57792 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

DEPARTMENT OF AGRICULTURE 

Food and Nutrition Service 

7 CFR Parts 210, 215, 220, 225, 226, 

and 235 

[FNS–2016–0040] 

RIN 0584–AE08 

Child Nutrition Program Integrity 

AGENCY: Food and Nutrition Service 

(FNS), U.S. Department of Agriculture 

(USDA). 

ACTION: Final rule. 

SUMMARY: This action implements 

statutory requirements and policy 

improvements to strengthen 

administrative oversight and operational 

performance of the Child Nutrition 

Programs. 

DATES: 

Effective date: The provisions of this 

rulemaking are effective September 22, 

2023. 

Compliance dates: This rulemaking 

consists of multiple provisions. 

Compliance for each provision is 

referenced in the SUPPLEMENTARY

INFORMATION section of this final rule 

and detailed in the section-by-section 

analysis. 

FOR FURTHER INFORMATION CONTACT: 

Megan Geiger, Senior Technical 

Advisor, Program Monitoring and 

Operational Support Division—4th 

floor, USDA Food and Nutrition 

Service, 1320 Braddock Place, 

Alexandria, VA 22314 or at 

megan.geiger@usda.gov. 

SUPPLEMENTARY INFORMATION: 

Outline: 

I. Child Nutrition Program Integrity Proposed 

Rule 

A. Background 

B. Public Comments 

C. Section-By-Section Discussion of the 

Regulatory Provisions 

1. Fines for Violating Program 

Requirements 

2. Reciprocal Disqualification in All Child 

Nutrition Programs 

3. Serious Deficiency Process and 

Disqualification in SFSP and CACFP 

4. State Agency Review Requirements in 

CACFP 

5. State Liability for Payments to Aggrieved 

Child Care Institutions 

6. CACFP Audit Funding 

7. Financial Review of Sponsoring 

Organizations in CACFP 

8. Informal Purchase Methods for CACFP 

9. School Food Authority Contracts With 

Food Service Management Companies 

10. Annual NSLP Procurement Training 

II. CACFP Amendments 

A. Background 

B. Codifying the CACFP Amendments 

1. Elimination of the Annual Application 

for Institutions 

2. Timing of Unannounced Reviews 

3. Standard Agreements Between 

Sponsoring Organizations and 

Sponsored Child Care Centers 

4. Collection and Transmission of 

Household Income Information 

5. Calculation of Administrative Funding 

for Sponsoring Organizations of Day Care 

Homes 

6. Carryover of Administrative Funding for 

Sponsoring Organizations of Day Care 

Homes 

III. Simplifying Monitoring in NSLP and SBP 

A. Background 

B. Streamlining the Administrative Review 

Process 

1. Return to a 5-Year Review Cycle 

2. Substitution of Local-Level Audits 

3. Completion of Review Requirements 

Outside of the Administrative Review 

4. Framework for Integrity-Focused Process 

Improvements 

5. Assessment of Resource Management 

Risk 

6. Buy American Area of Review 

7. Discretion in Taking Fiscal Action for 

Meal Pattern Violations 

C. Reducing Performance-Based 

Reimbursement Reporting 

IV. Miscellaneous Amendments 

A. State Administrative Expense (SAE) 

Funds 

B. FNS Contact Information 

C. Program Application Requirements 

V. Procedural Matters 

I. Child Nutrition Program Integrity 

Proposed Rule 

A. Background 

FNS cannot accomplish its mission to 

provide access to food, a healthful diet, 

and nutrition education in ways that 

inspire public confidence without a 

strong and sustained effort to ensure 

that integrity is always a priority in the 

administration of the Child Nutrition 

Programs. On March 29, 2016, FNS 

published a proposed rule, Child 

Nutrition Program Integrity, 81 FR 

17564, https://www.fns.usda.gov/cn/fr032916, to address criteria and 

procedures to strengthen administrative 

oversight and operational performance 

of the National School Lunch Program 

(NSLP), School Breakfast Program 

(SBP), Special Milk Program (SMP), 

Summer Food Service Program (SFSP), 

Child and Adult Care Food Program 

(CACFP), and State Administrative 

Expense Funds (SAE). 

Many of the modifications proposed 

by FNS were based on amendments to 

the Richard B. Russell National School 

Lunch Act (NSLA), 42 U.S.C. 1751 et 

seq., https://www.fns.usda.gov/nslaamended-pl-117-328, mandated by the 

Healthy, Hunger-Free Kids Act of 2010, 

Public Law 111–296, https://www.fns.

usda.gov/pl-111-296, including: 

• Implementation of fines; 

• Prohibition of participation of any 

terminated entity or terminated 

individual in any Child Nutrition 

Program; 

• Termination and disqualification of 

SFSP sponsors and unaffiliated CACFP 

centers through extension of the serious 

deficiency process; 

• Termination of permanent 

agreements of SFSP sponsors and 

CACFP institutions and facilities; 

• More frequent reviews of CACFP 

institutions that are at risk of having 

serious management problems; 

• State agency liability for payments 

when hearings for CACFP institutions 

are delayed; and 

• Additional State agency funding for 

audits of CACFP institutions. 

These provisions were added to the 

NSLA to strengthen the administration 

of Child Nutrition Programs, at all 

levels, through enhanced oversight and 

enforcement tools. They were designed 

to help FNS and State administering 

agencies reduce program error of all 

types, resulting in more efficient 

operations and improved compliance 

with program requirements. 

The proposed rule also incorporated 

recommendations from the USDA Office 

of Inspector General (OIG), including 

management decisions from audits— 

National School Lunch Program—Food 

Service Management Company 

Contracts, published January 2013, 

https://usdaoig.oversight.gov/reports/ 

audit/national-school-lunch-programfood-service-management-companycontracts, and Review of Management 

Controls for the Child and Adult Care 

Food Program, published November 

2011—and FNS management 

evaluations of State agency 

administration of NSLP, SBP, SFSP, and 

CACFP. The recommendations address 

improvements to contract management, 

adherence to Federal procurement 

standards, and financial oversight to 

further enhance program integrity. 

This final rule adds strong integrity 

safeguards to a variety of aspects of the 

Child Nutrition Programs. The 

provisions codified in this rulemaking 

are designed to increase program 

operators’ accountability and 

operational efficiency, while improving 

the ability of FNS and State agencies to 

address severe or repeated violations of 

program requirements. This rulemaking 

also provides States and program 

operators with targeted flexibilities 

which allow oversight efforts to be 

tailored to specific program 

circumstances. These provisions will be 

effective on September 22, 2023. 

However, each provision has a separate 

compliance date for implementation, 

which is explained in the section-bysection analysis. Although the proposed 

rule required implementation for most 


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provisions 90 days after publication of 

the final rule, numerous respondents 

requested a 1-year delay in 

implementation, and FNS agrees that 

additional time is needed to implement 

this rulemaking. The extended 

implementation period gives State 

agencies time to make necessary 

systems changes, and gives FNS time to 

provide technical assistance and 

develop resources to support successful 

implementation. 

FNS intends each of the provisions of 

this rule to be severable. Were a court 

to stay or invalidate any provision of 

this rule, or to hold a provision 

unlawful as applied in certain factual 

circumstances, FNS would intend that 

all other provisions set forth in this rule 

remain in effect to the maximum 

possible extent. 

B. Public Comments 

FNS received 5,659 comments from a 

cross section of stakeholders during a 

90-day comment period, which was 

extended to July 7, 2016. Of these, 3,261 

responses were from 11 form letter 

campaigns, 2,266 responses were 

unique, and an additional 108 were 

unique responses that contained 

particularly substantive comments on 

specific aspects of FNS’ proposed 

implementation of the statutory and 

discretionary requirements. The letter 

campaigns were organized primarily by 

the Freedom Works Foundation (2,652), 

the Food Research and Action Center 

(377), and the National CACFP Sponsors 

Association (147). Many of the 

comments expressed general opposition 

to Federal oversight policies, citing 

issues of government overreach. FNS is 

not responding to those comments, 

because they did not provide feedback 

on provisions that were specifically 

proposed for revisions as part of this 

rulemaking. Moreover, many of the 

requirements addressed in the proposed 

rule are based on statutory provisions in 

the NSLA and, therefore, cannot be 

removed through the rulemaking 

process. 

Responses were generated from State 

administering agencies (21) and a wide 

variety of child nutrition program 

stakeholders, including those who 

identified as parents and private 

citizens (5,472), school food authorities 

(37), advocates (34), schools and 

educational institutions (9), community 

and faith-based organizations (7), food 

service management companies (7), 

health and child care professional 

associations (6), food banks (4), and 

students (2). Only 15 respondents 

unconditionally favored the proposed 

rule. Respondents expressed wide 

support for implementing robust 

integrity practices and valuable 

suggestions for improvement. However, 

the vast majority of respondents (4,769) 

expressed general opposition to the 

penalties that FNS proposed. Of the 

remaining 875 comments, 687 were 

mixed and 188 were either out of scope 

(164) or duplicative (24). The comments 

(5,599) are posted at http://

www.regulations.gov under docket ID 

FNS–2016–0040, Child Nutrition 

Program Integrity. 

C. Section-by-Section Discussion of the 

Regulatory Provisions 

1. Fines for Violating Program 

Requirements 

Section 22(e)(1)(A) of the NSLA, 42 

U.S.C. 1769c(e), requires the Secretary 

to establish criteria by which a State 

agency or the Secretary may impose a 

fine against any school food authority 

(SFA) or school administering a Child 

Nutrition Program. Section 22(e)(2)(A) 

requires the Secretary to establish 

criteria by which the Secretary may 

impose a fine against any State agency 

administering a Child Nutrition 

Program. In both cases, the statute states 

that a fine may be imposed if it is 

determined that the SFA, school, or 

State agency has: 

• Failed to correct severe 

mismanagement of the program; 

• Disregarded a program requirement 

of which the SFA, school, or State has 

been informed; or 

• Failed to correct repeated program 

violations. 

Current regulations require State 

agency and FNS oversight to ensure 

program compliance, improve 

management, and promote integrity. 

The regulations at 7 CFR 210.26 provide 

FNS the authority to penalize 

individuals or entities for criminal 

violations, such as theft or fraud. 

However, existing regulations do not 

include a strong enforcement 

mechanism to protect Federal funds and 

maintain program integrity when an 

exceptional, non-criminal circumstance 

arises. 

FNS proposed a process to implement 

the statutory authority to establish fines, 

referred to as ‘‘assessments’’ in the 

proposed rule. FNS expected 

assessments to serve as a new 

accountability measure to address 

severe or repeated program violations 

that seriously threaten the integrity of 

Child Nutrition Programs, but do not 

meet the threshold for criminal action. 

The proposed rule: 

• Identifies violations that warrant 

assessments, as specified in statute; 

• Allows FNS to establish 

assessments against State agencies and 

to direct State agencies to establish 

assessments against SFAs, sponsors, or 

institutions; 

• Allows State agencies to establish 

assessments against SFAs, schools, 

sponsors, or institutions; 

• Identifies the calculations used to 

determine the first, second, and 

subsequent assessments; 

• Requires assessments to be paid 

from non-Federal funds; 

• Requires the State agency to notify 

FNS at least 30 days prior to 

establishing an assessment; 

• Provides the ability to appeal any 

assessment through existing processes; 

• Provides FNS and State agencies 

the authority to suspend or terminate for 

cause the participation of an entity, if 

the established assessment is not paid; 

and 

• Requires implementation one 

school year after the publication of the 

final rule. 

Public Comments 

Of the comments that discussed 

assessments or fines, 6 were supportive, 

3,955 were opposed, and 23 were 

mixed. Of the 3,955 responses in 

opposition, 3,132 were form letters. 

Many were opposed to the idea of 

government fines in general, citing 

issues of government overreach. 

Proponents noted this provision 

would give State agencies an additional 

mechanism to address program 

violations and strengthen 

accountability. One stated that fines 

would be a useful compliance tool in 

exceptional situations and supported 

extending this provision to all Child 

Nutrition Programs. 

Opponents argued that fines are 

unnecessary and punitive, and voiced 

concern that the risk of fines would 

discourage Child Nutrition Program 

operators from seeking technical 

assistance. They cited the potential for 

inconsistent application of fines across 

States, and expressed concern about 

bribery, collusion, and abuse. 

Opponents also disputed FNS authority 

to establish fines against non-school 

operators, and suggested State agencies 

have adequate accountability tools in 

SFSP and CACFP. 

FNS Response 

As required by statute, this final rule 

codifies the criteria and procedures that 

FNS has developed for State agencies to 

use to establish fines for program 

violations. Although the proposed rule 

used the term ‘‘assessment,’’ FNS has 

opted to use the term ‘‘fine’’ in this final 

rule for clarity and for consistency with 

statute. A fine is commonly known to be 

a monetary penalty for a prohibited act. 


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This change responds to concerns that 

terms used in the proposed rule created 

confusion. Consistent with the statute 

and the proposed rule, the criteria that 

warrant fines include: 

• Failure to correct severe program 

mismanagement; 

• Disregard of a program requirement 

of which an SFA or State agency has 

been informed; or 

• Failure to correct repeated 

violations of program requirements. 

FNS stresses that fines will be applied 

under exceptional, not routine, 

circumstances. For example, fines may 

be warranted to address a serious 

violation, such as the intentional 

destruction of records or the intentional 

misappropriation of program funds. 

Fines would not be warranted for 

routine problems, such as a menu 

planning or meal pattern violation or a 

recordkeeping or resource management 

error, which can be corrected with State 

agency oversight and technical 

assistance. 

A fine would never replace 

established technical assistance, 

corrective action, or fiscal action 

measures to solve commonplace or 

unintentional problems. Rather, the 

assessment of fines provides a new 

accountability tool for FNS and State 

agencies to use when there are severe or 

repeated non-criminal violations—the 

types of programs abuses that seriously 

threaten the integrity of Federal funds or 

significantly impair the delivery of 

service to eligible students. Each 

situation is different, and FNS and State 

agencies, in consultation with their legal 

counsel, will carefully consider whether 

a fine is the appropriate response. 

As required by statute, this final rule 

allows fines to be established against 

SFAs and State agencies in the 

operation of any Child Nutrition 

Program, including the issuance of fines 

against SFA sponsors in SFSP and SFA 

institutions in CACFP. This is a change 

from the proposed rule, which would 

have extended fines to all types of SFSP 

sponsors and CACFP institutions. FNS 

has decided to pursue a separate 

rulemaking to propose amendments to 

SFSP and CACFP regulations that 

would strengthen the serious deficiency 

processes to safeguard Federal funds 

and program integrity against 

mismanagement, abuse, and fraud. 

This final rule allows State agencies 

to suspend or terminate the 

participation of an SFA, if the 

established fine is not paid, and 

provides the ability to appeal any fine 

through existing processes at 7 CFR 

210.18(p), 225.13, 226.6(k), and 

235.11(f). Fines must be paid using nonFederal funds, as required by statute, 

which may include State revenue funds 

in excess of the 30 percent required 

match for NSLP, other State 

appropriated funds, and local 

contributions to support the programs. 

All fines, and any interest charged, must 

be remitted to FNS and then transmitted 

to the United States Treasury. These 

funds cannot be used by FNS. 

This final rule clarifies FNS 

expectations regarding the calculation 

and timeframe for the payment of fines. 

As required by section 22(e)(1)(A) of the 

NSLA, 42 U.S.C. 1769c(e), this 

rulemaking adds new paragraphs to 

identify maximum thresholds for first, 

second, and subsequent fines at 7 CFR 

210.26(b)(3), 215.15(b)(3), 220.18(b)(3), 

225.18(k)(3), 226.25(j)(3), and 

235.11(c)(2). For State agency fines, FNS 

will calculate the maximum thresholds 

using all SAE allocations made available 

to the State agency in the most recent 

fiscal year for which full year data is 

available. For SFA fines, the State 

agency will calculate the maximum 

thresholds using program meal 

reimbursements from the most recent 

fiscal year for which full year data (i.e., 

closeout data) is available. 

FNS and State agencies may calculate 

a fine below the maximum thresholds. 

For example, a State agency may target 

a fine only to certain school sites, or 

only to meal reimbursements earned by 

an SFA during a certain timeframe. 

Consistent with the proposed rule, State 

agencies must notify FNS at least 30 

days prior to fining an SFA. FNS 

approval of the State agency’s action is 

not required. States agencies have 

discretion to determine the due date for 

a fine, and may consult with FNS to 

determine an appropriate due date. FNS 

strongly recommends State agencies 

also consult with their legal counsel 

prior to fining an SFA. 

FNS is mindful of respondents’ 

concerns about the potential for fines to 

be established against State agencies for 

local program violations. This final rule 

clarifies that State agencies may only be 

fined for severe or repeated program 

violations at the State level, including 

lack of proper oversight, but not for 

singular, specific program violations 

that occur at the local level. This final 

rule maintains FNS authority to direct 

the State agency to establish a fine 

against an SFA. 

In most cases, Child Nutrition 

Program operators work together to 

build a culture of compliance. State 

agencies and SFAs that follow 

fundamental program requirements, and 

those that work to resolve compliance 

issues, will not be impacted by this 

provision, as fines will only be levied in 

cases of severe or repeated program 

violations. FNS expects fines to be 

imposed only after State agencies and 

SFAs have been informed of program 

violations—and provided opportunity to 

correct them—through existing 

processes, such as direct technical 

assistance, corrective action, or fiscal 

action. 

For less severe violations, for single 

violations, and for unintentional 

violations, technical assistance, 

corrective action, and, if necessary, 

fiscal action will remain appropriate 

courses of action. However, when 

existing processes do not adequately 

address program violations, the 

assessment of a fine will support efforts 

to ensure State agencies and SFAs 

comply with program regulations and 

use Federal funds for their intended 

purposes. FNS recognizes the 

importance of preserving public trust in 

the Child Nutrition Programs by holding 

State agencies and SFAs accountable for 

severe or repeated violations. In those 

exceptional circumstances, fines will be 

an important tool to bring State agencies 

and SFAs into compliance with Federal 

regulations and protect the integrity of 

the Child Nutrition Programs. 

Accordingly, this final rule amends 7 

CFR 210.18(p) and 235.11(c) and adds 

new paragraphs to 210.26(b), 215.15(b), 

220.18(b), 225.18(k), and 226.25(j) to 

provide authority to FNS and to State 

agencies to establish fines in cases of 

severe or repeated program violations. 

The compliance date is August 23, 2024. 

2. Reciprocal Disqualification in All 

Child Nutrition Programs 

Section 12(r) of the NSLA, 42 U.S.C. 

1760(r), states that any school, 

institution, service institution, facility, 

or individual that is terminated from 

any Child Nutrition Program and that is 

on a list of institutions and individuals 

disqualified from participation in SFSP 

or CACFP may not be approved to 

participate in or administer any Child 

Nutrition Program. Current CACFP 

regulations include procedures for 

disqualification of institutions and day 

care homes. An institution or individual 

remains on the National disqualified list 

(NDL) until each serious deficiency is 

corrected, or until 7 years have passed. 

In all cases, all debts owed must be 

repaid prior to removal from the NDL. 

State agencies are required to consult 

the NDL when reviewing any program 

application, and must deny the 

application if the institution, or any of 

its responsible principals, is on the 

NDL. Although the statute authorizes an 

NDL for SFSP, currently, CACFP is the 

only Child Nutrition Program with an 

NDL. 


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FNS proposed requiring State 

agencies to deny the application for any 

Child Nutrition Program if the applicant 

has been terminated for cause from any 

Child Nutrition Program or the 

applicant is on the NDL for CACFP or 

SFSP. This process is called ‘‘reciprocal 

disqualification.’’ The proposed rule: 

• Applies reciprocal disqualification 

to all applicants in any Child Nutrition 

Program; 

• Specifies that either termination for 

cause or placement on an NDL would be 

the basis for reciprocal disqualification; 

• Identifies an entity as any school, 

SFA, institution, service institution, 

facility, sponsoring organization, site, 

child care institution, day care center, 

day care home, responsible principal, or 

responsible individual; 

• Applies suspension or termination 

procedures when it is determined that 

an entity currently participating in a 

Child Nutrition Program is terminated 

for cause from another Child Nutrition 

Program; 

• Requires each State agency to 

develop a process to share information 

about disqualified entities within the 

State with other agencies administering 

Child Nutrition Programs or the Special 

Supplemental Nutrition Program for 

Women, Infants, and Children (WIC), 

which must be approved by FNS; 

• Maintains disqualification until 

deficiencies are corrected, or until 7 

years have passed, so that an entity will 

remain ineligible until all debts owed 

under the program are repaid; 

• Establishes that the decision to 

deny an application is final and not 

subject to further administrative or 

judicial review; and 

• Requires implementation 90 days 

after the publication of the final rule. 

Public Comments 

FNS received 127 comments about 

reciprocal disqualification. Of these, 7 

were supportive, 105 were opposed, and 

15 were mixed. Proponents stated that 

this provision promotes integrity across 

all Child Nutrition Programs. They 

agreed that if an entity is disqualified 

from one Child Nutrition Program, it 

should not be permitted to participate in 

another. Some responses supported the 

proposal but requested more guidance 

for successful implementation. 

Opponents were primarily concerned 

about the impact this provision could 

have on SFSP and CACFP participation. 

They asserted that SFAs may be 

reluctant to sponsor SFSP or CACFP if 

it puts their NSLP participation at risk 

and suggested limiting this provision to 

entities that are terminated for cause 

and placed on an NDL. 

FNS Response 

This provision supports integrity 

when it is determined that an entity 

currently participating in a Child 

Nutrition Program is terminated for 

cause from another Child Nutrition 

Program and placed on an NDL, as 

required by statute. It aligns with FNS’ 

efforts to preserve public trust in the 

programs by preventing further abuse 

and severe mismanagement. However, 

before the reciprocal disqualification 

process may be applied to program 

regulations, FNS recognizes that 

additional attention needs to be given to 

the NDL before it is expanded to SFSP. 

FNS intends to publish a separate 

rulemaking to propose improvements to 

the serious deficiency process that will 

also address the legal requirements for 

records maintained on individuals in 

the NDL, including independent 

verification and the opportunity to 

contest matches on the list. This 

separate rulemaking will allow FNS to 

address additional requirements, further 

consider respondents’ concerns about 

termination for cause and 

disqualification and provide an 

opportunity for the public to comment 

on the changes. FNS is committed to 

publishing new regulations. 

Accordingly, this final rule will not 

codify any regulatory amendments 

related to the reciprocal disqualification 

process at this time. 

3. Serious Deficiency Process and 

Disqualification in SFSP and CACFP 

Section 13(q) of the NSLA, 42 U.S.C. 

