9) of this section were made
only to eligible recipient agencies and
that the normal wholesale price of the
product was discounted or a refund
payment made for the agreement value
of the donated commodity.
(iii) When donated food is commingled with commercial food, the processor shall maintain records which will
permit an accurate determination of
the donated commodity inventory.
(iv) The processor shall make all pertinent records available for inspection
and review upon request by FNS, its
representatives and the General Accounting Office (GAO). All records
must be retained for a period of three
years from the close of the Federal fiscal year to which they pertain. Longer
retention may be required for resolution of an audit or of any litigation.
(11) The processor shall obtain, upon
FNS request, Federal acceptance service grading and review of processing
activities and shall be bound by the
terms and conditions of the grading
and/or review.
(12) The processor shall indemnify
and save FNS and the recipient agency
free and harmless from any claims,
damages, judgments, expenses, attorney’s fees, and compensation arising
out of physical injury, death, and/or
property damage sustained or alleged
to have been sustained in whole or in
part by any and all persons whatsoever
as a result of or arising out of any act
or omission of the processor, his/her
agents or employees, or caused or resulting from any deleterious substance,
including bacteria, in any of the products produced from donated food.
(13) The processor shall be liable for
payment for all uncommitted food inventory remaining at agreement termination.
(i) When agreements are terminated
at the request of the processor or at
FNS’ request because there has been
noncompliance on the part of the processor with the terms and conditions of
the agreement, or if any right of FNS
is threatened or jeopardized by the
processor, the processor shall pay FNS

an amount equal to the CCC unrestricted sales price, the cost CCC of replacement on the date the agreement is
terminated, or the agreement value of
donated commodities, whichever is
highest, for the inventory, plus any expenses incurred by FNS.
(ii) When the agreements are terminated at FNS’ request where there has
been no fault or negligence on the part
of the processor, the processor shall
pay FNS an amount equal to the CCC
unrestricted sales price, the cost to
CCC of replacement on the date the
agreement is terminated, or the agreement value of the donated commodities, whichever is highest, for the inventory, unless FNS and the processor
mutually agree on another value.
(14) The processor shall not assign
the processing contract or delegate any
aspect of processing under a subcontract or other arrangement without
the written consent of FNS. The subcontractor shall be required to become
a party to the processing contract and
conform to all conditions contained in
that contract.
(15) The processor shall comply fully
with the provisions of the NCP agreement and all Federal regulations and
instructions relevant to the NCP Program.
(16) The processor shall label end
products in accordance with § 250.15(j)
and, when end products contain vegetable protein products, in accordance
with 7 CFR part 210, 225, or 226 appendix A.
(17) The processor shall return to
FNS any funds received from the sale
of donated food containers and the
market value or the price received
from the sale of any by-products of donated food or commercial food which
has been substituted for donated food.
(18) For any year in which a processor receives more than $250,000 in donated food, the processor shall obtain
an independent audit conducted by a
Certified Public Accountant (CPA) for
that year. Processors receiving $75,000
to $250,000 in donated food each year
shall obtain an independent audit conducted by a CPA every two years and
those receiving less than $75,000 in donated food each year shall obtain an
independent audit conducted by a CPA
every three years. Processors in the

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§ 252.5

7 CFR Ch. II (1–1–22 Edition)

three year audit cycle shall move into
the two year audit cycle when the
value of donated food received reaches
$75,000. If the Department determines
that the audit is not acceptable or that
the audit has disclosed serious deficiencies, the processor shall be subject
to additional audits by OIG at the request of FNS.
(i) Audits shall be conducted in accordance with the auditing provisions
set forth under the Standards for Audit
of Government Organizations, Programs,
Activities and Functions, and the FNS
Audit Guide for Multi-State Processors.
(ii) The costs of the audits shall be
borne by the processor.
(iii) Audit findings shall be submitted by the processors to FNS.
(iv) Noncompliance with the audit requirement contained in this part will
render the processor ineligible to enter
into another processing contract until
the required audit has been conducted
and deficiencies corrected.

ceipt of the end products, except that
recipient agencies may submit refund
applications to a single processor on a
Federal fiscal quarterly basis if the
total anticipated refund due for all purchases of end product from that processor during the quarter is 25 dollars or
less. Recipient agencies must insure
that any funds received as a result of
refund payments be designated for use
by the food service department.
(d) Verification. If requested by FNS,
each recipient agency shall cooperate
in the verification of end product sales
reported by processors under the NCP
Program. The recipient agency may be
requested to verify actual purchases of
end products as substantiated by the
recipient agency’s invoices and may
also be requested to verify that the invoice correctly identifies the discount
included or refund due for the value of
the donated ingredient contained in
the end product.

