Issue: The two-tiered meal reimbursement system instituted in 1997 within the child care homes portion of the

Child and Adult Care Food Program added new duties for

sponsoring organizations. Is the reimbursement of sponsors’ administrative costs adequate now that tiering has

added income status determination and accounting to their

duties? As the number of sponsors declines, is the CACFP

readily accessible to family child care homes?

Background: The Personal Responsibility and Work

Opportunity Reconciliation Act (PRWORA) established a

two-tier meal reimbursement rate structure for CACFP

family child care homes. Homes that are either located in

low-income areas or run by providers with family incomes

at or below 185 percent of the Federal poverty guideline

are designated as Tier I. An area is considered low-income

if 50 percent or more of the children at the local elementary school have applied and been approved for free or

reduced price school meals, or if 50 percent or more of the

children in the area are in families with incomes at or

below 185 percent of the Federal poverty guidelines as

measured by the most recent decennial census. Meal reimbursement rates for Tier I homes are comparable to the

rates that existed for all CACFP homes before PRWORA.

Family child care homes that do not meet the low-income

criteria are designated as Tier II. Tier II homes receive

lower reimbursements, although they can be reimbursed at

Tier I rates for meals served to children from families with

incomes at or below 185 percent of the poverty guideline,

given appropriate documentation. 

Family child care homes can participate in the CACFP

only if they are sponsored by an organization that has

entered into an agreement with the State office to administer the program at the local level. Sponsors are responsible

for recruiting homes, determining that homes meet the

CACFP eligibility criteria, determining their tier status,

providing training and other support, and monitoring the

homes to assure that they comply with applicable Federal

and State regulations. Sponsors receive and verify the

homes’ claims for CACFP reimbursement, forward the

claims to State CACFP offices for payment, receive the

reimbursements, and distribute the meal reimbursements

to the homes. Sponsors receive payments for these administrative activities that are based on a four-part formula—

the lowest amount of (1) actual costs, (2) State-approved

budgeted costs, (3) the sum of a rates-times-homes schedule, or (4) 30 percent of total meal reimbursements and

administrative costs. The rates-times-homes schedule

accounts for economies of scale by reimbursing sponsors

at decreasing rates as the number of homes sponsored

increases (table 1).

United States

Department of

Agriculture

Economic 

Research

Service

Food Assistance and Nutrition Research Report Number 34-8 July 2003

WIC School

meals

CACFP General

Table 1. Administrative cost reimbursement rates for CACFP family child care home sponsors

Per home per month rates

Initial 50 Next 150 Next 800 Each additional

Dollars

Contiguous States 84 64 50 44

Alaska 136 104 81 71

Hawaii 98 75 59 52

Source: Food and Nutrition Service, USDA.

Tiering Increases CACFP

Sponsors’ Administrative

Tasks

Food Assistance Research Brief

Linda M. Ghelfi, lghelfi@ers.usda.gov, (202) 694-5437
2 Economic Research Service / USDA

Tiering Increases CACFP Sponsors’ Administrative Tasks / FANRR-34-8

Findings: The Family Child Care Homes Legislative

Changes Study funded by the Economic Research Service

found that tiering has added responsibilities and challenges for CACFP sponsors. With the introduction of tiering, sponsors became responsible for classifying homes as

Tier I or Tier II; determining the eligibility of children in

Tier II homes for reimbursement at Tier I rates (if requested by the provider); and, for Tier II providers with some

children reimbursed at Tier I rates, determining each

month the number of meals to be reimbursed at each rate.

Along with those new administrative duties, many sponsors reported increased difficulty in recruiting and retaining providers. The number of CACFP sponsors peaked in

1994-95 and declined in each subsequent year (fig. 1). The

rate of decline reached nearly –6 percent between fiscal

year 2000 and fiscal year 2001. The numbers of homes

participating in the CACFP and average daily numbers of

children served have also declined since FY 1997, but not

as rapidly as the number of sponsors (fig 2). The ability of

the remaining sponsors to recruit and provide service to

child care homes in all areas of the country is at issue. 

In the Legislative Changes Study, sponsors reported

changes in the content of training and greater difficulty in

recruiting homes. Sponsors also rate low-income area

determinations and providers’ low-income status determinations as their most burdensome duties. Open questions

regarding sponsoring organizations include: (1) Is the

nutrition knowledge of providers adequate now that sponsors need to spend some training time to educate providers

on tiering determination rules, and (2) Is the reimbursement

of sponsors’ administrative costs adequate now that tiering

has added income status determination to their duties. 

ERS is completing an exploratory study of the system

used to reimburse sponsors for their administrative costs.

Results of this study are forthcoming.

Information Sources:

Bernstein, Lawrence S. and William L. Hamilton, Sponsoring

Organizations and the CACFP: Administrative Effects of

Reimbursement Tiering. E-FAN-02-003. U.S. Department of

Agriculture, Economic Research Service, April 2002. Available at:

http://www.ers.usda.gov/publications/efan02003

Hamilton, William L., Nancy R. Burstein, and Mary Kay Crepinsek,

Reimbursement Tiering in the CACFP: Summary of the Family Child

Care Homes Legislative Changes Study. FANRR-22. U.S. Department

of Agriculture, Economic Research Service, March 2002. Available at:

http://www.ers.usda.gov/publications/fanrr22

Additional Information:

http://www.ers.usda.gov/briefing/foodnutritionassistance/childnutrition

The U.S. Department of Agriculture (USDA) prohibits discrimination in all its programs and activities on the basis of race, color, national origin, sex,

religion, age, disability, political beliefs, sexual orientation, or marital or family status. (Not all prohibited bases apply to all programs.) Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USDA’s TARGET

Center at (202) 720-2600 (voice and TDD).

To file a complaint of discrimination, write USDA, Director, Office of Civil Rights, Room 326-W, Whitten Building, 14th and Independence Avenue,

SW, Washington, DC 20250-9410, or call (202) 720-5964 (voice and TDD). USDA is an equal opportunity provider and employer.

Figure 2. CACFP family child care homes and average daily

attendance, FY 1995-20001

Source: Food and Nutrition Service, USDA.

150,000

160,000

170,000

180,000

190,000

200,000

930,000

940,000

950,000

960,000

970,000

980,000

Number of homes Average daily attendance

1995 1996 1997 1998 1999 2000 2001

1,000

1,100

1,200

1,300

Figure 1. CACFP family child care home sponsors, 

FY 1995-2001

Source: Food and Nutrition Service, USDA.

Sponsors

1995 1996 1997 1998 1999 2000 2001