1761(q), requires the Secretary to 

establish procedures for the termination 

of SFSP sponsors for each State agency 

to follow. The procedures must include 

a fair hearing and prompt determination 

for any sponsor aggrieved by any action 

of the State agency that affects its 

participation or claim for 

reimbursement. The Secretary is also 

required to maintain a list of 

disqualified sponsors and individuals 

that will be available to State agencies 

to use in approving or renewing sponsor 

applications. 

In order to implement section 13(q), 

along with the reciprocal 

disqualification requirement under 

section 12(r) of the NSLA, 42 U.S.C. 

1760(r), the proposed rule included 

amendments expanding the serious 

deficiency process in CACFP and 

extending it to SFSP. This integrityfocused process has provided a 

systematic way for CACFP State 

agencies and sponsoring organizations 

to correct serious management 

problems, and when that effort fails, 

protect the program through due 

process. 

Current SFSP regulations include 

provisions addressing corrective action, 

termination, and appeals. The 

regulations under 7 CFR part 225: 

• Specify criteria State agencies must 

consider when approving sites for 

participation; 

• Provide authority for the State 

agency to terminate sponsor 

participation; 

• List the types of program violations 

that would be grounds for application 

denial or termination; 

• Require State agencies to terminate 

participation of sites or sponsors for 

failure to correct program violations 

within timeframes specified in a 

corrective action plan; and 

• Establish procedures for sponsors to 

appeal adverse actions, including 

termination of a sponsor or site and 

denial of an application for 

participation. 

However, SFSP current regulations do 

not provide authority to FNS or State 

agencies to disqualify sponsors. 

Serious deficiency, termination, and 

disqualification procedures already 

exist for institutions, day care homes, 

responsible principals, and responsible 

individuals in CACFP under section 

17(d)(5) of the NSLA, 42 U.S.C. 

1766(d)(5), and codified in regulations 

at 7 CFR 226.6(c) and 226.16(l). These 

procedures provide seriously deficient 

institutions and facilities with the 

opportunity to correct the serious 

deficiency. They are intended to ensure 

that institutions and day care homes 

that had failed to take satisfactory 

corrective action, within the allotted 

period of time, have had their program 

agreement terminated, been 

disqualified, and placed on the NDL. 

FNS proposed applying these existing 

requirements to establish a serious 

deficiency process for sponsors and 

sites in SFSP and unaffiliated centers in 

CACFP, which is essential to fulfilling 

the intent of section 12(r) of the NSLA. 

The proposed rule includes 

amendments to: 

• Establish a serious deficiency 

process for unaffiliated child care 

centers and unaffiliated adult day care 

centers in CACFP; 

• Modify termination procedures and 

establish a serious deficiency process in 

SFSP; 

• Establish an NDL for SFSP that FNS 

would maintain and make available to 

all State agencies; 

• Require each SFSP State agency to 

establish a list of sponsors, responsible 

principals, and responsible individuals 

declared seriously deficient; 


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57796 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

• Require each SFSP State agency to 

provide appeal procedures to sponsors, 

annually and upon request; and 

• Specify the types of adverse actions 

that cannot be appealed in SFSP. 

Public Comments 

FNS received 236 comments 

addressing application of the serious 

deficiency process in SFSP—104 

(including a form letter campaign) were 

supportive, 8 were opposed, and 124 

were mixed. Several respondents 

requested additional definitions and 

clarification of the terms that are used 

to describe the serious deficiency 

process. Multiple respondents suggested 

alternatives that would extend the 

timeframe for corrective action, adapt 

the amount of time for corrective action 

to specific types of serious deficiencies, 

and allow State agencies to approve 

long-term corrective action plans. They 

also asked FNS to consider delaying 

implementation to allow time for 

updating automated systems. 

Out of 532 comments regarding 

amendments to the serious deficiency 

process in CACFP, 11 were supportive, 

47 (including 38 form letters) were in 

opposition, and 474 (including 462 form 

letters) were mixed. Many of the 

respondents voiced general concern 

about using the current CACFP serious 

deficiency process as a model for 

establishing procedures in other Child 

Nutrition Programs. They suggested that 

FNS further investigate and attempt to 

address potential inconsistencies in 

implementation among States. 

FNS Response 

FNS agrees that modifications are 

needed to improve the serious 

deficiency process to ensure its 

application is fair and fully 

implemented. Consequently, FNS 

published a notice, Request for 

Information: The Serious Deficiency 

Process in the Child and Adult Care 

Food Program, in the Federal Register, 

at 84 FR 22431, on May 17, 2019, 

https://www.fns.usda.gov/cacfp/fr051719, to gather information to help 

FNS understand the firsthand 

experiences of State agencies and 

program operators. FNS received 580 

comments in response to this request for 

information. An analysis of the 

responses has convinced FNS to delay 

the expansion of the serious deficiency 

process and related changes. To better 

serve State agencies and program 

operators, important modifications are 

needed to make the application of the 

serious deficiency process consistent 

and effective, in line with current 

statutory requirements. 

To allow FNS to respond to the 

concerns and challenges that resonated 

in the public comments, FNS intends to 

publish a separate rulemaking to 

propose improvements to the serious 

deficiency process and provide an 

opportunity for the public to comment 

on the changes. FNS is committed to 

publishing new regulations to address a 

serious deficiency determination, 

corrective action, termination for cause, 

and disqualification, prior to extending 

these requirements to unaffiliated 

centers in CACFP and SFSP sponsors. 

This separate rulemaking will establish 

a serious deficiency process for SFSP, 

with provisions for disqualification and 

placement on the NDL. It will also 

address the legal requirements for 

records maintained on individuals on 

the NDL. 

State agencies will continue to have 

discretion to apply their own processes 

for addressing seriously deficient 

performance by unaffiliated centers in 

CACFP and sponsors in SFSP, during 

this period of rulemaking development. 

Implementation of State agency 

processes does not require a State 

agency request for FNS approval of 

additional requirements. FNS will 

continue to provide technical assistance 

as needed to support such 

implementation. 

To eliminate ambiguity, this 

rulemaking also includes a definition of 

‘‘Termination for convenience’’ to 

clarify that an agreement may be 

terminated for convenience when a 

sponsor, institution, facility, or State 

agency chooses to permanently end 

program participation, due to 

considerations unrelated to its 

performance of program responsibilities. 

If an entity decides to apply to 

participate in SFSP or CACFP, at a 

future date, a new agreement is 

required. However, if the service of 

meals is temporarily interrupted, due to 

considerations unrelated to program 

performance, the State agency or 

sponsoring organization, as applicable, 

must be notified in writing that meals 

will not be claimed for that period of 

time. The agreement remains in effect. 

Termination for convenience, 

particularly by the State agency, may be 

an infrequent occurrence. The 

regulations maintain that the State 

agency, sponsor, institution, or facility 

cannot terminate for convenience to 

avoid implementing the serious 

deficiency process. Any entity that 

voluntarily terminates its agreement 

after receiving a notice of intent to 

terminate will be terminated for cause 

and disqualified. 

Accordingly, this final rule amends 7 

CFR 225.2, 225.6(i), 226.2, and 

226.6(b)(4) to define ‘‘Termination for 

convenience’’ and address the cessation 

of program activities in SFSP and 

CACFP for reasons that are unrelated to 

performance. The compliance date is 

August 23, 2024. FNS will propose 

additional State agency provisions for 

establishing a serious deficiency process 

to address termination for cause, 

disqualification, and other 

administrative actions for program 

violations in a separate rulemaking. 

4. State Agency Review Requirements in 

CACFP 

Monitoring is an essential tool for 

ensuring integrity and reducing program 

abuse. Section 17(d)(2)(C) of the NSLA, 

42 U.S.C. 1766(d)(2)(C), directs the 

Secretary to develop policies under 

which each State agency must conduct 

at least one scheduled site visit, at not 

less than 3-year intervals, to identify 

and prevent management deficiencies, 

fraud, and abuse, and to improve 

CACFP operations. The statute 

mandates more frequent reviews of any 

institution that: 

• Sponsors a significant share of the 

facilities participating in CACFP; 

• Conducts activities other than those 

expressly related to the administration 

and delivery of CACFP; 

• Has had prior reviews that detected 

serious management problems; 

• Is at risk of serious management 

problems; or 

• Meets other criteria as defined by 

the Secretary. 

Current regulations require State 

agencies to annually review at least a 

third (33.3 percent) of all institutions 

participating in the CACFP in each 

State. Independent centers must be 

reviewed at least once every 3 years. 

Sponsoring organizations with up to 100 

facilities must also be reviewed at least 

once every 3 years. Sponsoring 

organizations with more than 100 

facilities must be reviewed at least once 

every 2 years. New sponsoring 

organizations with five or more facilities 

must be reviewed within the first 90 

days of operation. 

As part of each required review of a 

sponsoring organization, the State 

agency must select a sample of facilities. 

For sponsoring organizations of less 

than 100 facilities, the State agency 

must review 10 percent of the facilities. 

For sponsoring organizations of more 

than 100 facilities, the State agency 

must review 5 percent of the first 1,000 

facilities, and 2.5 percent of the 

facilities in excess of 1,000. 

Consistent with the statutory mandate 

under section 17(d)(2)(C) of the NSLA, 

FNS proposed criteria for State agencies 

to use in selecting institutions for more 


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frequent reviews. Under the proposed 

rule, selected institutions must be 

reviewed at least once every 2 years. 

FNS did not propose any changes to the 

requirements for reviews of sponsored 

facilities. 

Public Comments 

FNS received 137 comments, of 

which 4 responses were supportive, 10 

were opposed, and 123 were mixed. A 

large form letter campaign requested 

FNS to provide additional criteria to 

describe institutions that are at risk of 

having serious management problems. 

Multiple State agencies did not agree 

that conducting activities other than 

those related to CACFP would increase 

the risk of abuse, citing the participation 

of numerous types of child care, social 

service, tribal, and other multi-purpose 

organizations that engage in activities 

outside of CACFP. They observed that 

virtually all sponsoring organizations 

conduct activities other than those 

related to CACFP and that there is 

greater risk for abuse by institutions that 

have little outside funding and rely 

almost exclusively on CACFP funds. 

They also asked FNS to clarify how 

State agencies should incorporate 

additional reviews into the current 3- 

year review cycle. 

Respondents expressed concern that 

compliance with the proposed rule 

would require additional State agency 

funding and staffing to address the 

substantial increase in burden. They 

recommended alternatives, such as 

requiring in depth financial reviews of 

all institutions; applying this 

requirement only to sponsoring 

organizations that do not provide child 

or adult care services, beyond CACFP; 

or excluding institutions that receive 

monitoring through their participation 

in other Federal programs, such as SFAs 

in NSLP. 

FNS requested specific comments 

addressing the frequency and number of 

reviews State agencies would be 

required to perform under the 

provisions of the proposed rule. Four 

State agencies responded. They 

projected that 26 to 64 percent of 

sponsoring organizations would require 

additional reviews. They voiced 

concern that the additional audit funds 

now available to State agencies would 

not sufficiently cover the increased 

costs of monitoring. 

FNS Response 

This final rule establishes additional 

priorities and criteria for State agencies 

to use in selecting institutions for 

review. As required by statute, it 

requires State agencies to conduct at 

least one review every 2 years of 

institutions that: 

• Sponsor more than 100 facilities, as 

currently required; 

• Engage in any activities other than 

those related to CACFP; 

• Have received findings from a 

recent review that detected serious 

management problems; or 

• Are at risk of having serious 

management problems. 

In developing this rulemaking, FNS 

recognizes that a more frequent 

schedule of reviews will require State 

agencies to also prioritize funding and 

staffing resources. Comments from State 

agencies and other respondents stress 

this point. However, FNS has found that 

some States are not making full use of 

SAE and CACFP audit funds that are 

available to support the performance of 

reviews, audits, and other oversight 

activities. That is why FNS continues to 

encourage all State agencies to make 

wider use of these funds. Full use of 

these funds will help ease any potential 

burden. 

SAE and CACFP audit funds are 

available to State agencies for specific 

purposes. SAE supports allowable 

expenses associated with the 

administration of the Child Nutrition 

Programs and related Food Distribution 

Programs; the employment of additional 

personnel to supervise, improve 

management, and give technical 

assistance to institutions; and other 

allowable uses described under 7 CFR 

235.6. When some State agencies cannot 

fully use their allotment of SAE funds, 

FNS reallocates them to other States that 

can ensure they are used. 

CACFP audit funds may be used to 

pay for the CACFP portion of institution 

audits and for conducting programspecific audits of institutions. The State 

agency may use these funds to support 

CACFP-related audits and subsequent 

audit resolution activities. The funds 

may also be used for reviews of CACFP 

institutions, provided that all required 

program-specific audits have been 

performed. The State agency may 

choose to retain all of its allocation, 

provide some of its audit funds to 

institutions, or use any remaining audit 

funds for other monitoring activities 

purposes. Section I–C–6 of this 

preamble provides additional 

information about the allocation and 

usage of audit funds for State agencies. 

The comments also point out 

concerns about the criteria State 

agencies must use in selecting 

institutions for review. As required by 

statute, institutions must receive more 

frequent monitoring if they sponsor 

more than 100 facilities, engage in any 

activities other than those related to 

CACFP, have had serious management 

problems, or are at risk of having serious 

management problems. These criteria 

are specified under section 17(d)(2)(C) 

of the NSLA. They underscore the 

importance of prioritizing State 

monitoring resources to achieve the 

most effective program oversight. 

FNS characterizes serious 

management problems as the types of 

administrative weaknesses that affect an 

institution’s ability to meet CACFP 

performance standards—financial 

viability, administrative capability, and 

accountability. A sponsoring 

organization that operates a variety of 

community programs may be prone to 

serious management problems if it has 

inadequate staffing to support CACFP 

operations or may be devoting too small 

of a share of administrative resources to 

CACFP. Routine allocation of a 

disproportional amount of a sponsoring 

organization’s budget to its other 

activities should raise a red flag about 

its ability to properly manage CACFP. 

More frequent monitoring by the State 

agency would help improve CACFP 

operations by identifying and 

addressing these weaknesses. Excluding 

Head Start centers, SFAs, and other 

types of institutions that receive 

monitoring through their participation 

in other Federal programs from this 

requirement would be inconsistent with 

the statutory requirement and would not 

support efforts to identify and correct 

serious management problems in 

CACFP. 

FNS expects State agencies to 

prioritize reviews to ensure that 

institutions do not divert CACFP 

resources to other activities. However, 

FNS is open to considering alternative 

approaches for determining review 

priorities, identifying institutions with a 

high number of risk factors, and 

ensuring effective monitoring on a caseby-case basis. State agencies should 

work with FNS to determine how they 

can design their monitoring policies to 

comply with statutory requirements. A 

State agency with a proposed alternative 

approach should consult with FNS. 

The proposed rule cites examples of 

factors that may expose an institution’s 

risk, including changes in ownership, 

significant staff turnover, new licensing 

status, complaints about a sponsoring 

organization, sizable differences in the 

number of claims or the amount of 

claims submitted by an institution, or 

large increases in the number of 

sponsored centers or day care homes. 

The State agency should also consider 

its ongoing evaluation of the 

performance standards that demonstrate 

the institution’s ability to effectively 

operate the program. For example, 


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institutions that have lost other sources 

of funding are at risk, as they may be 

incapable of meeting their financial 

obligations if there were an interruption 

in CACFP payments. 

Accordingly, as required by statute, 

this final rule amends 7 CFR 226.6(m)(6) 

to require the State agency to schedule 

reviews at least once every 2 years of 

institutions that sponsor more than 100 

facilities, engage in activities other than 

CACFP, have had serious management 

problems in previous reviews, or are at 

risk of having serious management 

problems. The compliance date is 

August 23, 2024. 

5. State Liability for Payments to 

Aggrieved Child Care Institutions 

Section 17(e) of the NSLA, 42 U.S.C. 

1766(e), directs the Secretary to 

promulgate CACFP regulations to 

ensure that State agencies use a fair and 

timely hearing process to reduce the 

amount of time between a State agency’s 

action and the child care institution’s 

hearing. This provision only applies to 

payments to child care institutions. It 

shifts the responsibility for payments 

from aggrieved child care institutions to 

State agencies and works as a deterrent 

to prevent State agencies from failing to 

issue administrative review decisions 

within the required timeframe. It 

requires State agencies to pay, from nonFederal sources, all valid claims for 

reimbursement, from the end of the 

regulatory deadline for providing the 

hearing to the date a decision is made. 

Under current regulations at 7 CFR 

226.6(k), the State agency must 

acknowledge an institution’s request for 

an administrative review within 10 days 

of its receipt of the request. Within 60 

days of the State agency’s receipt of the 

request, the administrative review 

official must inform the State agency, 

the institution’s executive director, 

chair of the board of directors, 

responsible principals, and responsible 

individuals of the administrative 

review’s outcome. During this period, 

all valid claims for reimbursement must 

be paid to the institution and the 

facilities of the institution, unless there 

is an allegation of fraud or a serious 

health or safety violation against the 

institution. The claims are paid from 

Federal funds. 

FNS proposed amending the 

regulations to establish the State 

agency’s liability to pay all valid claims 

if the State agency fails to meet the 

required timeframe for providing a fair 

hearing and a prompt decision. A State 

agency that fails to issue administrative 

review decisions within 60 days must 

pay, from non-Federal sources, all valid 

claims for reimbursement to the 

aggrieved institution, beginning on the 

61st day and ending on the date on 

which the decision is made. 

Public Comments 

FNS asked respondents to the 

proposed rule to address the financial 

implications of this provision, and 

suggest appropriate milestones that FNS 

could require of State agencies during 

implementation. FNS specifically 

requested comments to consider 

alternatives to the 60-day timeframe and 

any modifications which would meet 

State needs, without compromising 

integrity or the demand for a timely 

decision for the aggrieved institution. 

Out of 132 comments, 10 responses 

were supportive, 10 responses 

(including 2 form letters) were opposed, 

and 112 responses (including 99 form 

letters) were mixed. 

Although the comments did not 

highlight any financial impacts, 

multiple respondents offered 

alternatives or improvements to the 60- 

day timeframe. They cited numerous 

factors outside of the State agency’s 

control that may delay the State 

agency’s ability to issue administrative 

review decisions within a 60-day 

deadline, including: 

• Delays caused by the hearing 

official’s schedule; 

• Voluminous stacks of paperwork 

requiring the hearing official to take 

additional time for review; 

• Additional time needed by the 

hearing official to render and fully 

document the legal basis for the 

decision; 

• Continuances requested by the State 

agency to gather evidence; and 

• The aggrieved institutions’ needs 

for additional time to secure counsel, 

build their cases, or schedule hearings. 

Thirteen of the comments were from 

State agencies administering CACFP 

that are directly responsible for 

adhering to the timeframe for issuing an 

administrative review decision under 7 

CFR 226.6(k)(5)(ix). One State agency 

proposed changing the deadline for 

completion of the administrative review 

to 90 days, citing the results of Targeted 

Management Evaluations. During Fiscal 

Years 2010 and 2011, FNS conducted 

in-depth reviews of compliance with 

serious deficiency requirements and 

found that more than half of State 

agencies in the Targeted Management 

Evaluation sample needed up to 90 days 

to complete the administrative review 

process. Another State agency proposed 

changing the deadline to 120 days, 

which would conform with NSLP 

appeal procedures for SFAs under 7 

CFR 210.18(p). 

A form letter campaign proposed 

extending the appeals timeline from 60 

to 90 days and extending the timeframe 

from 60 to 120 days before the State 

agency is responsible for paying valid 

claims from non-Federal sources. The 

respondents asked FNS not to hold the 

State agency accountable for delays due 

to an institution’s actions or, 

alternatively, they asked FNS to allow 

an exemption from liability when the 

delays are outside the State agency’s 

control. They also requested that FNS 

include a step in the process that would 

elevate appeals of State agency review 

findings for FNS mediation, as 

recommended in the August 2015 

Report to Congress, Reducing Paperwork 

in the Child and Adult Care Food 

Program, https://fns.usda.gov/sites/ 

default/files/cacfp/CACFP_Paperwork_

Report.pdf. 

FNS Response 

Consistent with statute, this final rule 

requires State agencies to provide fair 

and timely hearings through the serious 

deficiency process. It also requires a 

State agency to pay all valid claims for 

reimbursement, from non-Federal 

sources, if the 60-day timeframe for the 

fair hearing is not met. Historically, 

some CACFP operators have come 

under scrutiny for a lack of program 

integrity in affording due process and 

ensuring payment accuracy, resulting in 

the need for the current regulatory 

framework featuring tighter regulations 

and deadlines. In order to minimize the 

exposure of program funds to waste or 

abuse, State agencies must be able to 

resolve problems quickly and train 

hearing officials to meet the FNS 

deadline to promptly complete the 

appeals process. 

In developing this rulemaking, FNS 

recognizes the concerns of State 

agencies and other respondents about 

exceptional circumstances that may 

require additional time and flexibility. 

They argued that, despite all reasonable 

efforts to keep administrative processes 

moving quickly and to overcome 

administrative law procedures that 

challenge the CACFP timelines, delays 

may arise from any number of 

exceptional circumstances. In response 

to these comments, this final rule allows 

FNS to approve, on a case-by case basis, 

a written request for an exception to the 

60-day deadline. 

FNS is committed to working with 

individual State agencies to establish 

milestones to implement this provision 

and minimize potential financial 

burdens. Suppose a State agency is 

unable to meet the deadline due to an 

isolated administrative issue at the State 

level. The State agency may seek a 


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reduction in its liability, a 

reconsideration of its liability, or an 

exception to the 60-day deadline in this 

specific case by submitting a request to 

FNS that includes information regarding 

any mitigating circumstances. In this 

example, the State agency would 

explain the specific administrative issue 

it is facing, why the issue prevents the 

State agency from meeting the deadline, 

and how the issue will be remedied to 

ensure that it does not continue in the 

future. To determine if the request 

should be approved, FNS would review 

the State agency’s information and 

consider the mitigating circumstances. 

For approval, FNS would also have to 

weigh factors, such as how many times 

the State agency has failed to meet the 

deadline, or how much of a risk to the 

integrity of Federal funds would the 

delay or inaction by the State agency 

cause. 

Accordingly, as required by statute, 

this final rule amends 7 CFR 226.6(k) to 

establish State liability for payments to 

aggrieved child care institutions. It 

requires the State agency to pay all valid 

claims with non-Federal funds if the 

State agency fails to meet the required 

timeframe for providing a fair hearing 

and a prompt determination, unless 

FNS grants an exception. To further 

support the State agency’s ability to 

ensure timely resolution of 

administrative reviews, FNS intends to 

provide technical assistance materials 

on developing processes for tracking 

and notifying State agencies when they 

would become liable for payments and 

best practices for working with hearing 

officials to emphasize the importance of 

adhering to a timeline in rendering their 

decisions. The compliance date is 

August 23, 2024. 