[51 FR 23518, June 30, 1986, as amended at 52
FR 16369, May 5, 1987; 52 FR 24978, July 2,
1987; 53 FR 16379, May 9, 1988; 53 FR 34014,
Sept. 2, 1988; 59 FR 62986, Dec. 7, 1994]

§ 252.6 Miscellaneous provisions.
(a) Improper distribution or loss of or
damage to donated food. If a processor
improperly distributes or uses any donated food, or causes loss of or damage
to a donated food through its failure to
provide proper storage, care, or handling, FNS shall require the processor
to pay to the Department the value of
the donated food as determined by the
Department.
(b) Disposition of damaged or out-ofcondition food. Donated food which is
found to be damaged or out-of-condition and is declared unfit for human
consumption by Federal, State, or
local health officials, or by any other
inspection services or persons deemed
competent by the Department, shall be
disposed of in accordance with instructions of the Department. This instruction shall direct that unfit donated
food be sold in a manner prescribed by
the Department with the net proceeds
thereof remitted to the Department.
Upon a finding by the Department that
donated food is unfit for human consumption at the time of delivery to a
recipient agency and when the Department or appropriate health officials require that such donated food be destroyed, the processor shall pay for any

§ 252.5 Recipient agency responsibilities.
(a) Registration. Recipient agencies
that have approved agreements with
State distributing agencies to receive
donated food may register with FNS on
an FNS approved form to participate in
the NCP Program. Upon request, FNS
will provide recipient agencies with
registration forms. Recipient agencies
shall notify FNS when they are no
longer eligible to receive donated food
under an agreement. Failure to notify
FNS shall result in claim action.
(b) Recipient agency records. Each recipient agency shall maintain accurate
and complete records with respect to
the receipt, disposal, and inventory of
donated food, including products processed from donated food, and with respect to any funds which arise from the
operation of the distribution program.
(c) Refunds. A recipient agency purchasing end products under the NCP
Program from a processor utilizing a
refund system shall submit a refund
application supplied by the processor
to the processor within 30 days of re-

[51 FR 23518, June 30, 1986, as amended at 59
FR 62987, Dec. 7, 1994]

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Food and Nutrition Service, USDA

§ 253.2

expenses incurred in connection with
such donated food as determined by the
Department. The Department may, in
any event, repossess damaged or outof-condition donated food.
(c) FNS sales verification. FNS may
conduct a verification of processor reported sales utilizing a statistically
valid sampling technique. If, as a result
of this verification, FNS determines
that the value of the donated food has
not been passed on to recipient agencies or if end products have been improperly distributed, FNS may assert a
claim against the processor. This claim
may include a projection of the
verification sample to the total NCP
sales reported by the processor.
(d) Sanctions. Any processor or recipient agency which has failed to comply
with the provisions of this part or any
instructions or procedures issued in
connection herewith, or any agreements entered into pursuant hereto,
may, at the discretion of the Department, be disqualified from further participation in the NCP Program. Reinstatement may be made at the option
of the Department. Disqualification
shall not prevent the Department from
taking other action through other
available means when considered necessary, including prosecution under applicable Federal statutes.
(e) Embezzlement, misuse, theft, or obtainment by fraud of commodities and
commodity related funds, assets, or property in child nutrition programs. Whoever
embezzles, willfully misapplies, steals,
or obtains by fraud commodities donated for use in the NCP Program, or
any funds, assets, or property deriving
from such donations, or whoever receives, conceals, or retains such commodities, funds, assets, or property for
his own use or gain, knowing such commodities, funds, assets, or property
have been embezzled, willfully misapplied, stolen, or obtained by fraud,
shall be subject to Federal criminal
prosecution under section 12(g) of the
National School Lunch Act, as amended, or section 4(c) of the Agriculture
and Consumer Protection Act of 1973,
as amended. For the purpose of this
paragraph ‘‘funds, assets, or property’’
include, but are not limited to, commodities which have been processed
into different end products as provided

for by this part, and the containers in
which commodities have been received
from the Department.
§ 252.7

OMB control number.

The information collection and reporting requirements contained in this
part have been approved by the Office
of Management and Budget under control number 0584–0325.

PART 253—ADMINISTRATION OF
THE FOOD DISTRIBUTION PROGRAM FOR HOUSEHOLDS ON INDIAN RESERVATIONS
Sec.
253.1 General purpose and scope.
253.2 Definitions.
253.3 Availability of commodities.
253.4 Administration.
253.5 State agency requirements.
253.6 Eligibility of households.
253.7 Certification of households.
253.8 Administrative disqualification procedures for intentional program violation.
253.9 Claims against households.
253.10 Commodity control, storage and distribution.
253.11 Administrative funds.
AUTHORITY: 91 Stat. 958 (7 U.S.C. 2011–2036).
SOURCE: 44 FR 35928, June 19, 1979, unless
otherwise noted. Redesignated by Amdt. 1, 47
FR 14137, Apr. 2, 1982.

§ 253.1 General purpose and scope.
This part describes the terms and
conditions under which: commodities
(available under part 250 of this chapter) may be distributed to households
on or near all or any part of any Indian
reservation, the program may be administered by capable Indian tribal organizations, and funds may be obtained
from the Department for the costs incurred in administering the program.
This part also provides for the concurrent operation of the Food Distribution
Program and the Food Stamp Program
on Indian reservations when such concurrent operation is requested by an
ITO.
§ 253.2 Definitions.
Disabled member means a member of a
household who:
(1) Receives supplemental security
income benefits under title XVI of the
Social Security Act or disability or

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