6. CACFP Audit Funding 

Program audits are an integral 

component of CACFP, allowing State 

agencies to monitor funding and 

operations to ensure that sponsoring 

organizations and centers operate 

CACFP as required by law. Section 

17(i)(2)(B) of the NSLA, 42 U.S.C. 

1766(i)(2)(B), allows additional funding 

to State agencies to conduct audits. The 

Secretary may increase the amount of 

funds to any State agency that 

demonstrates that it can effectively use 

the funds to improve program 

management, under criteria established 

by the Secretary. 

In previous fiscal years, each State 

agency has received up to 1.5 percent of 

the program funds used by the State 

during the second preceding fiscal year 

for the purpose of conducting CACFP 

audits. Beginning in Fiscal Year 2016, 

and each fiscal year thereafter, FNS 

began accepting requests from State 

agencies to increase their audit funding 

from 1.5 percent to a maximum of 2 

percent of the CACFP funds used by 

each State. 

Public Comments 

Out of 381 comments, 10 were 

supportive and 371 (including 354 from 

2 form letter campaigns) were mixed. 

The majority of responses supported 

increasing the amounts of audit funds 

available to State agencies, just not the 

need to have to apply for them. Multiple 

respondents requested greater flexibility 

to use audit funds to support integrityrelated expenses, such as purchases of 

improved technology or travel for 

training purposes. They also 

recommended that FNS: 

• Make it easier for State agencies to 

use additional audit funds to support 

the permanent or ongoing costs that are 

necessary for completing audits and 

maintaining program integrity; 

• Ensure that State agencies can still 

pass through audit funds to institutions 

if they have audit funds available to do 

so; and 

• Allow unspent audits funds to be 

used to improve CACFP, instead of 

returning them to the United States 

Treasury. 

FNS Response 

This final rule allows FNS to increase 

the amount of State audit funds if a 

State agency demonstrates that it can 

effectively use the funds to improve 

program management. This rulemaking 

codifies into CACFP regulations the 

procedures FNS has established for 

State agencies to apply for a higher 

allocation of audit funds. It also 

provides criteria for FNS to approve 

these requests. 

Additional CACFP audit funds are 

available to State agencies that 

demonstrate the need for an increase in 

resources to meet audit requirements 

under 7 CFR 226.8, fulfill monitoring 

requirements under 7 CFR 226.6(m), or 

effectively improve program 

management, under criteria established 

by the Secretary. FNS recognizes that 

the additional funds will be an 

incentive for State agencies to improve 

the effectiveness of their oversight 

activities and strengthen program 

integrity. FNS has established an 

equitable process, outlined below, to 

authorize these funds to those State 

agencies that submit a written request 

justifying the need for an increase in 

CACFP audit funds. 

Prior to the beginning of each new 

fiscal year, FNS announces the 

opportunity to increase CACFP audit 

funding levels from 1.5 to 2 percent. 

The announcement includes a 

spreadsheet calculating the State 

agency-by-State agency funding levels at 

the 1.5 and 2 percent levels to illustrate 

the maximum amounts available. Each 

State agency may request any amount 

within the 1.5 to 2 percent range of 

funds. Funding above 1.5 percent will 

be available only if the State agency can 

demonstrate it will effectively use the 

funds to improve program management. 

This action does not change the 

formula used to calculate CACFP audit 

funds. It only changes the maximum 

amount of assistance available for some 

State agencies. The amount of assistance 

provided to a State agency for this 

purpose, in any fiscal year, may not 

exceed the State’s expenditures for 

conducting audits as permitted under 7 

CFR 226.4 and 226.8. CACFP audit 

funds are not reallocated and may not 

be carried over into another fiscal year. 

The funds must be used for: 

• Funding of the CACFP portion of 

organization-wide audits and the 

resulting audit resolution activities; 

• Conducting, handling, and 

processing CACFP-related audits and 

performing the resulting audit 

resolution activities; and 

• Conducting monitoring of CACFP 

institutions, provided that all required 

program-specific audits have been 

performed. 

FNS approval of requests for 

additional CACFP audit funds is based 

on the State agency’s demonstrated need 

for additional funds to meet audit or 

monitoring requirements or effectively 

improve program management. To be 

funded, costs must be incurred strictly 

to meet the audit requirements under 7 

CFR 226.8 and the monitoring 

requirements under 7 CFR 226.6(m). 

Allowable costs include, but are not 

limited to, salaries of auditors and 

monitors and travel expenses incurred 

to conduct audits and monitoring. 

State agencies may use their 

allocation of CACFP audit funds to pay 

for the CACFP portion of institution 

audits or conduct program-specific 

audits of institutions, as specified under 

7 CFR 226.8(b) and (c), respectively. The 

State agency may choose to retain all of 

its allocation, provide some of its audit 

funds to institutions, or use any 

remaining audit funds for other 

monitoring activities. For example, after 

the completion of program-specific 

audits, the State agency may use the 

remaining funds to cover costs incurred 

in evaluating financial viability, 

administrative capability, and 

accountability at the time of application. 

The review of budgets to ensure that 

costs are allowable and the purchase of 

mapping software for determining the 


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57800 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

accuracy of area eligibility 

determinations for day care homes are 

also examples of allowable uses of 

remaining funds. 

Accordingly, this final rule amends 7 

CFR 226.4(j) to allow additional CACFP 

audit funds for State agencies. FNS now 

considers requests to increase audit 

funding from 1.5 percent to a 

cumulative maximum of 2 percent of 

CACFP funds used by the State agency 

during the second preceding fiscal year 

for the purpose of conducting program 

audits. The additional funds must be 

used to meet program oversight and 

audit requirements under 7 CFR 

226.6(m) and 226.8, respectively, or to 

improve program management under 

criteria established by the Secretary. 

The compliance date is September 22, 

2023. 

7. Financial Review of Sponsoring 

Organizations in CACFP 

The proposed rule includes 

modifications in program policy 

resulting from the reports of findings 

from OIG’s audit, Review of 

Management Controls for the Child and 

Adult Care Food Program, issued in 

November 2011, and FNS management 

evaluations of State agency 

administration of CACFP. These 

inquiries found that the misuse of funds 

was often an indicator of a sponsoring 

organization’s systemic program abuse 

that State agency financial reviews were 

unable to detect. The reports 

recommended improvements that 

would be effective at uncovering and 

preventing the misuse of funds, 

including the following requirements 

for State agencies to review: 

• CACFP bank account activity to 

verify that sponsoring organization 

transactions meet program 

requirements; and 

• Program expenditures and the 

amount of meal reimbursement funds 

sponsoring organizations retain from 

unaffiliated centers for administrative 

costs. 

Current regulations require State 

agencies to review and approve budgets 

for sponsoring organizations of centers 

to ensure that CACFP funds are used 

only for allowable expenses. The 

portion of the administrative costs to be 

charged to CACFP must not exceed 15 

percent of the meal reimbursements 

estimated to be earned during the 

budget year unless a waiver is granted. 

All administrative costs, whether 

incurred by the sponsoring organization 

or by its sponsored centers, must be 

taken into account. 

If a sponsoring organization intends to 

use any non-program resources to meet 

CACFP requirements, its budget must 

identify a source of non-program funds 

that could be used to pay overclaims or 

other unallowable costs. To determine if 

CACFP funds are solely used for the 

operation or improvement of the 

nonprofit food service, an evaluation of 

the financial trail of source documents, 

ledgers, bank account statements, 

canceled checks, electronic deductions 

and transfers, and other financial 

records is required. 

A thorough review of the sponsoring 

organization’s financial records is vital 

in ensuring program integrity. The 

sponsoring organization must produce 

accurate, current, and complete 

disclosure of the financial results of 

each Federal award or program. 

Additionally, the records must identify 

the source and application of funds for 

federally-funded activities. However, 

the State agency’s ability to monitor a 

sponsoring organization’s use of CACFP 

funds is limited. While sponsoring 

organizations must submit annual 

budgets, which detail expenditures by 

cost category, they are not currently 

required to report actual expenses or 

fully account for their disbursement of 

CACFP funds. 

To rectify these weaknesses, FNS 

proposed requiring State agencies to 

establish processes to verify that 

sponsoring organizations’ financial 

transactions comply with CACFP 

regulations by requiring sponsoring 

organizations to report program 

expenditures. The proposed rule would 

require the State agency to annually 

review and compare at least 1 month of 

a sponsoring organization’s bank 

account activity with documents to 

demonstrate that the transactions meet 

program requirements. The State agency 

must reconcile reported expenditures 

with CACFP payments to ensure that 

funds are accounted for fully. 

The proposed rule would also require 

the State agency to annually review 

sponsoring organization reports of 

actual expenditures of program funds 

and the amount of meal reimbursement 

funds retained from their unaffiliated 

centers for administrative costs. If the 

State agency identifies any expenditures 

that have the appearance of violating 

program requirements, the State agency 

must refer the sponsoring organization’s 

bank account activity to an auditor or 

other appropriate State authority for 

verification. 

Public Comments 

Out of 589 comments, 4 were 

supportive, 67 (including 53 form 

letters) were opposed, and 518 

(including 486 from 3 form letter 

campaigns) were mixed. Many 

respondents argued that completing 

annual financial reviews, particularly 

annual bank account reviews, would 

create an administrative burden for 

State agencies. Respondents were 

concerned that a review of a single 

month of bank account activity would 

not be an effective use of program 

resources. They asserted that bank 

account statements would not provide 

useful information because there is no 

requirement for sponsoring 

organizations to have separate bank 

accounts for Federal funds. 

Multiple responses suggested that 

State agencies change review priorities 

to tie invoices to bank account 

statements in a targeted edit check of 

bank, invoice, and accounting records 

during the review process. The 

responses also included 

recommendations for adopting a riskbased approach to ensure that 

organizations at risk of misusing Federal 

funds are reviewed annually; 

coordinating the financial review with 

the review cycle; or adding a 

requirement that sponsoring 

organizations maintain timely financial 

reports onsite so that these reports 

would be available for review at any 

time. 

FNS Response 

This final rule requires State agencies 

to annually verify bank account activity 

and actual expenditures by sponsoring 

organizations in CACFP. The State 

agency must select and compare 1 

month of a sponsoring organization’s 

CACFP bank account activity with other 

documents that are adequate to support 

that the financial transactions meet 

program requirements. This rulemaking 

also requires State agencies to annually 

review CACFP expenditures reported by 

sponsoring organizations of unaffiliated 

centers. Sponsoring organizations must 

annually report the amount of program 

expenditures of program funds and the 

amount of meal reimbursement funds 

retained from their unaffiliated centers 

for administrative costs. 

While comments to the proposed rule 

included a number of alternatives that 

may offer a small reduction in burden, 

FNS believes that an annual review of 

bank account activity will more 

effectively uncover and prevent the 

misuse of funds than a less frequent 

review cycle. The review of bank 

account activity provides the most 

reliable and effective means to verify 

and document costs. Unlike receipts 

that show the reviewer who is owed the 

payments, statements of bank account 

activity inform the reviewer of who 

actually received the payments. 

Bank account statements and 

supporting documents are utilized as 


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tools to conduct edit checks on 

compliance requirements associated 

with the receipt and use of CACFP 

reimbursement. Edit checks can be 

conducted electronically and remotely, 

once the necessary supporting financial 

documentation is received by the State 

agency reviewer. 

For example, to confirm that a 

sponsoring organization’s invoices for 

CACFP expenses are legitimate and 

correctly paid, the State agency reviewer 

would compare the invoices to the 

actual bank statement. If discrepancies 

were found, the sponsoring organization 

would have the opportunity to present 

documentation to resolve them. The 

State agency reviewer would expand the 

review to examine additional months of 

bank statements, as warranted, to 

determine if the discrepancies are part 

of a systemic problem. If any 

expenditures have the appearance of 

violating program requirements, the 

State agency reviewer must attempt to 

verify the bank account activity. If the 

discrepancies cannot be verified, or if 

they are significant, the State agency 

reviewer must refer the sponsoring 

organization’s bank account activity to 

appropriate State authorities, such as 

the State auditing division or the State 

Bureau of Investigation. 

The State agency has discretion to 

obtain statements of bank account 

activity with the annual budget 

submission, as part of the application 

renewal, or through a monitoring 

review. No changes were made to the 

review content, application procedures, 

or budget approval requirements at 7 

CFR 226.6. The review of bank account 

activity is easier if funds are not 

comingled. Although FNS does not 

require it in CACFP, maintaining a 

separate bank account for Child 

Nutrition Program funds is a 

recommended practice. Personal or nonChild Nutrition Program funds should 

be held in a separate bank account. 

Accordingly, this final rule amends 7 

CFR 226.7(b) to require the State agency 

to have procedures in place for annually 

reviewing at least 1 month of the 

sponsoring organization’s bank account 

activity against other associated records 

to verify that the financial transactions 

meet program requirements. The State 

agency must also have procedures for 

annually reviewing a sponsoring 

organization’s actual expenditures of 

CACFP funds and the amount of meal 

reimbursement funds retained from 

unaffiliated centers to support the 

sponsoring organization’s 

administrative costs. The State agency 

must reconcile reported expenditures 

with program payments to ensure that 

funds are accounted for fully. This final 

rule makes a corresponding change to 7 

CFR 226.10(c) to require sponsoring 

organizations of unaffiliated centers to 

annually make available to the State 

agency the amount of program 

expenditures of program funds and the 

amount of meal reimbursement funds 

retained from their centers for 

administrative costs. FNS will work 

closely with State agencies to develop 

resources and provide technical 

assistance to sponsoring organizations 

to ensure successful implementation of 

these requirements. The compliance 

date is August 23, 2024. 

8. Informal Purchase Methods for 

CACFP 

Informal purchase methods (i.e., 

micro-purchases and small purchases) 

for procurements under Federal awards 

are covered in the Uniform 

Administrative Requirements, Cost 

Principles, and Audit Requirements for 

Federal Awards, published by the Office 

of Management and Budget at 2 CFR 

part 200 and adopted by USDA at 2 CFR 

part 400. This guidance sets the dollar 

threshold and degree of informality that 

characterizes micro-purchases and small 

purchases. 

Current practices allow CACFP 

institutions to use the micro-purchase 

method for transactions in which the 

aggregate cost of the items purchased 

does not exceed $10,000, the current 

Federal threshold. Institutions may use 

the small purchase method for 

purchases below the Federal simplified 

acquisition threshold, currently set at 

$250,000. States and local agencies may 

specify lower micro-purchase and 

simplified acquisition thresholds, and 

local agencies may set a higher micropurchase thresholds in line with 2 CFR 

part 200.320(a)(1)(iv–v). FNS would like 

to note that when the Child Nutrition 

Program Integrity rule was initially 

proposed and open to public comment, 

the dollar amounts quoted for the micropurchase threshold and the small 

purchase threshold aligned with the 

2016-time frame. Due to the passage of 

time and inflationary adjustments the 

above-mentioned micro-purchase and 

small purchase thresholds align with 

the current federal thresholds. 

CACFP regulations set out procedures 

that are intended to prevent fraud, 

waste, and program abuse in contracts 

and purchasing. However, operational 

provisions addressing food service 

management companies (FSMC) and 

procurement standards under 7 CFR 

226.21 and 226.22, respectively, do not 

align with existing practices. Current 

regulations set the Federal threshold for 

small purchases at $10,000. There is no 

mention of micro-purchases. FNS 

proposed amending the regulations to 

expand the availability of informal 

purchase methods and align the 

applicable Federal dollar thresholds 

with future adjustments that may be 

made for inflation. 

Public Comments and FNS Response 

Of the comments addressing changes 

to informal purchase methods, three 

were supportive and one was mixed. 

One respondent requested that FNS 

define a range for informal purchases. 

This final rule updates procurement 

standards and guidelines and makes the 

values of the Federal micro-purchase 

threshold and Federal simplified 

acquisition threshold consistent with 

current guidance on informal purchase 

methods under 2 CFR part 200. This 

modification eliminates the need to 

revise CACFP regulations each time the 

thresholds are adjusted for inflation. 

This rulemaking also streamlines 

CACFP procurement standards and 

provides clarity by removing outdated 

or duplicative provisions of the 

regulations that have been replaced by 

2 CFR part 200. For example, 

institutions must comply with 

procurement procedures for micropurchases, small purchases, sealed bids, 

competitive proposals, and noncompetitive proposals. The text at 7 CFR 

226.22(i) is replaced with crossreferences to the procedures at 2 CFR 

part 200 and USDA regulations under 2 

CFR parts 400 and 415. This 

modification ensures that CACFP 

requirements are consistent with the 

streamlined regulations, Uniform 

Administrative Requirements, Cost 

Principles, and Audit Requirements for 

Federal Awards, that the Office of 

Management and Budget first published 

at 78 FR 78589, on December 26, 2013, 

https://www.federalregister.gov/ 

documents/2013/12/26/2013-30465/ 

uniform-administrative-requirementscost-principles-and-audit-requirementsfor-federal-awards, and USDA-specific 

requirements published at 79 FR 75871, 

on December 19, 2014, https://

www.federalregister.gov/documents/ 

2014/12/19/2014-28697/federalawarding-agency-regulatoryimplementation-of-office-ofmanagement-and-budgets-uniform. 

Micro-purchase and small purchase 

procedures are relatively simple and 

informal methods that are appropriate 

for the procurement of goods and 

services for which the cost is below 

Federal, State, and local thresholds. 

Micro-purchase procedures are used 

when the transaction is below the 

current Federal threshold of $10,000 

and prices are reasonable. Similarly, 

although State and local agencies may 


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impose more restrictive procurement 

procedures, adopting the Federal 

simplified acquisition threshold for 

small purchases—up to the threshold 

set by 2 CFR 200.88, Simplified 

acquisition threshold—would 

streamline the procurement process for 

CACFP institutions. The Federal 

simplified acquisition threshold is 

currently set at $250,000. All 

procurement transactions, regardless of 

the amount, must be conducted in a 

manner that ensures free and open 

competition. 

To the extent practicable, CACFP 

institutions must distribute micropurchases equitably among qualified 

suppliers. When purchases are below 

the current Federal simplified 

acquisition threshold, an institution 

may use small purchase procedures, 

sealed bids, or competitive proposals, 

which require prices to be solicited and 

documented from an adequate number 

of qualified sources. Depending on the 

value of the purchase, many of the 

required contract provisions in 

Appendix II to 2 CFR part 200, Contract 

Provisions for Non-Federal Entity 

Contracts Under Federal Awards, may 

apply. 

Accordingly, this final rule amends 7 

CFR 226.21(a) to remove outdated 

language so that the values of the 

Federal micro-purchase threshold and 

Federal simplified acquisition threshold 

are linked to 2 CFR part 200. This final 

rule also makes technical changes to 

remove outdated or duplicative 

provisions of 7 CFR 226.22 and affirm 

that procurements by public or private 

non-profit institutions comply with the 

appropriate requirements under 2 CFR 

part 200. The compliance date is August 

23, 2024. 

9. School Food Authority Contracts 

With Food Service Management 

Companies 

Any school food authority (SFA) may 

contract with an FSMC to manage the 

food service operation at one or more of 

its schools. SFAs are required to 

monitor contractor performance to 

ensure that FSMCs comply with the 

terms, conditions, and specifications of 

their contracts. As required by 2 CFR 

200.403, all costs must be reasonable, 

necessary, and allocable. SFAs are 

currently permitted to use ‘‘fixed-price’’ 

and ‘‘cost-reimbursable’’ FSMC 

contracts: 

• Under a fixed-price contract, the 

FSMC charges the SFA a fixed cost per 

meal or a fixed cost for a certain time 

period; and 

• Under a cost-reimbursable contract, 

the FSMC charges the SFA for food 

service operating costs, and also charges 

fixed fees for other services, such as 

labor. 

The proposed rule included a 

provision to eliminate the use of costreimbursable contracts for SFAs that 

contract with a FSMC. FNS proposed 

limiting FSMC contracts in NSLP and 

SBP to fixed-price contracts, either with 

or without economic price adjustments 

tied to a standard index and eliminating 

cost-reimbursable FSMC contracts in 

NSLP and SBP. The proposed rule also 

included two technical changes to align 

FSMC requirements under 7 CFR 210.16 

with existing regulations under 7 CFR 

parts 210 and 250. These changes would 

have required State agencies to annually 

review and approve all contracts and 

contract amendments between any SFA 

and FSMC and require an FSMC to 

credit the value of USDA Foods to the 

respective SFA. 

Public Comments 

FNS received 107 comments about the 

proposed elimination of costreimbursable contracts. Of these, 15 

were supportive, 80 were opposed 

(including 52 form letters), and 12 were 

mixed. Proponents agreed that the 

complexity of rebates, discounts, and 

credits in cost-reimbursable contracts 

make the contracts challenging to 

manage and to monitor. They suggested 

the elimination of cost-reimbursable 

contracts would reduce fraud, while 

creating more straightforward business 

dealings for SFAs. One food industry 

representative noted that in order to 

manage cost-reimbursable contracts 

effectively, SFAs must devote 

significant resources to review, monitor, 

and audit costs and billings. By contrast, 

another respondent suggested fixedprice contracts allow SFAs to focus on 

manageable program areas, such as 

contract compliance. The return of 

rebates, discounts, and credits is not 

required under a fixed-price contract, as 

these factors are considered when 

submitting the bid. One State agency 

noted that consistent with its authority 

in current regulations, all FSMC 

contracts in that State are already 

required to be fixed-price. 

Opponents were concerned that fixedprice contracts may cause FSMCs to 

focus on the lowest cost per meal, rather 

than food quality. They argued that costreimbursable contracts offer greater 

transparency that provides SFAs better 

management control over the program. 

For example, a joint comment from four 

food industry representatives noted that 

cost-reimbursable contracts allow 

flexibility for SFAs to incorporate local 

produce, switch to sustainable paper 

products, and adjust other associated 

costs during the contract term. 

FNS Response 

In this final rule, FNS is not 

eliminating the availability of cost 

reimbursable contracts as a type of 

FSMC contract SFAs may use in the 

NSLP and SBP. As noted in the 

proposed rule, audit findings, FNS 

management evaluations, and 

stakeholder feedback suggested that 

some SFAs have not been fully 

successful in conducting procurements 

or monitoring of cost-reimbursable 

contracts in the past. The ability of 

those SFAs to receive the full benefit of 

the contract terms and achieve 

administrative and nutritional 

compliance in the programs was 

negatively impacted, however given the 

mixed comments received on the 

proposed rule FNS has chosen not to 

finalize this provision as proposed. 

In response to the COVID–19 public 

health emergency and consistent with 

legislative directives, FNS, State 

partners, and SFAs developed new 

approaches that offered unprecedented 

flexibilities to school meal service and 

program management, through 

nationwide waivers. The fundamental 

goal for each of the waivers was to 

provide substantive support promoting 

access to nutritious meals to all children 

during the COVID–19 pandemic. In 

2020, FNS issued guidance, Nationwide 

Waiver of Food Service Management 

Contract Duration in the National 

School Lunch Program and Summer 

Food Service Program, https://

www.fns.usda.gov/cn/covid-19-childnutrition-response-19, which waived 

contract duration requirements for all 

State agencies, SFAs, and SFSP 

sponsors. SFAs in States opting to use 

this waiver could extend contracts with 

FSMCs beyond the fourth extension 

year, without undertaking new 

competitive procurements. The waiver 

relieved SFAs and FSMCs of the burden 

of competitive procurements and 

enabled full focus on preparing and 

providing nutritious school meals. 

In 2021, when FSMCs and schools 

experienced supply chain disruptions 

that impacted food, packaging 

components, and transportation 

demands, FNS offered States and SFAs 

flexibilities, resources, and support to 

compensate for the unpredictability of 

the supply chain and the new 

uncertainties in accessing foods and 

supplies essential for school food 

service. Despite that, stakeholders 

provided compelling information 

indicating that even those contracts 

which included a price adjustment tied 

to a standard index—such as the 

Consumer Price Index—were not 

flexible enough to fully offset the 


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contract price to adjust during the 

COVID–19 pandemic supply chainrelated market volatility. In a few 

instances, FSMCs concluded that 

withdrawal from the SFA market was in 

their best interest, leaving affected SFAs 

with few options in providing school 

meal service. 

As a result of the lessons learned 

during COVID–19 and in response to the 

negative and mixed comments received 

during the comment period when this 

provision was proposed this final rule 

does not eliminate cost-reimbursable 

contracts in NSLP and SBP regulations. 

In responding to the demands of the 

COVID–19 pandemic, FNS gained 

deeper insight into the contractual 

relationships between SFAs and FSMCs, 

the financial aspects of those contracts, 

the impact on school food service 

workers, and the opportunities FNS may 

have to support and improve school 

food service. FNS has concluded that 

the proposed rule’s elimination of cost 

reimbursable contracting would not be 

in the best interest of the programs at 

this time. FNS intends to assess the 

options and resources which may 

improve administrative and nutritional 

compliance, through stakeholder 

outreach, consultation, and analysis of 

the data reported as part of the COVID– 

19 waiver process. 

As with the proposed rule, this final 

rule amends NSLP regulations to require 

each State agency to annually review 

and approve each contract and contract 

amendment between any SFA and 

FSMC. This final rule also amends 

NSLP and SBP regulations to require the 

value of USDA Foods to accrue only to 

the benefit of the SFA’s nonprofit school 

food service. The proposed rule did not 

extend these provisions to SBP. 

However, FNS is correcting this 

oversight in this final rule. FNS 

recognizes the importance of 

consistency and administrative 

streamlining of Child Nutrition Program 

and USDA Food regulations. Current 

NSLP and SBP regulations define costreimbursable contract. Finally, for 

clarity, this final rule adds a definition 

for fixed-price contract to NSLP and 

SBP regulations. Fixed-price contract 

means a contract that charges a fixed 

cost per meal, or a fixed cost for a 

certain time period. Fixed-price 

contracts may include an economic 

price adjustment tied to a standard 

index. Current NSLP and SBP 

regulations define cost-reimbursable 

contract as a contract that provides for 

payment of incurred costs to the extent 

prescribed in the contract, with or 

without a fixed fee. 

FNS recognizes that SFAs value 

flexibility in their contracts. For 

example, a contract that includes an 

economic price adjustment tied to a 

standard index—such as the Consumer 

Price Index—allows the contract price 

to adjust during market volatility. The 

SFA may also include a clause to 

account for changes in labor cost, such 

as a minimum wage increase. 

Additionally, qualitative factors—such 

as specifications relating to product 

appeal to students—are allowable 

evaluation factors that may be published 

in solicitations, as long as cost is the 

primary factor. SFAs may also include 

provisions that penalize an FSMC if 

meal quality is an issue. FNS 

recommends that SFAs consult with 

counsel during the procurement process 

to ensure that the contract terms are 

consistent with Federal law and any 

pertinent State and local laws. 

Accordingly, this final rule amends 7 

CFR 210.2 and 220.2 to define fixedprice contract in NSLP and SBP. The 

rulemaking also amends 7 CFR 

210.19(a)(5) to require each State agency 

to annually review—and approve—each 

contract and contract amendment 

between any SFA and FSMC, for 

consistency with 7 CFR 210.16(a)(10). 

Finally, this rulemaking adds 7 CFR 

210.16(c)(4) and 220.7(d)(3)(iv) to 

require the value of USDA Foods to 

accrue only to the benefit of the SFA’s 

nonprofit school food service, to align 

with 7 CFR 210.16(a)(6). The 

compliance date is August 23, 2024. 

10. Annual NSLP Procurement Training 

Section 7(g)(2) of the Child Nutrition 

Act of 1966, 42 U.S.C. 1776(g)(2), 

requires training for school food service 

personnel on certain administrative 

practices and gives USDA discretion to 

require other appropriate training topics 

to address critical issues, such as 

integrity concerns. Current regulations 

at 7 CFR 210.30(b), (c), and (d) outline 

the professional standards training 

requirements for school nutrition 

program directors, management, and 

staff, respectively. Current regulations at 

7 CFR 235.11(g)(3) outline the training 

requirements for State directors of 

school nutrition programs and 

distributing agencies. The specific 

annual training requirements vary, but 

for each position, FNS may identify 

other training topics, as needed. There 

are no specific regulatory requirements 

related to NSLP procurement training. 

As discussed in the proposed rule, 

FNS released a guidance memo strongly 

encouraging periodic training for State 

Agency and SFA staff tasked with 

procurement responsibilities and has 

taken a number of steps to share 

information about proper procurement 

methods. However, State agencies and 

SFAs continue to face challenges 

implementing Federal procurement 

requirements. Helping State agencies 

and SFAs better understand 

procurement responsibilities through 

adequate training is one way to ensure 

Federal funds are used appropriately in 

NSLP. To improve compliance of these 

important requirements, the proposed 

rule requires annual procurement 

training for State agency and SFA staff 

tasked with procurement 

responsibilities, with an effective date 

90 days after publication of the final 

rule. The proposed rule also requires 

State agencies and SFAs to retain 

records to document compliance with 

this provision. 

Public Comments 

FNS received 15 comments about 

NSLP procurement training. Of these, 2 

were supportive, 4 were opposed, and 9 

were mixed. Proponents described this 

provision as important and necessary, 

and stated that annual procurement 

training would ensure the school 

nutrition programs use Federal funds 

efficiently. Some respondents asked for 

clarification about the implementation 

of this requirement, including the 

number of annual training hours 

required. Regarding the proposal to 

document training, one respondent 

noted this would be an important step 

in assuring accountability. Opponents 

were concerned that this provision 

would increase program costs and create 

burden. They argued that annual 

procurement training is duplicative or 

excessive, unless it is necessary to 

resolve a review finding. One 

respondent argued that annual trainings 

in general lose value and become 

tedious. 

FNS Response 

This final rule requires State directors 

of school nutrition programs, State 

directors of distributing agencies, and 

school nutrition program directors, 

management, and staff who work on 

NSLP procurement activities to 

complete procurement training 

annually. FNS modified the language in 

this final rule to align with the school 

nutrition professional standards. This 

final rule also amends 7 CFR 210.30 and 

235.11 to clarify that NSLP procurement 

training is subject to professional 

standards monitoring and recordkeeping 

requirements and may count towards 

the professional standards training 

requirements. This change from the 

proposed rule streamlines monitoring, 

recordkeeping, and training 

requirements. 

FNS is mindful of respondents’ 

concerns that NSLP procurement 


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training will not be relevant to all 

program staff. FNS recognizes that 

school nutrition program personnel 

have a variety of job responsibilities, 

which may or may not include 

procurement. FNS does not intend to 

require all personnel to complete annual 

procurement training, nor to take time 

away from other relevant training 

topics. This requirement only applies to 

State directors and school nutrition 

program directors, management, and 

staff who work on NSLP procurement 

activities. 

FNS will not require a specific 

number of annual training hours. For 

personnel with minimal involvement, a 

brief refresher course may be sufficient. 

Personnel who are new to NSLP 

procurement, who are assigned new 

procurement tasks, or who use more 

complex procurement methods, such as 

sealed bids and competitive proposals, 

may require a full day of training. FNS 

encourages the training plan that best 

supports each staff member’s jobspecific training needs and experience. 

Consistent with the professional 

standards training requirements, a 

variety of training formats may be used, 

such as webinars, classroom training, 

and seminars. State agencies may use 

SAE funds to pay for the costs of 

receiving or delivering annual NSLP 

procurement training. Generally, 

training is an allowable use of school 

food service funds. State agencies and 

SFAs are encouraged to access the free 

or low-cost training resources listed 

online at https://professionalstandards.

fns.usda.gov/. 

Annual training is an important step 

to ensure personnel who work on NSLP 

procurement activities have the 

knowledge they need to successfully 

implement Federal procurement 

requirements. Ensuring that responsible 

personnel annually gain knowledge of 

Federal procurement standards and 

contract performance monitoring 

through this regulatory change is an 

important step towards improving 

program integrity. 

Accordingly, this final rule adds new 

paragraphs at 7 CFR 210.21(h), 

210.30(g)(3), and 235.11(h)(3) to require 

State directors of school nutrition 

programs, State directors of distributing 

agencies, and school nutrition program 

directors, management, and staff who 

work on NSLP procurement activities to 

complete annual procurement training. 

The compliance date is August 23, 2024. 

II. CACFP Amendments 

A. Background 

FNS is also using this opportunity to 

codify statutory requirements that are 

designed to improve the administration 

and operational efficiency of CACFP, 

with less paperwork. FNS published a 

proposed rule, Child and Adult Care 

Food Program: Amendments Related to 

the Healthy, Hunger-Free Kids Act of 

2010, 77 FR 21018, on April 9, 2012, 

https://www.fns.usda.gov/cacfp/fr040912, that included amendments that 

would replace the renewal application 

with an annual certification process, 

vary the timing of reviews of day care 

homes and centers, require permanent 

operating agreements for sponsored 

centers, broaden procedures for the 

collection of meal benefit forms for 

children enrolled in day care homes, 

and allow carry over and simplified 

calculation of administrative payments. 

Since these changes in CACFP policy 

were required by the Healthy, HungerFree Kids Act of 2010 (HHFKA), and 

FNS released the changes in policy 

memos, they have become standard 

operating practices for State agencies 

and sponsoring organizations. In the 

intervening years since publication of 

the proposed rule, due to shifting 

priorities and the COVID–19 pandemic, 

FNS was unable to publish subsequent 

rulemaking to incorporate these 

statutory amendments into CACFP 

regulations under 7 CFR part 226. 

Through this final rule, FNS is 

incorporating only the statutory 

amendments proposed in the Child and 

Adult Care Food Program: Amendments 

Related to the Healthy, Hunger-Free 

Kids Act of 2010, 77 FR 21018, on April 

9, 2012, https://www.fns.usda.gov/ 

cacfp/fr-040912, into CACFP 

regulations. 

FNS received 27 comments in 

response to the proposed rule. Many of 

them pointed out technical errors, 

questioned potential gaps in 

implementation, and offered valuable 

suggestions for improvement, but none 

of the comments objected to any of the 

six amendments, which are required by 

statute. There were no adverse 

comments challenging the rule’s 

underlying premise or approach or 

suggesting that the content of the rule 

would be inappropriate, ineffective, or 

unacceptable without a change. The 

comments are posted at http://

www.regulations.gov under docket ID 

FNS–2012–0022, Child and Adult Care 

Food Program: Amendments Related to 

the Healthy, Hunger-Free Kids Act of 

2010. 

The amendments included in this 

final rule: 

• Require institutions to submit an 

initial application to the State agency 

and, in subsequent years, periodically 

update the information, in lieu of 

submitting a new application; 

• Require sponsoring organizations to 

vary the timing of reviews of sponsored 

facilities; 

• Require State agencies to develop 

and provide for the use of a standard 

permanent agreement between 

sponsoring organizations and day care 

centers; 

• Allow tier II day care homes to 

collect household income information 

and transmit it to the sponsoring 

organization; 

• Modify the method of calculating 

administrative payments to sponsoring 

organizations of day care homes; and 

• Allow sponsoring organizations of 

day care homes to carry over up to 10 

percent of their administrative funding 

from the previous Federal fiscal year 

into the next fiscal year. 

B. Codifying the CACFP Amendments 

1. Elimination of the Annual 

Application for Renewing Institutions 

Annual certification of an institution’s 

eligibility to continue participating in 

CACFP has replaced the renewal 

application process. Section 17(d)(2) of 

the NSLA, as amended by HHFKA, 

directs the Secretary to develop a policy 

to address the initial application 

requirements for institutions and annual 

confirmation of compliance with 

licensing and all other requirements for 

institutions and facilities to continue to 

participate in CACFP. These 

amendments required changes to 

current regulations, which require 

institutions to submit an annual 

application to participate in the 

program. Renewing institutions must reapply at intervals of between 12 and 36 

months after their initial application 

was approved by the State agency. 

FNS issued CACFP 19–2011, Child 

Nutrition Reauthorization 2010: Child 

and Adult Care Food Program 

Applications, on April 8, 2011, https:// 

www.fns.usda.gov/cacfp/applications, 

to provide guidance regarding the 

HHFKA requirements that renewing 

institutions must submit an annual 

certification of information, updated 

licensing information, and a budget. 

FNS included the requirements for 

annual certification in the April 9, 2012, 

proposed rule for the public to review 

and comment on. FNS did not receive 

any substantive comments on this 

provision. 

This final rule adopts these changes, 

as proposed, by amending 7 CFR 

226.6(b) to require an initial application 

for new institutions and annual 

confirmation for renewing institutions 

that they are compliant with program 

requirements. Renewing sponsoring 

organizations must submit updated 


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licensing information for its sponsored 

facilities, an annual budget, and an 

annual certification of compliance with 

all of the requirements under 7 CFR 

226.6(b)(2) and 226.6(f)(1). The 

renewing sponsoring organization must 

certify that: 

• The management plan on file with 

the State agency is complete and up to 

date, per 7 CFR 226.6(b)(1)(iv); 

• The sponsoring organization and its 

principals are not currently on the 

National Disqualified List, per 7 CFR 

226.6(b)(1)(xii); 

• No sponsored facility or principal 

of a sponsored facility is currently on 

the CACFP National Disqualified List, 

per 7 CFR 226.6(b)(1)(xii); 

• A list of any publicly funded 

programs that the sponsoring 

organization and its principals have 

participated in, in the past 7 years, is 

current, per 7 CFR 226.6(b)(1)(xiii)(B); 

• The sponsoring organization and its 

principals have not been determined 

ineligible for any other publicly funded 

programs due to violation of that 

program’s requirements, in the past 7 

years, per 7 CFR 226.6(b)(1)(xiii)(B); 

• No principals have been convicted 

of any activity that occurred during the 

past 7 years and that indicated a lack of 

business integrity, per 7 CFR 

226.6(b)(1)(xiv)(B); 

• The names, mailing addresses, and 

dates of birth of all current principals 

have been submitted to the State agency 

per 7 CFR 226.6(b)(1)(xv); 

• The outside employment policy 

most recently submitted to the State 

agency remains current and in effect, 

per 7 CFR 226.6(b)(1)(xvi); 

• The sponsoring organization is 

currently compliant with the required 

performance standards of financial 

viability and management, 

administrative capability, and program 

accountability, per 7 CFR 

226.6(b)(1)(xviii); 

• Licensing or approval status of each 

sponsored child care center, adult day 

care center, or day care home is up-todate; 

• The list of the sponsoring 

organization’s facilities on file with the 

State agency is up-to-date; and 

• All facilities under the sponsoring 

organization’s oversight have adhered to 

Program training requirements. 

Renewing independent centers must 

submit updated licensing information 

and an annual certification of 

compliance with all of the requirements 

under 7 CFR 226.6(b)(2) and 226.6(f)(1). 

The renewing independent center must 

certify that: 

• The center and its principals are not 

currently on the National Disqualified 

List, per 7 CFR 226.6(b)(1)(xii); 

• A list of any publicly funded 

programs that the center and its 

principals have participated in the past 

7 years is current, per 7 CFR 

226.6(b)(1)(xiii)(B); 

• The center and its principals have 

not been determined ineligible for any 

other publicly funded programs due to 

violation of that program’s requirements 

in the past 7 years, per 7 CFR 

226.6(b)(1)(xiii)(B); 

• No principals have been convicted 

of any activity that occurred during the 

past 7 years and that indicated a lack of 

business integrity, per 7 CFR 

226.6(b)(1)(xiv)(B); 

• The names, mailing addresses, and 

dates of birth of all current principals 

have been submitted to the State agency 

per 7 CFR 226.6(b)(1)(xv); 

• The center is currently compliant 

with the required performance 

standards of financial viability and 

management, administrative capability, 

and program accountability, per 7 CFR 

226.6(b)(1)(xviii); and 

• Licensing or approval status of each 

child care center or adult day care 

center. 

State agencies may add to this list 

other types of information that they 

require annually for proper 

administration of the program, such as 

submission of budgets by independent 

centers, which is not a Federal 

requirement. The miscellaneous 

responsibilities currently listed under 7 

CFR 226.6(f)(3)(iv) include additional 

reporting requirements for CACFP 

institutions. This final rule makes a 

corresponding change to remove the 

reapplication requirements under 7 CFR 

226.6(f)(2) and move the responsibilities 

at other time intervals, listed under 

paragraph (f)(3), to paragraph (f)(2). 

Accordingly, as required by statute, 

this action amends 7 CFR 226.2, and 

226.6(b) to require an initial application 

for new institutions and annual updates, 

as needed, for renewing institutions. A 

corresponding change is made at 7 CFR 

226.6(f). This provision has been a 

standard operating practice for State 

agencies since 2011. The compliance 

date is September 22, 2023. 

2. Timing of Unannounced Reviews 

Reviews are more effective at ensuring 

program integrity when they are 

unannounced and unpredictable. 

Section 17(d)(2)(B)(ii) of the NSLA 

requires sponsoring organizations to 

vary the timing of unannounced reviews 

in a manner that makes the reviews 

unpredictable to sponsored facilities. 

Current regulations require sponsoring 

organizations to conduct three reviews 

per year at each facility, two of which 

must be unannounced. One of the 

unannounced reviews must include 

observation of a meal service. No more 

than 6 months may elapse between 

reviews. However, there is no current 

regulatory requirement that the timing 

of those reviews must be varied. 

FNS issued CACFP 16–2011, Child 

Nutrition Reauthorization 2010: Varied 

Timing of Unannounced Reviews in the 

Child and Adult Care Food Program, on 

April 7, 2011, https://

www.fns.usda.gov/cacfp/varied-timingunannounced-reviews-child-and-adult, 

to advise State agencies of the new 

statutory requirement under HHFKA to 

ensure that the timing of unannounced 

reviews is varied in a way that would 

ensure they are unpredictable to the day 

care home or sponsored center. FNS 

included the requirements for the 

timing of unannounced reviews in the 

CACFP proposed rule for the public to 

review and comment on. FNS did not 

receive any substantive comments on 

this provision. 

This final rule adopts these changes 

by amending 7 CFR 226.16(d)(4)(iii) to 

require sponsoring organizations to vary 

both the timing of unannounced reviews 

and the types of meal service that are 

subject to review. This rulemaking also 

amends the review content at 7 CFR 

226.6(m)(3) to add a requirement that 

the State agency assess the frequency, 

predictability, and type of each 

sponsoring organization’s facility 

reviews. Effective monitoring of day 

care homes and sponsored centers will 

require sponsoring organizations to 

ensure that: 

• At least two of the three annual 

reviews are unannounced; 

• At least one unannounced review 

includes observation of a meal service; 

• At least one review is made during 

each new facility’s first 4 weeks of 

program operations; 

• No more than 6 months elapse 

between reviews; 

• The timing of unannounced reviews 

is varied so that they are unpredictable 

to the facility; 

• All types of meal service are 

reviewed; and 

• The types of meal service reviewed 

are varied. 

Accordingly, this final rule amends 

226.16(d)(4)(iii) to require sponsoring 

organizations to vary the timing of 

unannounced reviews and vary the type 

of meal service subject to review. A 

corresponding change is made at 7 CFR 

226.6(m)(3)(ix) to require the State 

agency to assess the timing of each 

sponsoring organization’s reviews of 

day care homes and sponsored centers. 

This provision has been a standard 

operating practice for sponsoring 

organizations and State agencies since 


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2011. The compliance date is September 

22, 2023. 

3. Standard Agreements Between 

Sponsoring Organizations and 

Sponsored Centers 

Section 17(j) of the NSLA requires 

State agencies to develop and provide 

for the use of a standard form of 

agreement between each sponsoring 

organization and day care home or 

sponsored center. Current regulations 

require the sponsoring organization to 

enter into a written permanent 

agreement with each sponsored day care 

home, which specifies the rights and 

responsibilities of both parties. 

However, there is no standard form of 

agreement and no requirement that 

sponsoring organizations establish 

agreements with sponsored centers. 

FNS included the requirements for 

standard operating agreements in the 

CACFP proposed rule for the public to 

review and comment on. FNS did not 

receive any substantive comments on 

this provision. FNS proposed 

establishing a standard form of 

agreement between sponsoring 

organizations and their sponsored 

centers at 7 CFR 226.16(h) that would 

specify the rights and responsibilities of 

each party. 

This final rule adopts the proposed 

terms of a standard agreement between 

a sponsoring organization and a child 

care center at 7 CFR 226.17, an at-risk 

afterschool care center at 7 CFR 226.17a, 

an outside-school-hours care center at 

226.19, and an adult day care center at 

226.19a. The standard agreement, 

described at 7 CFR 226.6(p), requires the 

center to: 

• Allow visits by sponsoring 

organizations or State agencies to review 

meal service and records; 

• Promptly inform the sponsoring 

organization about any change in its 

licensing or approval status; 

• Meet any State agency approved 

time limit for submission of meal 

records; and 

• Distribute to parents a copy of the 

sponsoring organization’s notice to 

parents if directed to do so by the 

sponsoring organization. 

The standard agreement also 

establishes the right of centers to receive 

timely reimbursement from the 

sponsoring organizations for meals 

served. Consistent with the requirement 

under 7 CFR 226.16(h)(2), sponsoring 

organizations must pay program funds 

to child care centers, adult day care 

centers, emergency shelters, at-risk 

afterschool care centers, or outsideschool-hours care centers within 5 

working days of receipt from the State 

agency. 

FNS also proposed a corresponding 

amendment to define ‘‘Facility’’ under 7 

CFR 226.2. In this final rule, facility 

means a sponsored center or day care 

home. FNS is finalizing a new definition 

of ‘‘Sponsored center’’, as proposed, to 

mean a child care center, an at-risk 

afterschool care center, an adult day 

care center, an emergency shelter, or an 

outside-school-hours care center that 

operates CACFP under the auspices of a 

sponsoring organization. A sponsored 

center may be either affiliated—as part 

of the same legal entity as the CACFP 

sponsoring organization—or 

unaffiliated, which is legally distinct 

from the sponsoring organization. 

Accordingly, this final rule amends 7 

CFR 226.6(p) and 226.17a(f) and adds 

new paragraphs at 226.17(e) and (f), 

226.19(d) and (e), and 226.19a(d) and (e) 

to require sponsoring organizations to 

enter into permanent agreements with 

their unaffiliated centers. New 

definitions of ‘‘Facility’’ and 

‘‘Sponsored center’’ are added under 7 

CFR 226.2. This provision is a standard 

operating practice for sponsoring 

organizations. The compliance date is 

September 22, 2023. 

4. Collection and Transmission of 

Household Income Information 

Section 17(f)(3)(A)(iii)(III)(dd) of the 

NSLA allows day care homes to assist 

in the transmission of necessary 

household income information to the 

sponsoring organization. Section 

17(f)(3)(A)(iii)(III)(ee) directs the 

Secretary to develop policy specifying 

the written consent of parents and other 

conditions, which would allow day care 

home providers to assist in transmitting 

meal benefit forms from parents to the 

sponsoring organizations. 

Current regulations include 

procedures for families whose children 

are enrolled in family day care to 

provide household income information 

on meal benefit forms that are 

transmitted directly to the sponsoring 

organization. The sponsoring 

organization is responsible for 

informing tier II day care homes of all 

of their options for receiving 

reimbursement for meals served to 

enrolled children, including electing to 

have the sponsoring organization 

attempt to identify all income-eligible 

children enrolled in the day care home, 

through collection of meal benefit 

forms. The sponsoring organization 

must also ensure that free and reducedprice eligibility information of 

individual households is not available 

to day care homes. 

FNS issued CACFP 17–2011, Child 

Nutrition Reauthorization 2010: 

Transmission of Household Income 

Information by Tier II Family Day Care 

Homes in the Child and Adult Care 

Food Program, on April 7, 2011, https:// 

www.fns.usda.gov/cacfp/transmissionhousehold-income-information-tier-ii. 

This guidance describes how tier II 

family day care home providers may 

participate in the collection and 

transmission of household information. 

The guidance also outlines the options 

and privacy protections available to 

households. FNS included these options 

in the CACFP proposed rule for the 

public to review and comment on. FNS 

did not receive any substantive 

comments on this provision. 

This final rule adopts these options by 

amending the sponsoring organization’s 

responsibility under 7 CFR 

226.18(b)(13) to allow tier II day care 

homes to assist in collecting meal 

benefit forms from households and 

transmitting the forms to the sponsoring 

organization on the household’s behalf. 

It is important to emphasize that this is 

an option available to day care home 

providers and households. The State 

agency or sponsoring organization 

cannot require day care homes to collect 

and transmit this information. 

Households cannot be required to return 

their meal benefit forms directly to the 

provider. 

The sponsoring organization is also 

responsible for establishing procedures 

that prohibit a day care home provider 

who chooses this option from reviewing 

or altering the information on the meal 

benefit form. This rule finalizes a new 

paragraph at 7 CFR 226.23(e)(2)(vii) as 

proposed with minor clerical 

adjustments to further require the 

sponsoring organizations to protect the 

privacy of a household’s income 

information. Households of children 

enrolled in tier II day care homes that 

elect this option must give their consent 

for the collection and transmission of 

their information. The household must 

be advised that: 

• The household is not required to 

complete the meal benefit form in order 

for a child to participate in CACFP; 

• The household may return the meal 

benefit form to either the sponsoring 

organization or the day care home 

provider; 

• By signing the letter and giving it to 

the day care home provider, the 

household has given the day care home 

provider written consent to collect and 

transmit the household’s application to 

the sponsoring organization; and 

• The meal benefit form will not be 

reviewed by the day care home 

provider. 

Accordingly, this final rule adds a 

new paragraph at 7 CFR 226.18(b)(13) to 

add the right of the tier II day care home 


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to assist in collecting and transmitting 

applications to the sponsoring 

organizations and prohibit the provider 

from reviewing applications from 

households. This final rule also adds a 

new paragraph at 7 CFR 226.23(e)(1)(vii) 

to address household consent and 

actions to protect the privacy of a 

household’s income information. This 

provision has been a standard operating 

practice for sponsoring organizations of 

day care homes since 2011. The 

compliance date is September 22, 2023. 

5. Calculation of Administrative 

Funding for Sponsoring Organizations 

of Day Care Homes 

Section 17(f)(3)(B)(i) of the NSLA 

authorizes reimbursement for 

administrative expenses of sponsoring 

organizations of day care homes and 

applies a formula for calculating the 

amount of administrative 

reimbursement a sponsoring 

organization may receive. As amended 

by HHFKA, section 17(f)(3) of the NSLA 

by eliminating the ‘‘lesser of’’ cost and 

budget comparison for calculating 

administrative payments to sponsoring 

organizations of day care homes, as 

defined under current regulations at 7 

CFR 226.12(a). Under current 

regulations, the State agency determines 

administrative reimbursement by 

calculating and paying the ‘‘lesser of’’ 

actual administrative costs, budgeted 

administrative costs, or an amount 

established by a formula. 

FNS issued CACFP 06–2011, Child 

Nutrition Reauthorization 2010: 

Administrative Payments to Family Day 

Care Home Sponsoring Organizations, 

on December 22, 2010, https://

www.fns.usda.gov/cacfp/2010- 

administrative-payments-family-daycare-home, to advise State agencies that 

a simpler method for determining 

monthly administrative payments had 

been established by HHFKA. Effective 

October 1, 2010, the sponsoring 

organization’s monthly payment would 

be based on the statutory formula that 

would no longer require a comparison 

with actual expenditures or budgeted 

administrative costs. FNS included the 

requirements for calculating 

administrative payments in the CACFP 

proposed rule for the public to review 

and comment on. FNS did not receive 

any substantive comments on this 

provision. 

This final rule adopts this change by 

amending 7 CFR 226.12(a) to establish 

that administrative costs payments are 

determined only by multiplying the 

appropriate administrative 

reimbursement rate by the number of 

day care homes submitting claims for 

reimbursement during the month. 

Administrative reimbursement rates are 

announced annually in the Federal 

Register. 

Sponsoring organizations are still 

required to submit annual budgets and 

remain responsible for correctly 

accounting for costs and maintaining 

records and sufficient supporting 

documentation to demonstrate that the 

claimed costs were incurred, are 

allocable to the program, and comply 

with Federal regulations and policies. 

State agencies must continue to recover 

reimbursements that are unallowable or 

that lack adequate documentation. 

However, the expenditures for 

administrative costs, the amount of 

costs approved in the administrative 

budget, and the 30 percent restriction on 

the total amount of administrative 

payments and food service payments for 

day care home operations no longer 

apply in determining the sponsoring 

organization’s monthly payment. 

Accordingly, this final rule amends 7 

CFR 226.12(a) to simplify the 

calculation of monthly administrative 

reimbursement that sponsoring 

organizations of day care homes are 

eligible to receive. To determine the 

amount of payment, the State agency 

must multiply the appropriate 

administrative reimbursement rate, 

which is announced annually in the 

Federal Register, by the number of day 

care homes submitting claims for 

reimbursement during the month. This 

provision has been a standard operating 

practice for State agencies since 2010. 

The compliance date is September 22, 

2023. 

6. Carryover of Administrative Funding 

for Sponsoring Organizations of Day 

Care Homes 

Section 17(f)(3)(B)(iii) of the NSLA, as 

amended by HHFKA, directs the 

Secretary to develop procedures under 

which up to 10 percent of a sponsoring 

organization’s administrative funds may 

remain available for obligation or 

expenditure in the succeeding fiscal 

year. It allows sponsoring organizations 

to carry over up to 10 percent of their 

administrative payments from the 

previous fiscal year into the next fiscal 

year. There is no provision for carryover 

of administrative payments in current 

regulations. 

FNS issued a memorandum, CACFP 

18–2011 Child Nutrition 

Reauthorization 2010: Carry Over of 

Unused Child and Adult Care Food 

Program Administrative Payments, on 

April 8, 2011, https://

www.fns.usda.gov/cacfp/carry-overunused. FNS advised State agencies of 

the option available to sponsoring 

organizations of day care homes to carry 

over up to 10 percent of unspent 

administrative reimbursement from the 

current Federal fiscal year to the next 

fiscal year. 

FNS issued additional guidance, 

CACFP 11–2012, Family Day Care 

Home Administrative Reimbursements: 

Options and Carryover Reporting 

Requirements, on March 19, 2012, 

https://www.fns.usda.gov/cacfp/familyday-care-home-administrativereimbursements-options-and-carryoverreporting, and CACFP 24–2012: 

REVISED, Family Day Care Home 

Administrative Reimbursements: 

Carryover Reporting Requirements for 

Fiscal Year 2012 and All Subsequent 

Years, on September 5, 2012, https://

www.fns.usda.gov/cacfp/family-daycare-home-administrativereimbursements-carryover-reportingrequirements-fy-2012. These 

memoranda provided clarification of 

options regarding administrative 

reimbursements and the management of 

unspent funds that may be carried over 

from the current Federal fiscal year to 

the next fiscal year. They also described 

procedures for reporting administrative 

funds under a 2-year period of 

performance. 

FNS included the requirements 

allowing sponsoring organizations of 

day care homes to carry over 

administrative funding in the CACFP 

proposed rule for the public to review 

and comment on. FNS did not receive 

any substantive comments on this 

provision. This final rule amends 7 CFR 

226.12(a) to allow a sponsoring 

organization to carry over and obligate 

a maximum of 10 percent of 

administrative funds into the 

succeeding fiscal year, with State 

agency approval. Corresponding 

amendments at 7 CFR 226.6(f)(1)(iv), 

226.7(g) and 226.7(j), require State 

agencies to ensure that: 

• The annual budget that is submitted 

for the State agency’s review and 

approval includes an estimate of the 

sponsoring organization’s requested 

administrative fund carryover amounts 

and a description of the proposed 

purpose for obligating or expending 

those funds; 

• An amended budget, which 

identifies the amount of administrative 

funds that the sponsoring organization 

actually carried over and describes the 

purpose, is submitted for the State 

agency’s review and approval as soon as 

possible after fiscal year close-out; 

• The review of the sponsoring 

organization’s administrative costs 

includes a review of the documentation 

supporting carryover requests, 

obligations, and expenditures; and 


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57808 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

• Procedures are established to 

recover any administrative funds that 

exceed 10 percent of that fiscal year’s 

administrative payments, and any 

carryover amount that is not expended 

or obligated by the end of the fiscal year 

following the fiscal year in which the 

funds were earned. 

Administrative funds remaining at the 

end of the fiscal year must be returned 

to the State agency. If any remaining 

carryover funds are not obligated or 

expended by the sponsoring 

organization in the succeeding fiscal 

year, the sponsoring organization is 

required to return the remaining funds 

to the State agency. A sponsoring 

organization can avoid that situation by 

using its payments for administrative 

costs on a first-in-first-out basis. 

Sponsoring organizations are not 

required to carry over any unspent 

funds. They may, at their option, return 

them to the State agency. The 

sponsoring organization also has the 

option to request that the State agency 

base administrative payments on the 

sponsoring organization’s actual 

expenses. However, sponsoring 

organizations receiving administrative 

payments based upon actual expenses 

are not permitted to carry over funds 

into the next fiscal year. 

Accordingly, this final rule amends 7 

CFR 226.6(f)(1)(iv) and adds new 

paragraphs at 226.7(g)(2) and 

226.12(a)(3) to allow carryover of 

administrative funds with State agency 

approval. This rulemaking also amends 

7 CFR 226.7(j) and adds a new 

paragraph 226.12(a)(4) to require the 

State agency to establish procedures to 

recover administrative funds from 

sponsoring organizations of day care 

homes that are not properly payable, are 

in excess of the 10 percent maximum 

carryover amount, or any carryover 

amounts not expended or obligated by 

the end of the fiscal year following the 

fiscal year in which they were earned. 

This provision has been a standard 

operating practice for sponsoring 

organizations and State agencies since 

2011. The compliance date is September 

22, 2023. 

III. Simplifying Monitoring in NSLP 

and SBP 

A. Background 

State agencies are responsible for 

regularly monitoring SFA operations in 

NSLP and SBP, in addition to providing 

training and technical assistance. Since 

School Year 2013–2014, the unified 

administrative review process has 

provided State agencies with a 

comprehensive process for evaluating 

compliance with program requirements. 

It includes a review of an SFA’s 

financial practices, compliance with 

nutrition standards, and a review of 

program operations to ensure 

compliance with Federal regulations. 

This final rule provides a means for 

FNS to amend the administrative review 

process. State agencies and SFAs have 

called on FNS to streamline 

requirements so that they could more 

effectively direct their resources to their 

core mission of serving nutritious meals 

to children. FNS looked for 

opportunities to reduce administrative 

burden addressing findings from 

USDA’s Child Nutrition Reporting 

Burden Analysis Study, released in 

2019, https://www.fns.usda.gov/childnutrition-reporting-burden-analysisstudy, in a responsible way, while 

giving consideration to local resource 

constraints. In a proposed rule, 

Simplifying Meal Service and 

Monitoring Requirements in the 

National School Lunch and School 

Breakfast Programs, 85 FR 4094, on 

January 23, 2020, https://

www.fns.usda.gov/nslp/fr-012120, FNS 

suggested a number of discretionary 

changes to streamline the administrative 

review, without compromising State 

agency and SFA efforts to maintain 

accountability and integrity. 

Through this final rule, FNS is taking 

action to codify the proposed changes to 

monitoring. These amendments will 

give State agencies greater flexibility, 

eliminate redundancy, and target 

limited State resources to higher risk 

SFAs. This rulemaking includes 

amendments to: 

• Allow State agencies to return to a 

5-year administrative review cycle and 

require State agencies that conduct 

reviews on a longer than 3-year cycle to 

identify high-risk SFAs for additional 

oversight at 7 CFR 210.18(c); 

• Give State agencies flexibility to 

substitute information from local-level 

audits for related parts of the 

administrative review, at 7 CFR 

210.18(f)(3); 

• Reduce the performance-based 

reimbursement reporting requirement, 

from quarterly to annually, by removing 

7 CFR 210.5(d)(2)(ii) and 210.7(d)(1)(vii) 

and (d)(2), which are obsolete; 

• Allow State agencies to omit 

specific elements of the administrative 

review, when equivalent oversight 

activities are conducted outside of the 

administrative review process, at 7 CFR 

210.18(f), (g), and (h); 

• Adopt a framework that State 

agencies may elect to modify the 

administrative review if the State 

agency or SFA adopts the specified 

integrity-focused improvements, at 7 

CFR 210.18(f), (g), and (h); 

• Give State agencies flexibility to 

conduct the assessment of an SFA’s 

nonprofit school food service account at 

any point in the review process, at 7 

CFR 210.18(h)(1); 

• Include compliance with the Buy 

American requirement as part of the 

general areas of the administrative 

review, at 7 CFR 210.18(b) and (h)(2); 

• Removes requirement for required 

fiscal action against SFAs for repeated 

violations of meal pattern 

noncompliance, at 7 CFR 210.18(l)(2); 

and 

• Allow State agencies to conduct the 

FSMC review on a 5-year cycle, at 7 CFR 

210.19(a)(5). 

FNS received 57,248 public 

comments on the proposed rule. Nearly 

all of the comments were submitted in 

response to proposed amendments 

related to school meal nutrition 

standards, which are not addressed in 

this final rule but are instead addressed 

in a separate rulemaking. The comments 

are posted at http://www.regulations.gov 

under docket ID FNS–2019–0007, 

Simplifying Meal Service and 

Monitoring Requirements in the 

National School Lunch and School 

Breakfast Programs. 

Although less than 150 respondents 

addressed any of the proposed changes 

to monitoring under the administrative 

review process, the comments were 

overall supportive of proposed changes. 

Respondents agreed that the proposed 

monitoring amendments would free up 

time and resources for State agencies to 

more effectively perform reviews, 

provide technical assistance, and focus 

on program improvement. They 

championed the increased flexibility, 

reduced redundancy, and paperwork 

savings that would be achieved. Their 

comments expressed support for 

changes that would allow opportunities 

for State agencies to provide technical 

assistance, instead of what respondents 

perceived as penalizing schools. 

Respondents also asserted that the 

proposed rule would provide State 

agencies the autonomy to determine the 

review processes that make the most 

operational sense for their situation. 

In addition to providing training and 

technical assistance, State agencies are 

responsible for regularly monitoring 

SFA operations. Since School Year 

2013–2014, the unified administrative 

review process has provided a more 

robust review of the school meal 

programs. It also includes a review of an 

SFA’s financial practices through the 

Resource Management Module to better 

ensure compliance with Federal 

regulations. 

As was discussed in the proposed 

rule, program regulations under 7 CFR 


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210.18 address various aspects of the 

administrative review, including the 

timing of review, use of audit findings 

as part of the scope of review, areas of 

critical and general review, corrective 

action, withholding of payments, fiscal 

action, and appeal rights. FNS examined 

the review process to identify a number 

of elements that could favorably reduce 

administrative burden in a responsible 

way. 

B. Streamlining the Administrative 

Review Process 

1. Return to a 5-Year Review Cycle 

The unified administrative review 

process provides a robust review of the 

school meal programs, supporting 

integrity and administrative 

responsibility. Current regulations at 7 

CFR 210.18(c) require State agencies to 

conduct a comprehensive 

administrative review of each SFA 

participating in NSLP and SBP at least 

once during a 3-year cycle. 

FNS proposed modifying the review 

cycle to ease the burden for State 

agencies and SFAs, by allowing State 

agencies to return to a 5-year 

administrative review cycle. An SFA 

that has any findings on the previous 

administrative review or noncompliance 

with Federal procurement regulations 

would be designated high risk. The 

proposed rule would require State 

agencies to designate and, within 2 

years, perform follow-up reviews of 

high-risk SFAs. The proposed rule 

would also allow State agencies to 

conduct more frequent reviews. 

FNS received 147 comments on the 

proposed 5-year review cycle—97 were 

supportive, 38 were opposed, and 12 

were mixed. Proponents recognized that 

the high number of waivers granted to 

State agencies under the current waiver 

process—which allows State agencies to 

request to extend the 3-year review 

cycle—underscores the need for relief. 

State agencies currently using waivers 

to extend their review cycles have 

reported that it allows them to better 

balance resources between technical 

assistance and formal reviews, and 

better support schools in their 

operations. Many respondents 

supported requiring targeted follow-up 

reviews for high-risk SFAs, maintaining 

that additional oversight could improve 

their performance. Many also agreed 

that a risk-based approach would target 

limited State agency oversight resources 

where they are most needed. 

Opponents suggested that a 5-year gap 

between reviews would be too long and 

could weaken program integrity. Instead 

of making this change, they suggested 

that FNS retain the 3-year cycle and 

work to streamline the administrative 

review process or ensure that SFAs 

selected for follow-up reviews receive 

technical assistance. FNS is committed 

to robust oversight, integrity, and 

quality in the school meal programs. 

However, FNS recognizes that the 3-year 

review cycle is taxing for State agencies 

and SFAs and diverts resources from 

technical assistance and program 

improvement. 

This final rule amends 7 CFR 

210.18(c), to allow State agencies to 

implement a 5-year administrative 

review cycle, while targeting additional 

oversight to those SFAs most in need of 

assistance. State agencies may continue 

with a shorter review cycle if they wish 

to do so. This rule also requires State 

agencies that review SFAs on a longer 

than 3-year cycle to identify high-risk 

SFAs for additional oversight. SFAs in 

need of more frequent monitoring— 

those that present program integrity 

concerns—will receive it through the 

required targeted follow-up review. 

Each State agency that reviews SFAs on 

a longer than 3-year cycle must develop 

a plan for FNS approval describing the 

criteria that will be used to identify 

high-risk SFAs for targeted follow-up 

reviews. 

In this final rule, minimum high-risk 

criteria that must be included in State 

plans will be outlined at 7 CFR 

210.18(c)(2). These core elements are 

consistent with recommendations from 

State agencies to focus on compliance 

with the performance standards and the 

appropriate use of Federal funds. State 

agencies may add other criteria and use 

other information to designate an SFA 

as high-risk on a case-by-case basis. 

State agencies must also conduct a 

targeted follow-up review of any SFA 

designated as high-risk within 2 years of 

the initial review. The targeted followup review must, at a minimum, include 

the areas identified in the most recent 

review that caused the SFA to be 

designated high-risk. 

FNS also proposed a corresponding 

change at 7 CFR 210.19(a)(5) to align the 

food service management company 

(FSMC) review with the 5-year 

administrative review cycle. FNS 

received 19 comments on this 

proposal—13 were supportive, 3 were 

opposed, and 3 were mixed. Most 

respondents cited the same reasons for 

supporting or opposing a return to a 5- 

year administrative review cycle. One 

respondent argued that there should be 

no change in cycle because the review 

of FSMCs is primarily a procurement 

review, which would be completed 

annually off-site. Another suggested that 

more frequent reviews of invoices 

should be conducted instead. 

Accordingly, this final rule amends 7 

CFR 210.18(c), and allow State agencies 

to implement a 5-year administrative 

review cycle, while targeting additional 

oversight to those SFAs most high risk. 

This final rule also amends 7 CFR 

210.19(a)(5) to allow State agencies to 

conduct the FSMC review on a 5-year 

cycle to align with the administrative 

review cycle. This final rule does not 

make any changes to the oversight of 

FSMCs, including the requirement for 

State agencies to review each contract 

between an SFA and FSMC annually. 

State agencies may continue with a 

shorter FSMC review cycle if they wish 

to do so. The compliance date is July 1, 

2024. 

2. Substitution of Local-Level Audits 

Current regulations at 7 CFR 

210.18(f)(3) allow State agencies to use 

applicable findings from federallyrequired audit activity or State-imposed 

audit requirements in lieu of reviewing 

the same information on an 

administrative review, provided the 

audit activity complies with the same 

standards and principles that govern the 

Federal single audit. FNS proposed 

building on this flexibility by expanding 

the allowable use of local-level audits. 

The proposed rule would allow State 

agencies to use recent and applicable 

findings from local-level audits initiated 

by SFAs or other entities including 

tribes, supplementary audit activities, or 

requirements added to Federal or State 

audits by local operators, as long as the 

audit activity complies with the same 

standards. 

FNS received 47 comments that 

addressed this proposed amendment— 

38 were supportive, 3 were opposed, 

and 6 were mixed. One respondent 

argued that external audits would only 

add confusion because they do not 

necessarily align with the same 

standards used in the administrative 

review process. However, FNS agrees 

with most respondents that the use of 

local-level audits will simplify 

monitoring—limiting unnecessary 

duplication of efforts and minimizing 

burden on State agency staff—without 

compromising program integrity. 

Accordingly, this final rule amends 7 

CFR 210.18(f)(3) to allow State agencies, 

with FNS approval, to use information 

from local-level audits to substitute for 

related parts of the administrative 

review. Requiring FNS approval will 

ensure that the local-level audit aligns 

with Federal audit standards. The 

compliance date is July 1, 2024. 


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3. Completion of Review Requirements 

Outside of the Administrative Review 

State agencies conduct a variety of 

oversight activities outside of the formal 

administrative review process. FNS 

proposed adding a new amendment 

under 7 CFR 210.18(f), (g), and (h), to 

allow State agencies to satisfy sections 

of the administrative review through 

equivalent State oversight activities that 

take place outside of the formal 

administrative review process, if the 

State agency or SFA has implemented 

FNS-specified error reduction strategies 

or monitoring efficiencies. In other 

words, State agencies would be able to 

omit specific, redundant areas of the 

administrative review, when sufficient 

oversight is conducted elsewhere. 

FNS received 22 comments on this 

proposal—21 were supportive and 1 

was opposed. Respondents described a 

number of equivalent State oversight 

activities that would satisfy sections of 

the administrative review, including 

health inspections, validation of 

Community Eligibility Provision source 

data at the time of election, school 

reports of financial revenues and 

expenses, information collected during 

annual agreement renewals, on-site and 

comprehensive technical assistance 

visits, and review of financial and other 

types of reports. FNS agrees with 

respondents that this proposed 

amendment will increase flexibility and 

reduce redundancy by allowing State 

agencies to satisfy parts of the 

administrative review through activities 

they have already performed. 

Accordingly, this final rule amends 7 

CFR 210.18(f), (g), and (h) to allow State 

agencies, with FNS approval, to omit 

specific, redundant areas of the 

administrative review, when sufficient 

oversight is conducted outside of the 

administrative review. Each of these 

State agencies must submit a plan, for 

FNS approval, that describes the State 

agency’s specific oversight activities and 

the critical or general areas of review 

that would be replaced. State agencies 

must submit updates or additions to 

their plan for FNS approval. The 

compliance date is July 1, 2024. 

4. Framework for Integrity-Focused 

Process Improvements 

To address the improper payment 

challenges facing the NSLP and SBP, 

where much of the underlying program 

error cannot be identified or addressed 

through monitoring alone, additional 

efforts must be directed to process 

reform. FNS proposed further amending 

7 CFR 210.18(f), (g), and (h) to allow 

State agencies to elect to modify, 

reduce, or eliminate a specified 

administrative review requirement, if 

the State agency or the SFA has adopted 

a given set of process improvements. 

The goal would be to redirect some of 

the costs of the administrative review 

into State agency or SFA investment in 

designated systems or process 

improvements to reduce or eliminate 

program errors. The streamlined review 

would be the incentive to make the 

necessary investments in systems or 

process improvements that can reduce 

or eliminate program errors. 

FNS received 26 comments on this 

proposal—12 were supportive, 3 were 

opposed, and 11 were mixed. Many of 

the comments identified potential 

challenges or asked for clarification. For 

example, respondents requested more 

specific information on what the 

integrity-focused processes entail, 

expressed concerns about potential 

impacts of the proposal on State 

agencies or SFAs, and posed questions 

about the effect of proposed integrity 

features. FNS believes that providing 

States and SFAs the option of adopting 

integrity focused process reforms could 

increase outcomes and decrease errors. 

FNS intends to develop guidance and 

a series of FNS-approved optional 

process reforms that respond to the 

latest findings from USDA research, 

independent audits, and FNS analysis of 

administrative data that State agencies 

and SFAs may adopt. FNS understands 

there will be costs associated with some 

of these process reforms, but that these 

will be offset, in whole or in part, 

through savings from the streamlined 

administrative review. 

FNS will test potential reforms, in 

cooperation with State and local 

program administrators, to assess their 

feasibility and effectiveness. States or 

SFAs may then adopt these FNSapproved process reforms, at their 

option, in exchange for elimination, 

modification, or reduction of existing 

administrative review requirements. 

FNS anticipates that this package of 

optional reforms will grow over time in 

response to new research and changes 

in the nature of the integrity challenges 

facing the programs. 

Accordingly, this final rule amends 7 

CFR 210.18(f), (g), and (h) to allow State 

agencies to omit designated areas of 

review, in part or entirely, where a State 

agency or SFA has implemented FNSspecified error reduction strategies or 

utilized FNS-specified monitoring 

efficiencies. The effective date is 

September 22, 2023. 

5. Assessment of Resource Management 

Risk 

Current regulations at 7 CFR 

210.18(h)(1) direct State agencies to 

perform an off-site assessment of an 

SFA’s nonprofit school food service 

account to evaluate the risk of 

noncompliance with resource 

management requirements. If risk 

indicators show that the SFA is at high 

risk for noncompliance with resource 

management requirements, the State 

agency must conduct a comprehensive 

review. FNS proposed giving State 

agencies discretion to conduct this 

assessment at any point in the review 

process rather than requiring it to take 

place off-site. 

FNS received 19 comments on this 

proposal—16 were supportive and 3 

were opposed. While proponents 

supported greater flexibility for State 

agencies to determine when and how 

they conduct the resource management 

module, opponents were concerned that 

reviews would become less efficient and 

more disruptive to SFAs under this 

proposal. For example, one respondent 

argued that SFAs need a firm timeline 

to prepare for the administrative review. 

FNS recognizes that allowing State 

agencies to set up the review process to 

meet their needs will increase the 

usefulness of the resource management 

assessment, while reducing unnecessary 

burden. 

Accordingly, this final rule amends 7 

CFR 210.18(h)(1) to allow State agencies 

to conduct the assessment of an SFA’s 

nonprofit school food service account at 

any point in the review process. Similar 

to the on-site portion of the review, FNS 

will no longer require that this 

assessment take place off-site before the 

administrative review. Although the 

State agency should make this 

assessment in the school year that the 

review began, completion of the 

resource management module may 

occur before, during, or after the on-site 

portion of the administrative review. 

The compliance date is September 22, 

2023. 

6. Buy American Area of Review 

Program regulations under 7 CFR 

210.21(d) and 7 CFR 220.16(d) describe 

requirements SFAs must follow to 

purchase, to the maximum extent 

practicable, domestic commodities or 

products and State agencies already 

review this provision as a part of the 

administrative review. However, Buy 

American is not currently included in 

regulation as part of the general areas of 

the administrative review. FNS 

proposed including compliance with 

the Buy American requirements as a 

general area of review, under 7 CFR 

210.18(h)(2), that State agencies must 

monitor when they conduct 

administrative reviews. 


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FNS received 20 comments—9 were 

supportive, 4 were opposed, and 7 were 

mixed. While many of the comments 

went beyond the scope of the proposed 

rule, one respondent argued that a Buy 

American review should be included in 

either the oversight of procurement 

practices required under 

governmentwide regulations at 2 CFR 

200 or the administrative review, but 

not both. State agencies review Buy 

American on-site through the 

administrative review, which then 

allows the State agency to conduct the 

oversight of procurement practices 

entirely off-site. To the extent 

practicable, these review teams should 

coordinate reviews and communicate 

findings in order to provide 

comprehensive monitoring of the Buy 

American requirements. 

Accordingly, this final rule amends 7 

CFR 210.18(h)(2) to add a new 

paragraph (xi) to require State agencies 

to ensure compliance with the Buy 

American requirements to purchase 

domestic commodities or products. This 

final rule also makes a corresponding 

technical change to the definition of 

‘‘General areas’’ under 7 CFR 210.18(b). 

This small change provides consistency 

by aligning the lists of general areas of 

review that appear in paragraphs (b) and 

(h)(2). The compliance date is 

September 22, 2023. 

7. Discretion in Taking Fiscal Action for 

Meal Pattern Violations 

Current regulations at 7 CFR 

210.18(l)(2) require State agencies to 

take fiscal action to recover Federal 

funds from SFAs for repeated violations 

of milk type and vegetable subgroup 

requirements. FNS proposed to instead 

give the State agency discretion to take 

fiscal action against SFAs for repeated 

violations of milk type and vegetable 

subgroup requirements. This would 

align with current State discretion to 

take fiscal action to address repeated 

violations of food quantity, whole grainrich, and dietary specifications 

requirements. 

FNS received 54 comments on this 

proposal—23 were supportive, 28 were 

opposed, and 3 were mixed. Proponents 

suggested that this amendment would 

allow State agencies to provide 

technical assistance, instead of 

penalizing schools for unintentional 

errors. Opponents argued that continued 

violations of program requirements 

should be addressed uniformly, with 

consequences that will prevent integrity 

concerns. FNS continues to believe that 

implementing this amendment will 

increase efficiency and reduce burden, 

without compromising integrity. 

While most SFAs strive to make a 

good faith effort to comply with meal 

pattern requirements, FNS recognizes 

that some SFAs may need additional 

support from the State agency to fully 

and correctly implement the meal 

pattern. Rather than require State 

agencies to fiscally penalize SFAs, this 

rule allows States to consider each 

unique situation and determine whether 

technical assistance, fiscal action, or a 

combination of both, is the appropriate 

response. FNS encourages State 

agencies to communicate with their 

SFAs about situations that would 

warrant fiscal action, to ensure a 

uniform and fair approach. 

Accordingly, this final rule amends 7 

CFR 210.18(l)(2) to give State agencies 

the discretion to take fiscal action 

against SFAs for repeated violations of 

milk type and vegetable subgroup 

requirements. This amendment aligns 

with State’s existing discretion to take 

fiscal action for repeated violations 

concerning food quantities, whole grainrich foods, and the dietary 

specifications. This final rule retains the 

requirement that State agencies must 

take fiscal action for missing food 

components. The compliance date is 

September 22, 2023. 

C. Reducing Performance-Based 

Reimbursement Reporting 

Program regulations at 7 CFR 

210.5(d)(2)(ii) require State agencies to 

submit to FNS a quarterly report 

detailing the total number of SFAs in 

the State and the names of SFAs that are 

certified to receive the statutorilyestablished 8-cents performance-based 

reimbursement. The regulations further 

affirm that State agencies will no longer 

be required to submit the quarterly 

report once all SFAs in the State have 

been certified. In the Simplifying Meal 

Service and Monitoring Requirements in 

the National School Lunch and School 

Breakfast Programs, 85 FR 4094, https:// 

www.fns.usda.gov/nslp/fr-012120, FNS 

proposed reducing the frequency of this 

reporting requirement from quarterly to 

annually, as almost all SFAs are already 

certified to receive the performancebased reimbursement. 

FNS received 21 comments on this 

proposal—20 were supportive and 1 

was mixed. The mixed comment 

generally supported the provision but 

suggested a change to the rate structure 

which is statutorily driven. FNS agrees 

with respondents that eliminating or 

reducing non-essential administrative 

requirements and simplifying program 

regulations will allow more time for 

State agencies to focus on improving 

program operations. 

Accordingly, this final rule amends 7 

CFR 210.5(d) to reduce the performancebased reimbursement reporting 

requirement from quarterly to annually. 

This rulemaking moves the 

performance-based reimbursement 

report from the quarterly report under 

paragraph (d)(2) to the end-of-the-year 

report under paragraph (d)(3). 

Corresponding changes remove 

references to the performance-based 

reimbursement report at 7 CFR 

210.7(d)(1)(vii) and (d)(2) that are now 

obsolete. This rulemaking amends 7 

CFR 210.5(d)(2) and (d)(3) and 210.7(d). 

The compliance date is September 22, 

2023. 

IV. Miscellaneous Amendments 

A. State Administrative Expense (SAE) 

Funds 

SAE regulations require State agencies 

to return to FNS any unexpended SAE 

funds at the end of the fiscal year 

following the fiscal year for which the 

funds are awarded. FNS proposed an 

amendment that would require State 

agencies to return any unobligated SAE 

funds—instead of unexpended—to give 

State agencies more flexibility to spend 

their funds. FNS received 40 comments 

on this proposal—38 were supportive, 1 

was opposed, and 1 was mixed. FNS 

agrees with respondents that making 

this change will help ensure that State 

agencies are not missing opportunities 

to use their funds. This change also 

gives State agencies a longer period of 

time to expend SAE funds to complete 

critical work. Accordingly, this final 

rule amends 7 CFR 235.5(d) and (e)(2) 

to require State agencies to return any 

unobligated SAE funds to FNS. The 

compliance date is September 22, 2023. 

B. FNS Contact Information 

A realignment of FNS Regional 

Offices took effect on September 29, 

2019. These organizational changes 

achieve operational efficiencies, 

increased accountability, and improved 

communications to support program 

integrity, and ensure continued 

executive supervisory oversight for 

mission critical functions such as 

human resources, contracting, and 

logistics. This final rule makes a 

technical change to advise the public to 

contact the appropriate State agency or 

FNS Regional Office to obtain program 

information. Accordingly, this final rule 

amends 7 CFR 210.32, 215.17, 220.21, 

225.19, and 226.26 to direct the public 

to the FNS website to obtain contact 

information. The effective date is 

September 22, 2023. 


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57812 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

C. Program Application Requirements 

CACFP institutions must submit a 

certification, under 7 CFR 

226.6(b)(1)(xv), 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 board of directors 

chair or, in the case of a for-profit 

center, the owner of the for-profit 

center. Similar information about the 

executive director, board of directors 

chair, and other responsible principals 

must be included in each SFSP 

application. SFSP sponsors and CACFP 

institutions must also provide Federal 

Employer Identification Numbers (FEIN) 

or the Unique Entity Identifier (UEI). 

This final rule codifies these 

amendments under 7 CFR 225.6(c)(1), 

226.6(b)(1)(xv), and 226.6(b)(2)(iii)(F). 

The effective date is September 22, 

2023. 

V. Procedural Matters 

Executive Orders 12866 and 13563 

Executive Orders 12866, 13563, and 

14094 direct agencies to assess all costs 

and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits, 

including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and equity. 

Executive Order 13563 emphasizes the 

importance of quantifying both costs 

and benefits, reducing costs, 

harmonizing rules, and promoting 

flexibility. This final rule was reviewed 

by the Office of Management and 

Budget (OMB) and determined to be 

significant. As required, an economic 

summary was developed for this final 

rule. 

Economic Summary 

Need for Action: This action 

implements statutory requirements and 

policy improvements to strengthen 

administrative oversight and operational 

performance of the Child Nutrition 

Programs. Strong integrity safeguards for 

taxpayer investments in nutrition are 

fundamental to earning and keeping the 

public confidence that make these 

programs possible. As FNS continues to 

work towards improving integrity in 

these programs, this final rule 

establishes criteria and procedures 

through a number of provisions that are 

designed to increase accountability, 

maximize operational efficiency, and 

ensure that the National School Lunch 

Program, School Breakfast Program, 

Special Milk Program, Summer Food 

Service Program, and Child and Adult 

Care Food Program deliver important 

nutritional benefits and protect scarce 

Federal resources with the highest level 

of integrity. 

Affected Parties: The programs 

affected by this rule are the National 

School Lunch Program (NSLP), School 

Breakfast Program (SBP), Special Milk 

Program (SMP), Child and Adult Care 

Food Program (CACFP), and the 

Summer Food Service Program (SFSP). 

The parties affected by this regulation 

are the USDA’s Food and Nutrition 

Service, State agencies administering 

Child Nutrition programs, local school 

food authorities, schools, institutions, 

sponsoring organizations, sponsor sites, 

and day care centers. 

Summary: A regulatory impact 

analysis (RIA) must be prepared for 

major rules with effects of $200 million 

or more in any one year. USDA does not 

anticipate that this final rule is likely to 

have an economic impact of $200 

million or more in any one year, and 

therefore, does not meet the definition 

of ‘‘significant effects’’ under 3(f)(1) 

under Executive Order 12866, as 

amended. 

USDA estimates the cost of this rule 

to State and local government agencies 

to be approximately $0.7 million over 5 

years, and for the cost to businesses (i.e., 

CN program sponsors) to be $6 million 

over 5 years, for a total 5-year nominal 

cost of $6.7 million. At least some of 

those costs will be offset by new federal 

CACFP audit funding made available 

under this rule; USDA estimates the 

lower bound of these transfers from the 

federal government to the States to be 

$27.2 million over 5 years and the upper 

bound to be $108.9 million over 5 years. 

Due to these transfers, USDA anticipates 

that the net costs to the State and local 

parties will be lower than $6.7 million 

over 5 years. All estimates in this 

economic summary are given in 2023 

dollars. 

Baseline for analysis: The baseline for 

this particular analysis is the 

administrative costs prior to the 

provisions’ implementation on State 

agencies, SFAs, and CACFP sponsors for 

administering programs in compliance 

with Federal CN rules and statute, 

including reporting and recordkeeping 

costs. The cost estimates presented are 

the additional costs and transfer impacts 

above this baseline attributable to the 

provisions of this rule. Some of the 

rule’s provisions have already been 

implemented and are simply codified 

through this rule. The cost impacts of 

provisions being codified are included 

with the total cost impacts of all 

provisions in this economic summary 

for transparency; those provisions are 

explicitly identified in the discussion 

below. The estimates and tables in this 

analysis assume that all provisions will 

be in effect by 2025, so 2025 is used as 

the starting year for simplification and 

consistency in this economic summary. 

Summary of provisions from Child 

Nutrition Program Integrity Proposed 

rule factored into economic analysis: 

This section states and summarizes the 

provisions considered in the Final 

Integrity rule carried over from the 

Child Nutrition Program Integrity 

Proposed rule, with a particular focus 

on the components with administrative 

cost implications. 

• Fines for Violating Program 

Requirements: The CNI final rule 

authorizes the imposition of fines by the 

USDA and State agencies against school 

food authorities (SFAs) that have an 

agreement with a State agency to 

administer any of USDA’s child 

nutrition programs. USDA and State 

agencies may impose fines against these 

institutions for failure to correct severe 

mismanagement of one of the CN 

programs, disregard of program 

requirements, and failure to correct 

repeated violations of program 

requirements. It also provides for the 

imposition of fines by the USDA against 

State agencies for failure to correct State 

or local mismanagement of a CN 

program, disregard of program 

requirements, or failure to correct 

repeated violations of program 

requirements. The rule sets limits on 

these fines and provides for the right to 

appeal fines imposed under this section. 

• State Agency Review Requirements 

in CACFP: The final rule increases the 

minimum frequency of review, from 

once every three years to once every 

two, for certain CACFP institutions— 

independent centers or sponsoring 

organizations that have been identified 

as having or are at risk of having serious 

management problems, and sponsors of 

up to 100 facilities that conduct 

activities in addition to the CACFP 

(known as multi-purpose sponsors). 

• State Liability for Payments to 

Aggrieved Child Care Institutions: The 

final rule sets reporting requirements for 

the administrative review process for 

CACFP sponsors or providers that face 

State agency administrative or fiscal 

actions and requires that State agencies 

issue administrative review decisions 

within 60 days, and permits USDA to 

make the State agency liable to pay all 

valid claims for reimbursement (meals 

and administrative) to the institution 

from non-Federal sources starting on the 

61st day. This provision amends current 

regulations at 7 CFR 226.6(k). 

• CACFP Audit Funding: Beginning 

in FY 2016, if a State agency 

demonstrated that it can effectively use 

additional funds to improve program 


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management in accordance with USDA 

criteria, USDA increased the funds 

made available to the State from 1.5 

percent to 2 percent of the CACFP funds 

used by that State in the second 

preceding fiscal year. This provision is 

already in effect, and the final rule 

codifies this change in regulation. 

• Financial Review of Sponsoring 

Organizations in CACFP: The final rule 

requires sponsoring organizations to 

report actual program expenditures, and 

it requires State agencies to annually 

review at least one month of all 

sponsoring organization’s CACFP bank 

account activity against supporting 

documents to validate that all 

transactions meet program 

requirements. This provision amends 

current regulations at 7 CFR 226.7(b) 

and 7 CFR 226.10(c). 

• Informal Purchase Methods for 

CACFP: This final rule amends 7 CFR 

226.21(a) and 226.22(i)(1) to link the 

values of the Federal micro-purchase 

threshold and Federal simplified 

acquisition threshold to 2 CFR 200 

(currently $10,000 for micro-purchases 

and $250,000 for the simplified 

acquisition threshold). 

• SFA Contracts with Food Service 

Management Companies: This final rule 

amends NSLP regulations to require 

each State agency to annually review 

and approve each contract and contract 

amendment between any SFA and 

FSMC. (Currently, State agencies are 

required to review procurement 

contracts, but not to approve them 

formally.) It also amends NSLP and SBP 

regulations to require the value of USDA 

Foods to accrue only to the benefit of 

the SFA’s nonprofit school food service. 

The proposed rule did not extend this 

second provision to SBP. However, FNS 

is correcting this oversight in this final 

rule by adding the USDA Foods 

provision to both NSLP and SBP 

regulations. Finally, the final rule adds 

a definition for fixed-price contract to 

NSLP and SBP regulations for clarity. 

Current NSLP and SBP regulations 

define cost-reimbursable contract. This 

provision amends current regulations at 

7 CFR 210.19(a)(5). 

• Annual NSLP Procurement 

Training: This provision requires that 

State directors of school nutrition 

programs, State directors of distributing 

agencies, and school nutrition program 

directors, management, and staff who 

work on NSLP procurement activities 

successfully complete annual training in 

procurement standards. It also requires 

State agencies and SFAs to retain 

records to document compliance with 

professional standards training 

requirements. 

• FNS Contact Information: A 

realignment of FNS Regional Offices 

took effect on September 29, 2019. 

These organizational changes achieve 

operational efficiencies, increased 

accountability, and improved 

communications to support program 

integrity, and ensure continued 

executive supervisory oversight for 

mission critical functions such as 

human resources, contracting, and 

logistics. This final rule makes a 

technical change to advise the public to 

contact the appropriate State agency or 

FNS Regional Office to obtain program 

information. 

• Program Applications: CACFP 

institutions must submit a certification, 

under 7 CFR 226.6(b)(1)(xv), 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 

board of directors chair or, in the case 

of a for-profit center, the owner of the 

for-profit center. Similar information 

about the executive director, board of 

directors chair, and other responsible 

principals must be included in each 

SFSP application. SFSP sponsors and 

CACFP institutions must also provide 

Federal Employer Identification 

Numbers (FEIN) or the Unique Entity 

Identifier (UEI). 

Summary of provisions from CACFP 

amendments factored into economic 

analysis: This section states and 

summarizes the provisions in the Final 

Integrity rule carried over from the 

CACFP amendments Proposed rule. 

• Elimination of the Annual 

Application for Institutions: This 

provision eliminates renewal 

applications and modifies the frequency 

with which initial and follow-up 

applications must be submitted by 

sponsoring organizations to state 

agencies. It also adds new definitions of 

New Institution, Participating 

Institution, Renewing Institution, and 

Lapse in Participation. Finally, the rule 

reorganizes applications submission and 

renewal requirements. This provision is 

already in effect. 

• Timing of Unannounced Reviews: 

The timing of reviews conducted by 

sponsoring organizations will be 

required to vary and be unannounced, 

so they are unpredictable to sponsored 

facilities. The unannounced reviews 

from this provision are intended to 

uncover program integrity issues more 

effectively. This provision is already in 

effect. 

• Standard Agreements Between 

Sponsoring Organizations and 

Sponsored Child Care Centers: This 

final rule requires State agencies to 

develop and provide for the use of 

permanent operating agreements 

between sponsoring organizations of 

sponsored centers and day care homes. 

A standard agreement can be developed 

by State agencies to be used between 

sponsoring organizations and 

unaffiliated childcare centers. State 

agencies are also allowed to approve an 

agreement developed by the sponsoring 

organization. This provision is already 

in effect. 

• Collection and Transmission of 

Household Income Information: The 

provision requires sponsoring 

organizations to allow providers of tier 

II day care homes to assist in the 

collection and transmission of 

household income information with the 

written consent of the parents or 

guardians of children in their care. It 

provides specific steps a day care home 

must take when assisting with this 

process. It also strongly encourages 

sponsoring organizations to establish 

procedures to protect the confidentiality 

of a household’s income information 

and prohibits the provider from 

reviewing applications from 

households. This provision is already in 

effect. 

• Calculation of Administrative 

Funding for Sponsoring Organizations 

of Day Care Homes: A modification was 

made to the method of calculating 

administrative payments to sponsoring 

organizations of day care homes by 

eliminating the ‘‘lesser of’’ cost and 

budget comparisons. FNS proposed 

calculating administrative 

reimbursement by multiplying the 

number of day care homes under the 

sponsoring organization’s oversight by 

the appropriate annually adjusted 

administrative payment rate. This 

provision is already in effect. 

• Carryover of Administrative 

Funding for Sponsoring Organizations 

of Day Care Homes: Under this 

provision, sponsoring organizations of 

day care homes can carry over and 

obligate up to 10 percent of 

administrative payments into the 

following year with State agency 

approval. The State agency is required 

to establish procedures to recover the 

funds from sponsoring organizations 

that are not properly payable, are in 

excess of the 10 percent maximum 

carryover amount, or any carryover 

amounts not expended or obligated by 

the end of the fiscal year following the 

year they were earned. This provision is 

already in effect. 

Summary of provisions from the 

Simplifying Monitoring in NSLP and 

SBP proposed rule: The provisions 

listed below were carried over from the 

Simplifying Monitoring in NSLP and 


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SBP proposed rule into the Final 

Integrity Rule. 

• Discretion in Taking Fiscal Action 

for Meal Pattern Violations: The final 

rule provision removes the requirement 

that State agencies must take fiscal 

action against SFAs for repeated 

violations of milk type and vegetable 

subgroup requirements. State agencies 

will instead have the discretion to take 

fiscal action, consistent with the 

guidance for food quantities, whole 

grain-rich foods, and dietary 

specifications. Waivers have been in 

place during the COVID–19 public 

health emergency to allow for State 

agency discretion for meal pattern 

violations. 

• Return to a 5-Year Review Cycle: 

The final rule allows State agencies to 

return to a 5-year administrative review 

cycle and allows review of SFAs more 

frequently. The State agencies that 

review on a 3-year cycle are not 

required to designate high-risk or 

targeted reviews; however, high-risk 

designations and targeted reviews are 

required for State agencies that review 

SFAs on a longer than 3-year cycle. 

Each State agency that reviews SFAs on 

a longer than 3-year cycle must develop 

a plan for FNS approval describing the 

criteria that will be used to identify 

high-risk SFAs for targeted follow-up 

reviews. State Agencies must conduct 

targeted follow-up reviews of high-risk 

SFAs within two years of the review 

findings. This provision also changes 

the food service management company 

review from a 3-year to 5-year cycle, to 

align with the amendments to the 

administrative review cycle. This allows 

State agencies to review SFAs 

contracting with food service 

management companies more 

frequently, if they choose. Thirty-six 

State agencies had a waiver in place 

allowing reviews to be conducted on a 

5-year review cycle prior to publication 

of the rule proposing this provision. 

• Framework for Integrity-focused 

Process Improvements: The final rule 

proposes a framework for waiving or 

bypassing certain review requirements 

for State agencies or SFAs as an 

incentive to invest in one or more 

USDA-designated systems or process 

improvements that can reduce or 

eliminate Program errors. The series of 

optional process reforms will be 

published separately from the final rule. 

• Substitution of Third-Party Audits: 

The final rule allows State agencies to 

use recent and applicable findings from 

the following audits in lieu of reviewing 

the same information on an 

administrative review, provided the 

audit activity complies with the same 

standard and principals that govern the 

Federal single audit: 

Æ Supplementary audit activities, 

Æ Requirements added to federal or 

State audits by local operators, 

Æ Other third-party audits initiated by 

SFAs, or 

Æ Other third-party audits initiated by 

other local entities. 

• Completion of Review Requirements 

Outside of the Administrative Review: 

State agencies may satisfy sections of 

the administrative review through 

equivalent State oversight activities that 

take place outside of the formal 

administrative review process, with 

required regional office approval. 

• Assessment of Resource 

Management Risk: Under this provision, 

State agencies may conduct the 

assessment of an SFA’s nonprofit school 

food service account at whichever point 

in the review process makes the most 

operational sense to the State agency. 

State agencies may also set up a review 

process and staff work units in the 

manner that they see fit. 

• Buy American Area of Review: The 

requirement to review Buy American as 

part of the general areas of the 

administrative review are codified in 

the final rule and added to the 

regulatory definition of ‘‘general areas.’’ 

Guidance on Buy American is provided 

currently. 

• Performance-based Reimbursement 

Quarterly Report: The final rule changes 

the frequency of the reporting from 

quarterly to annual as most SFAs are 

already certified to receive the 6-cents 

performance-based reimbursement. 

• State Administrative Expense 

Funds: This provision updates 

regulatory language to state that State 

agencies must return any State 

Administrative Expense funds which 

are unobligated. This is a change from 

the current requirement that 

unexpended funds must be returned. 

Addressing Public Comments on the 

Proposed 2016 CN Integrity Program 

Rule RIA: The following list summarizes 

the comments on the proposed rule’s 

Regulatory Impact Analysis: 

• Five commenters discussed costs 

related to the Regulatory Impact 

Analysis (RIA) for the proposed CN 

Integrity Proposed Rule. A general 

advocacy group opposed many of the 

provisions in the proposed rule and 

expressed dissatisfaction that the 

original Congressional Budget Office 

analysis of Public Law 111–296 did not 

provide an estimate of the imposition of 

fines against entities other than State 

Agencies and SFAs. Although the 

dissatisfaction was not directed at the 

regulatory impact analysis of the 

proposed rule, USDA notes that the 

final rule removes the provision 

authorizing fines against entities other 

than State Agencies and SFAs, so there 

will be no fines against entities other 

than State Agencies and SFAs. This is 

a change from the proposed rule, which 

would have extended fines to SFSP 

sponsors and CACFP institutions. 

• An individual commenter also 

expressed concern about the additional 

administrative costs to the States of 

monitoring CACFP providers, which 

USDA estimated at $4.3 million in 

FY2017 and $22.7 million from 

FY2017–FY2021 in the RIA for the 

proposed rule. USDA presents updated 

estimates for FY2025–FY2029 for the 

final rule below, which results in a net 

decrease in cost and burden on State 

and local government agencies. 

Similarly, a State agency argued that 

State agencies would need more State 

funds (i.e., non-federal funds) in order 

to comply with the ‘‘more frequent 

investigations and reporting’’ in the 

proposed rule. The State agency also 

recommended the creation of a national 

list of seriously deficient sponsors, 

rather than requiring each State to 

devise their own database reporting 

methodology and requiring each State to 

maintain the database itself. USDA also 

notes that the final rule makes available 

additional audit funding to State 

agencies that can justify a need for that 

funding. 

• Finally, a State agency expressed 

concern about the ability of a State 

agency to pay any potential fines, as 

they do not have general funds available 

for this kind of liability, and any final 

ability to pay ‘‘will be severely 

hampered by the State’s budgeting 

process.’’ 

• FNS was required by statute to 

codify the criteria and procedures under 

which FNS may establish fines against 

State agencies. In general, FNS expects 

fines to be established in exceptional 

circumstances, when existing processes 

(technical assistance, corrective action, 

and routine fiscal action) do not bring 

State agencies into compliance. FNS is 

not required to establish fines against 

State agencies, and fines would be 

limited to severe or repeated program 

violations that FNS, in consultation 

with its legal counsel, determines 

warrant a fine. Additionally, if an 

exceptional circumstance does warrant 

a fine, FNS may establish a fine below 

the maximum threshold established in 

regulation. 

• There were no comments received 

on the RIA for the CACFP Amendments 

or the Simplifying Monitoring in NSLP 

and SBP proposed rules. 

Cost/Benefit Assessment Summary: 

The analysis that follows quantifies the 


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1Source: FNS Administrative Data. 

impact of the four provisions of the 

above-listed provisions that we estimate 

have non-negligible cost implications 

for the Federal government, State 

agencies, SFAs, and/or businesses 

(including CACFP sponsors and 

centers), as well as the new reporting 

and recordkeeping requirements of the 

final rule. 

The analysis does not quantitatively 

estimate the value of the CNI final rule’s 

benefits or the magnitude of most of its 

potential transfer impacts (such as the 

recovery of improper program 

payments) due to a lack of data, but we 

expect the overall economic effect to be 

relatively small. The provisions codified 

in this final rule are designed to 

increase program operators’ 

accountability and operational 

efficiency, while improving the ability 

of FNS and State agencies to address 

severe or repeated violations of program 

requirements. 

TABLE 1—SUMMARY OF ESTIMABLE ADMINISTRATIVE COST DIFFERENCES AND RESOURCES

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

State agency programmatic administrative costs 

State Agency MIS Upgrade and Maintenance Costs ...... $2.9 $0.1 $0.1 $0.1 $0.1 $3.1 

State and Local Government Reporting and Recordkeeping Costs 

State and Local Government Information collection burden (reporting and recordkeeping) ............................... ¥0.4 ¥0.5 ¥0.5 ¥0.5 ¥0.5 ¥2.3 

Institutions (Business) administrative costs 

Businesses—Reporting Requirements ............................ 1.1 1.2 1.2 1.2 1.3 6.0 

Increase in Federal audit funding for State agencies (CACFP) 

low estimate ..................................................................... 5.1 5.2 5.4 5.6 5.9 27.2 

upper bound estimate ...................................................... 20.3 20.9 21.7 22.6 23.4 108.9 

Note: Numbers may not sum to totals due to rounding. 

Administrative Impact: This section 

begins with cost estimates for the four 

provisions expected to have the most 

significant effect on State agencies’, 

local governments’, and CACFP and 

SFSP providers’ administrative 

responsibilities. We follow that with a 

qualitative discussion of the potential 

administrative impact of the rule’s 

remaining provisions. 

State Agency Review Requirements in 

CACFP: This provision is expected to be 

implemented by 2025. The CNI final 

rule increases the minimum frequency 

of review, from once every three years 

to once every two, for certain CACFP 

institutions—independent centers or 

sponsoring organizations that have been 

identified as having or are at risk of 

having serious management problems, 

and sponsors of up to 100 facilities that 

conduct activities in addition to the 

CACFP (known as multi-purpose 

sponsors). (Sponsoring organizations 

with more than 100 facilities already 

must be reviewed at least once every 

two years.) 

The cost of this provision is included 

in the burden estimate under the 

Paperwork Reduction Act, so it is 

included in our estimate of the total 

reporting and recordkeeping costs for 

State and local government and for 

businesses. It accounts for 6,728 of the 

increased burden hours, or 12.5% of the 

total increase in burden hours attributed 

to the rule as estimated in Table 10. At 

a rate of $67.97, based on 2022 BLS 

State and Government Management and 

Professional compensation rates, this is 

an estimated annual cost of 

approximately $457,302. 

The administrative costs of this 

provision may vary across States with 

the relative concentration of small 

multi-purpose and other high-risk 

sponsors. In FY2022, FNS 

administrative data shows that there 

were 19,460 sponsors and independent 

centers, and a total of 140,434 centers 

and homes participating in CACFP. 

About 53 percent of CACFP providers 

are day care homes, and childcare 

centers account for about 46 percent of 

CACFP providers. At least for family 

day care homes, there is considerable 

variation in the distribution of homes 

per sponsor across the States (Table 2). 

For example, in November 2022, all 

sponsors of day care homes in New 

Hampshire oversaw 1 to 50 homes. 

Conversely, in Oregon, 67 percent of 

sponsoring organizations of day care 

homes oversaw 200 to 1,000 homes. 

Table 2 shows that 18 States report that 

more than half of their family day care 

home sponsors administer between 1 

and 50 homes. 

Independent childcare centers made 

up 10.6% of all childcare providers in 

2015 and are more likely to operate 

fewer than 10 sites. Among family day 

care home sponsors, 14.7 percent have 

10 or fewer sites compared to 94.6 

percent of childcare center and 75.4 

percent of Head Start center sponsors. 

Conversely, 38.3 percent of family day 

care home sponsors have more than 100 

sites compared to less than 0.2 percent 

of childcare centers and 0.1 percent of 

Head Start center sponsors. FNS data 

cannot distinguish multi-purpose 

sponsors from other sponsors that 

oversee no more than 100 daycare 

homes. FNS administrative data offer 

some indication that the administrative 

burden associated with this provision 

may vary across States. States with the 

highest percentage of small family day 

care home sponsors (those responsible 

for no more than 100 homes) may have 

a disproportionate number of small 

multi-purpose sponsors and may 

therefore be disproportionately 

impacted by this provision.1


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TABLE 2—PROFILE

SPONSORING

ORGANIZATIONS OF

DAY

CARE

HOMES

States * 

Percent of sponsoring organizations 

administering 1–50 day care homes 

Percent of sponsoring organizations 

administering 51–200 day care homes 

Percent of sponsoring organizations 

administering 201–1000 day care homes 

Percent of sponsoring organizations 

administering 1000 + day care homes 

1% to 

25% 

26% to 

50% 

51% to 

75% >75% 1% to 25% 26% to 50% 51% to 75% >75% 1% to 25% 26% to 50% 51% to 75% >75% 1% to 25% 26% to 50% 51% to 75% >75% 

November 2022 

........................ 10 16 8 10 9 22 9 5 16 9 2 1 3 0 0 0 

* 52 States including DC and Puerto Rico. Source: FNS Administrative Data. 


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2Figures used in these actuals and in the 

FY2025–FY2029 projections were prepared for the 

FY 2024 President’s Budget. 

3The years most affected by the COVID–19 

pandemic (2019–2021) resulted in a lower percent 

of available 0.5% funds used compared to other 

years. 

4USDA administrative data. 

Financial Review of Sponsoring 

Organizations in CACFP: This provision 

amends current regulations at 7 CFR 

226.7(b) and 7 CFR 226.10(c) and is 

expected to be implemented by 2025. 

The cost of this provision is included in 

the burden estimate as published in the 

ICR that accompanies this rule, so it is 

included in our estimate of the total 

reporting and recordkeeping costs for 

State and local government and for 

businesses in Table 10. The estimated 

burden associated with this provision is 

6,638 hours annually, making up 12.4% 

of total increase in burden. At a rate of 

$67.97, based on 2022 BLS State and 

Government Management and 

Professional compensation rates, this is 

an estimated annual cost of 

approximately $451,185. 

CACFP Audit Funding: Section 17(i) 

of the NSLA (42 U.S.C. 1766(i)) was 

amended by Section 335 of the Healthy, 

Hunger-Free Kids Act of 2010 (P.L. 111– 

296) to provide additional CACFP audit 

funding. This provision will codify the 

already-implemented increase of the 

maximum amount of CACFP audit 

funding from 1.5 percent to 2 percent of 

CACFP expenditures. The provision 

took effect in FY 2016. Consistent with 

current program rules, audit funds are 

computed as a percent of CACFP 

spending in the second preceding year. 

Table 3 contains the Department’s 

actual value of CACFP audit 

distributions to the States in FY 2020, 

FY 2021, and FY 2022 for illustrative 

purposes.2

TABLE 3—FEDERAL TRANSFERS TO STATE AGENCIES FOR CACFP AUDIT FUNDING

CACFP projections 

Fiscal year 

(millions) 

2020 2021 2022 

Maximum Available Audit Funding Projections from 2020 President’s Budget (1.5% + 0.5%) $70.1 $71.8 $58.4 

1.5% Share Max Available .......................................................................................................... $52.6 $53.9 $43.8 

0.5% Share Max Available .......................................................................................................... $17.5 $18.0 $14.6 

Actual 1.5% funds used ............................................................................................................... $52.0 $53.6 $43.4 

Actual 0.5% funds used ............................................................................................................... $4.3 $4.9 $6.2 

Percent of available 0.5% funds used 3 ...................................................................................... 24.4% 27.5% 42.4% 

If all State agencies request and 

demonstrate the need for additional 

funds under this provision, then 

projected extra FY 2025 CACFP funds 

would be calculated by multiplying 

CACFP expenditures by the full 1⁄2

percent, giving an increase in FY 2025 

audit funding of $20.3 million. We use 

the same methodology to estimate the 

upper bound estimate in Tables 1 and 

4. Our upper bound estimate assumes 

that all State agencies will request and 

use the full 1⁄2 percent increase in audit 

funds. 

In practice, additional audit funds are 

only made available to States that are 

able to justify a need for the funds. 

States are required to detail their plans 

for the use of additional funds in 

written requests to USDA. In FY 2018, 

47.3% of these available funds were 

actually spent; in FY 2022, 42.4% of the 

available funds were actually spent.4

Therefore, we may assume that, in most 

years, fewer than 100% of States 

Agencies will request 100% of the 

available 0.5% in additional audit 

funding. USDA estimates an additional 

four burden hours per State that chooses 

to submit a plan and request for 

additional funding, as outlined in the 

ICR and our estimate of the 

administrative burden below. 

To account for the additional reviews 

required by this final rule, we estimate 

the costs of increasing CACP audit 

funding in Table 4. We establish our 

lower bound estimate at 25% of the 

maximum additional audit funding 

available. 

TABLE 4—COST OF INCREASE IN STATE AUDIT FUNDING IN CACFP 

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

Increase in Federal audit funding (CACFP) 

Lower estimate (25% of available funding) ..................... $5.1 $5.2 $5.4 $5.6 $5.9 $27.2 

Upper bound (100% of available funding) ....................... 20.3 20.9 21.7 22.6 23.4 108.9 

Administrative Review Cycle: The 

transition from a 5-year cycle to a 3-year 

cycle for the administrative review 

process resulted in some State agencies 

and SFAs struggling to complete 

reviews and oversight activities. This 

provision is expected to be 

implemented in all States agencies by 

2025. Thirty-six State agencies had a 

waiver in place allowing reviews to be 

conducted on a 5-year review cycle 

prior to publication of the rule 

proposing this provision. USDA has 

received feedback through several 

avenues regarding the difficulties faced 

by State agencies. The Child Nutrition 

Burden Study was conducted in SY 

2017–2018 in response to a 

Congressional mandate in House Report 

114–531 to identify areas to reduce 

burden in the Child Nutrition Programs. 

This study collected data through 

workgroups with State and local 

Program operators, as well as a survey 

from a census of all State agencies and 

a nationally representative sample of 

SFAs. One reoccurring theme in this 

study, from both the State agency and 

SFA perspectives, was the burden 

associated with the 3-year 

administrative review cycle. To comply 

with the 3-year administrative review 

requirements, some State agencies and 


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SFAs were sacrificing staff resources 

needed for program administration, 

including providing technical 

assistance. State agencies face a number 

of time and resource constraints, and 

Program operators struggled to adopt the 

new procedures and timeframes. 

It is important to assess the impact of 

returning to a 5-year cycle. Fewer SFAs 

would be reviewed each year, resulting 

in the potential for program error to 

continue for longer. Table 5 shows the 

projected number of annual reviews that 

would be conducted using a 5-year 

cycle and the number of annual reviews 

that would be conducted using a 3-year 

cycle. It also provides the number of 

actual reviews conducted in SY 2018– 

2019. 

TABLE 5—NUMBER OF ANNUAL REVIEWS CONDUCTED

Total number of SFAs in SY 2018–19 

Number of 

SFAS 

reviewed 

during 

5-year cycle 

Number of 

SFAs 

reviewed 

during 

3-year cycle 

Number of 

SFAs 

reviewed 

SY 2018–19 

18,925 .......................................................................................................................................... 3,785 6,308 5,972 

To better understand the impact of the 

proposed follow-up review for the 

designated high-risk SFAs, the data 

from the SY 2018–2019 review year was 

analyzed to estimate the potential 

number of follow-up reviews that may 

have been conducted, if the proposed 

follow-up reviews were implemented. 

The criteria used in this simulation only 

focuses on the results of the 

administrative reviews and does not 

account for other important criteria that 

the State agency may identify or items 

that may be identified through public 

comments. To estimate the potential 

number of follow-up reviews, FNS 

forms 640A and 640B were analyzed to 

group reviewed SFAs by the number of 

error flags triggered during 

administrative reviews in SY 2018– 

2019. The methodology of this flag 

count analysis has been updated since 

the 2020 proposed rule to reduce the 

margin of error in the flag counts for SY 

2018–19 data. 

Forms 640A and 640B document 

administrative review findings, 

including types of errors found during 

the review. For this analysis, a flag was 

assigned to unique SFAs per type of 

error, not for every error found (Table 

6). SFAs with any application errors (for 

example missing child or household 

name or income information) were 

assigned an error flag for applications, 

the same process was done for SFAs 

with certification benefit issuance errors 

(for example, during a review, a 

sampled student was approved for free 

meals but was not eligible). SFAs with 

a fiscal action amount that was not 

disregarded were assigned a fiscal 

action error flag. SFAs were also 

assigned an error flag if they triggered 

the risk flag for the resource 

management errors (nonprofit school 

food service account, Paid Lunch 

Equity, revenue from nonprogram foods, 

and indirect costs) or served meals 

missing components. 

TABLE 6—NUMBER OF SFAS BY ERROR FLAG

[SY 2018–19 Reviews] 

Total SFAs reviewed No error flags Application 

error flags 

Certification 

benefit error 

flag 

Fiscal action 

taken flag 

Resource 

management 

flag 

Incomplete 

meal error flag 

5,972 ........................................................ 1,289 869 874 411 3,845 663 

TABLE 7—NUMBER OF SFAS BY ERROR FLAGSY 2018–19 REVIEWS

Number of error flags Count of SFAs 

Percent of SFAs 

reviewed by 

number of flags 

(percent) 

0 ....................................................................................................................................................... 1,289 21.6 

1 ....................................................................................................................................................... 3,241 54.3 

2 ....................................................................................................................................................... 1,002 16.8 

3 ....................................................................................................................................................... 354 5.9 

4 ....................................................................................................................................................... 76 1.3 

5 ....................................................................................................................................................... 10 0.2 

The number of SFAs by type of error 

flag is presented in Table 6. Similarly, 

the number of SFAs reviewed by total 

number of error flags is in Table 7. It is 

important to note this analysis does not 

consider the magnitude of a particular 

error, just the presence of an error found 

during an administrative review. 


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5Based on reported wage rate for State and local 

government sector management, professional, and 

related workers from the Bureau of Labor Statistics’ 

‘‘Table 3. State and local government workers by 

occupational and industry group’’ database (https:// 

www.bls.gov/news.release/ecec.t03.htm). For FY 

2022 (September), the total compensation per hour 

for these positions averaged $67.96 per hour. We 

inflate this figure through FY 2029 with projected 

growth in the State and Local Expenditure Index 

prepared by OMB for use in the FY 2024 President’s 

Budget. 

6Twenty-one States reported information about 

ten of their appeals of a Notice of Proposed 

Termination during the 2010 and the 2011 Targeted 

Management Evaluations (TMEs). More recent data 

on delay times are not available. 

TABLE 8—ANNUAL AND 5-YEAR COST DIFFERENCE OF OPTIONAL 5-YEAR ADMINISTRATIVE REVIEW CYCLE & TARGETED, 

FOLLOW-UP REVIEWS FOR HIGH-RISK SFAS

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

¥$3.3 ................................................................................... ¥$3.4 ¥$3.5 ¥$3.6 ¥$3.7 ¥$17.4 

Based on the projected number of 

reviews in a 5-year cycle compared to a 

3-year cycle (Table 5), there would be 

about 2,244 fewer annual reviews 

conducted under this proposed change 

assuming about 7 percent of SFAs with 

3 or more flags require follow-up review 

(Table 7). This reduction in reviews 

leaves the potential for issues to 

continue for additional years. However, 

the targeted nature of the follow-up 

review, in both selection and scope, 

would aim to redirect resources to fixing 

program issues and providing the 

necessary technical assistance that is 

currently difficult to do for some 

resource-strapped States under the 

current 3-year cycle. 

This final rule also amends NSLP 

regulations to change frequency of food 

service management company review 

from 3-year to 5-year cycle, in alignment 

with the changes to the administrative 

review cycle. State agencies would still 

be allowed to review SFAs contracting 

with food service management 

companies more frequently if they 

choose. 

An overall decrease in burden hours 

(-42,760 hours) is expected for moving 

from a 3-year to a 5-year review cycle. 

The targeted nature of the follow-up 

reviews are intended to be more directly 

focused on noncompliance and highrisk areas and therefore be less 

burdensome than the initial review. 

This aids in streamlining the review 

procedures while balancing the need to 

quickly resolve program errors and the 

importance of addressing 

noncompliance in high-risk SFAs. This 

is intended to help State and local 

operators focus resources on technical 

assistance and technology to improve 

Program operations. 

These changes are anticipated to save 

$17.4 million over 5 years, calculated by 

multiplying the total burden hour 

reduction over 5 years by projected 

2025–2029 management and 

professional wages according to BLS.5

The savings shown in Table 8 isolates 

the cost impact specific to this provision 

and are factored into total reporting and 

recordkeeping cost impacts in Table 10. 

The change in estimate from the 2020 

proposed rule is largely due to the 

change in reporting and recordkeeping 

burden estimates (from –171,330 hours) 

according to the NSLP ICR, along with 

state and local government occupation 

wage increases over recent years. 

Fines for Violating CN Program 

Requirements: This provision is 

expected to be in effect by 2025. FNS 

stresses that the statutory authority 

conferred on State administering 

agencies to impose fines on SFAs will 

be used rarely and only against 

egregious and repeat violators of 

program rules. For example, fines may 

be warranted to address a serious 

violation, such as the deliberate 

destruction of records or the deliberate 

misappropriation of program funds. 

Fines would not be warranted for 

routine problems, such as a menu 

planning or meal pattern violation or a 

recordkeeping or resource management 

error, which can be corrected with State 

agency oversight and technical 

assistance. 

A fine would never replace 

established technical assistance, 

corrective action, or fiscal action 

measures to solve commonplace or 

unintentional problems. Rather, the 

assessment of fines provides a new 

accountability tool for FNS and State 

agencies to use when there are severe or 

repeated non-criminal violations—the 

types of programs abuses that seriously 

threaten the integrity of Federal funds or 

significantly impair the delivery of 

service to eligible students. Each 

situation is different, and FNS and State 

agencies, in consultation with their legal 

counsel, will carefully consider whether 

a fine is the appropriate response. 

USDA expects that the risk of more 

substantial financial penalties will 

further reduce the already low 

incidence of severe or repeated 

violations, making the need to exercise 

the authority under the rule 

unnecessary, except in extreme 

circumstances. 

Similarly, we do not expect this 

statutory authority to result in 

substantial fines by USDA against State 

agencies. The authority to impose fines 

against State agencies places additional 

pressure on those agencies to reduce the 

incidence of severe mismanagement and 

repeat violations of program rules at the 

provider and sponsor levels. The 

expected effect of this authority is 

increased vigilance by State 

administrators against exceptional 

mismanagement at the provider and 

sponsor levels. 

State Liability for Payments to 

Aggrieved Child Care Institutions: This 

provision is expected to be in effect by 

2025. The data collected in the 2010 and 

the 2011 Targeted Management 

Evaluations (TMEs), an instrument used 

by USDA to monitor State agency 

compliance with CACFP regulation, 

provides some of the measures used in 

estimating the impact of this provision. 

Twenty-one States 6 reported the 

average number of days elapsed 

between the State agency’s receipt of an 

institution’s request for a hearing and 

the date of the hearing official’s decision 

on their 2010 and 2011 TMEs. Ten 

percent of those States reported no 

requests for hearings; 33 percent 

reported averages of 60 days or less; 19 

percent reported averages between 61 

and 90 days; and 38 percent reported 

averages over 91 days. This data show 

that in the absence of a financial 

penalty, 43 percent of the States 

reporting information either had no 

appeals or provided a determination 

within the 60-day timeframe. 

We expect that increased monitoring 

by FNS and a shift in the responsibility 

for program payments to the States will 

encourage the States to resolve 

administrative reviews within the 

established regulatory timeframe of 60 

days. Although the provision is 

intended to speed the processing of 

administrative reviews, it is not 

intended or expected to add 

significantly to the States’ cost of 


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57820 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

7 ‘‘Professional Standards for State and Local 

School Nutrition Programs Personnel as Required 

by the Healthy, Hunger-Free Kids Act of 2010,’’ 

Federal Register Vol 80, No. 40 (March 2, 2015), p. 

11077–11096. 

handling those reviews. Procurement 

Training Requirement for State Agency 

and SFA Staff: The CNI final rule 

requires State directors of school 

nutrition programs, State directors of 

distributing agencies, and school 

nutrition program directors, 

management, and staff who work on 

NSLP procurement activities to 

successfully complete procurement 

training annually. The required training 

would cover the procurement topics 

specified in subsection 210.21(h). 

FNS expects that State Agencies and 

SFAs will integrate this training 

requirement into their current training 

curriculums required under the 

Professional Standards Rule,7 with no 

additional annual training hours 

required on average. Furthermore, the 

final rule preamble notes that State 

agencies may use SAE funds to pay for 

the costs of receiving or delivering 

annual NSLP procurement training. 

This is expected to be implemented by 

2025. 

Performance-based Reimbursement 

Quarterly Report: This proposed change 

would reduce, from quarterly to 

annually, the frequency of a State 

Agency report on the status of SFAs 

certified for the performance-based 

reimbursement. As of February 2019, 99 

percent of SFAs are certified to receive 

the performance-based reimbursement. 

This change responds to feedback from 

the Child Nutrition Program Reducing 

Burden Study; State agencies requested 

USDA to review the reporting 

requirements and determine areas to 

streamline reporting. USDA currently 

receives a count of the monthly number 

of lunches receiving the performancebased reimbursement on the Report of 

School Meal Operations (form FNS–10) 

from States. 

The reduced frequency of the 

quarterly certification report aims to 

enable State and local Program 

operators to direct resources to maintain 

effective and efficient program 

operations while still providing USDA 

the necessary information on SFA 

certification. Along with the monthly 

FNS–10 reporting, the annual update 

will be sufficient for USDA to track the 

status of SFA certification. This change 

slightly decreases the burden hours 

associated with moving the frequency of 

reporting from quarterly to annually. 

This is a small reduction of 42 annual 

burden hours, which is about $3,000 

annually. This is expected to be 

implemented by 2025. 

Standard Agreements Between 

Sponsoring Organizations and 

Sponsored Centers: This provision is 

already in effect. The State Agency must 

develop/revise and provide a 

sponsoring organization agreement 

between sponsor and facilities, which 

must have standard provisions. 

Sponsoring organizations must enter 

into permanent agreements with their 

unaffiliated centers and annually 

provide State agencies with bank 

account activity against other associated 

records to verify that the transactions 

meet program requirements. FNS 

estimates that there are 18,601 

sponsoring organizations that are 

businesses, each of which will submit 1 

month’s bank statement to their State 

agency. 

The terms of the standard agreement 

adds requirements of centers to allow 

visits by sponsoring organizations or 

State Agencies to review meal service 

and records, promptly inform sponsors 

about any change in licensing or 

approval status, meet any State agency 

approved time limit for submissions of 

meal records, and distribute to parents 

a copy of the sponsoring organization’s 

notice to parents if directed by the 

sponsor. This provision contributes 

5,646 additional burden hours that are 

accounted for in the projected reporting 

and recordkeeping costs (Table 10). 

Elimination of the Annual 

Application for Institutions: This 

provision has already been 

implemented. This final rule codified 

elimination of the requirement for 

renewing institutions to submit an 

annual application for renewal; 

however, these institutions must 

demonstrate that they are capable of 

operating the Program in accordance 

with this part as set forth in § 226.6b(b) 

by reviewing annual certification of an 

institution’s eligibility to continue 

participating in CACFP (replaces the 

renewal application process). Therefore, 

a total of 3,005 burden hours associated 

with the renewing institutions to submit 

an annual application has been removed 

because of this rule. This difference is 

included in Table 10. 

Collection and Transmission of 

Household Income Information: This 

provision is already in effect. This final 

rule codifies the right of tier II day care 

homes to assist in collecting meal 

benefit forms from households and 

transmitting the forms to the sponsoring 

organization on the household’s behalf. 

If a tier II day care home elects to assist 

in collecting and transmitting the 

applications to the sponsoring 

organization, sponsoring organizations 

must establish procedures to ensure the 

provider does not review or alter the 

application. The burden associated with 

this is 5,199 hours, which are accounted 

for in the projected reporting and 

recordkeeping costs in Table 10. This 

provision has been a standard operating 

practice for sponsoring organizations of 

day care homes since 2011. 

Carryover of Administrative Funding 

for Sponsoring Organizations of Day 

Care Homes: This provision is already 

in effect. The final rule codifies 

allowing sponsoring organizations of 

day care homes to carry over up to 10 

percent of unspent administrative 

reimbursement from the current federal 

fiscal year to the next fiscal year. The 

sponsoring organizations of day care 

homes seeking to carry over 

administrative funds must submit an 

amended budget, to include an estimate 

of requested administrative fund 

carryover amounts and a description of 

proposed purpose for which those funds 

would be obligated or expended. 

The State agency must review the 

budget and supporting documentation 

prior to approval, for sponsoring 

organizations of day care homes seeking 

to carry over administrative funds. The 

State agency must establish procedures 

to recover administrative funds from 

sponsoring organizations of day care 

homes that are not properly payable 

under FNS Instruction 796–2, 

administrative funds that are in excess 

of the 10 percent maximum carryover 

amount, and carryover amounts that are 

not expended or obligated by the end of 

the fiscal year following the fiscal year 

in which they were received. This 

provision is codifying standard 

operating practice. The burden 

associated with this is 1,462 hours, 

which are accounted for in the projected 

reporting and recordkeeping costs in 

Table 10. 

Remaining Provisions: The CNI final 

rule’s remaining provisions are expected 

to have only modest impacts on State 

agency or sponsor administrative costs. 

State agency and sponsor 

responsibilities under these provisions 

are limited largely but not entirely to 

improved documentation. 

The following provisions will likely 

have no costs or negligible cost impacts: 

1. Varied Timing of Reviews 

Conducted by CACFP Sponsoring 

Organizations 

(a) Program impact: Reviews are more 

effective at ensuring program integrity 

when they are unannounced and 

unpredictable. Sponsoring organization 

are already required to conduct two 

unannounced reviews out of 3 reviews 

per year in a manner that makes the 

reviews unpredictable to sponsored 

facilities. One of the unannounced 

reviews must include observation of a 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 57821 

meal service. This provision requires 

the timing of the mandatory 

unannounced reviews and type of meal 

serviced reviewed to vary and is already 

in effect. 

(b) Cost Impact: We estimate no 

change in cost associated with this 

provision. This change merely requires 

sponsors to vary the timing of 

unannounced reviews but does not 

impact the frequency. This provision 

has also been a standard operating 

practice for sponsoring organizations 

and State agencies since 2011. 

2. Fiscal Action for Meal Pattern 

Violations 

(a) Program impact: This provision 

gives State agencies the discretion to 

take fiscal action against SFAs for 

repeated violations of milk type and 

vegetable subgroup requirements, 

instead of requiring fiscal action. This 

amendment aligns with State’s existing 

discretion to take fiscal action for 

repeated violations concerning food 

quantities, whole grain-rich foods, and 

the dietary specifications. 

(b) Cost Impact: We estimate no 

change in cost associated with this 

provision. Fiscal action will be at the 

discretion of the State agencies, instead 

of required. Waivers have been in place 

during the COVID–19 public health 

emergency to allow for State agency 

discretion for meal pattern violations, 

and we expect this provision to be fully 

implemented by 2025. 

3. NSLP Resource Management 

Module 

(a) Program impact: Flexibility and 

discretion is allowed to State agencies 

in this provision. FNS will no longer 

require that this assessment take place 

off-site before the administrative review. 

Although the State agency should make 

this assessment in the school year that 

the review began, completion of the 

resource management module may 

occur before, during, or after the on-site 

portion of the administrative review. 

(b) Cost Impact: We estimate no 

change in cost associated with this 

provision. This does not change 

frequency or burden of conducting 

assessment of SFA’s nonprofit school 

food service account. This provision 

merely allows State agencies to 

complete the assessment of an SFA’s 

nonprofit school food service account 

and to conduct the resource 

management module at any point in the 

review process. 

4. Buy American Review 

(a) Program impact: Program 

regulations under 7 CFR 210.21(d) and 

7 CFR 220.16(d) describe requirements 

SFAs to purchase, to the maximum 

extent practicable, domestic 

commodities or products, and State 

agencies already review this provision 

as a part of the administrative review. 

However, Buy American is not currently 

included in regulation as part of the 

general areas of the administrative 

review. FNS proposed including 

compliance with the Buy American 

requirements as a general area of review, 

under 7 CFR 210.18(h)(2), that State 

agencies must monitor when they 

conduct administrative reviews. 

(b) Cost Impact: We estimate no 

change in cost associated with this 

provision. Existing Guidance is codified 

and modifies the technical definition of 

‘‘General Areas’’ in this provision with 

no practical change in current program 

operations. 

5. State Administrative Expense 

Funds 

(a) Program impact: This amendment 

updated regulatory language that would 

require State agencies to return any 

unobligated SAE funds—instead of 

unexpended—to give State agencies 

more flexibility to spend their funds. 

(b) Cost Impact: We estimate a 

negligible change in cost associated 

with this provision by 2025. The 

regulatory language increases flexibility 

of State agencies to utilize their SAE 

funds but is not expected to have 

measurable impacts on the amount of 

funds returned. Between 2018 and 2021 

unobligated SAE funds ranged from 

approximately 1 to 3 percent. 

6. Administrative Payment Rates to 

Sponsoring Organizations for Day Care 

Homes 

(a) Program impact: This rule amends 

7 CFR 226.12(a) to simplify the 

calculation of monthly administrative 

reimbursement that sponsoring 

organizations of day care homes are 

eligible to receive. To determine the 

amount of payment, the State agency 

must multiply the appropriate 

administrative reimbursement rate, 

which is announced annually in the 

Federal Register, by the number of day 

care homes submitting claims for 

reimbursement during the month. This 

provision has been a standard operating 

practice for State agencies since 2010. 

(b) Cost Impact: Existing practice is 

codified. We estimate a negligible cost 

(104 hours) of this provision that is 

accounted for in projected reporting and 

recordkeeping costs (Table 10). 

The following are provisions that may 

have minor, non-quantifiable 

administrative impacts: 

(1) NSLP Integrity-focused Process 

improvements 

(a) Program impact: The 

administrative review process is an 

integral part of program integrity but is 

burdensome to State agency staff and 

resources. Impacts of this rule include 

FNS seeking out input to develop a 

series of optional process reforms. The 

process improvements would give State 

agencies more flexibility to satisfy parts 

of the administrative review and reduce 

or eliminate human errors. State 

agencies will require FNS approval of 

process reforms. 

(b) Cost Impact: This provision may 

incur minor potential future costs that 

are not quantifiable at the time of this 

rule, but USDA does not expect these 

costs to be material. 

(2) NSLP Third-party Audits 

(a) Program impact: With FNS 

approval, third party audits may be used 

in lieu of reviewing the same 

information on an administrative 

review. This will give State agencies 

more flexibility to satisfy parts of the 

administrative review and limit 

needless duplication through activities 

they already perform if the audit activity 

complies with the same standard that 

govern the federal single audit. 

(b) Cost Impact: The variation in what 

is used to satisfy parts of an 

administrative review is too wide to be 

able to quantify. 

(3) Completion of Review 

Requirements Outside of the 

Administrative Review 

(a) Program impact: With FNS and 

regional office approval, State agencies 

are allowed to satisfy sections of the 

administrative review through 

equivalent State oversight activities that 

take place outside of the formal 

administrative review process. This 

gives State agencies more flexibility and 

limits redundancies to satisfy parts of 

the administrative review through 

activities they already perform. 

(b) Cost Impact: This provision will 

have minimal administrative savings 

that are not quantified. 

Management Information System 

(MIS) Upgrade Costs: FNS expects that 

SAs, SFAs, SFSP and CACFP program 

operators will be able to implement the 

vast majority of the provisions of the 

rule with no changes to their current 

management information systems (MIS) 

or information technology (IT) 

infrastructure. 

However, FNS acknowledges that this 

will not be universally true, and that 

some SAs, SFAs, SFSP, and/or CACFP 

program operators may incur some onetime and/or ongoing IT costs to be able 

to implement the required provisions of 

the rule. In most cases, FNS expects 

these additional IT costs to be marginal 

or minimal, and that most or all of the 

additional costs to SAs, SFAs, SFSP, 

and CACFP program operators will be 

administrative, as estimated elsewhere 

in this document. 


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57822 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

8Based on reported wage rate for State and local 

government sector management, professional, and 

related workers from the Bureau of Labor Statistics’ 

‘‘Table 3. State and local government workers by 

occupational and industry group’’ database (https:// 

www.bls.gov/news.release/ecec.t03.htm). For FY 

2022 (September), the total compensation per hour 

for these positions averaged $67.96 per hour. We 

inflate this figure through FY 2029 with projected 

growth in the State and Local Expenditure Index 

prepared by OMB for use in the FY 2024 President’s 

Budget. 

Two of the finals rule’s 

requirements—that CACFP 

administering SAs must annually 

review at least one month’s bank 

account activity of all sponsoring 

organizations against documents 

adequate to support that the financial 

transactions meet Program 

requirements, and that CACFP 

administering SA’s must annually 

review actual expenditures reported of 

Program funds and the amount of meal 

reimbursement funds retained from 

unaffiliated centers to support the 

sponsoring organization’s 

administrative costs—have the potential 

to incur larger costs to the respective 

SAs, as these provisions may require 

those SAs to integrate new functions 

into their MIS. 

FNS does not have information 

specifically on the cost to SAs to make 

changes to their CACFP MIS, but an 

internal FNS data collection from all 

NSLP/SBP SAs on the 2016–2017 

school year provides some information 

on MIS costs to SAs running NSLP/SBP, 

and this is the best proxy we have 

available for potential costs for a CACFP 

MIS. This data collection found that 

only a couple of complex modules 

(menu planning and direct certification/ 

matching) tend to cost more than 

$500,000 to develop, while less complex 

modules (e.g., federal reporting, nutrient 

analysis, financial management for 

SFAs, and professional standards 

training) tend to cost less than $100,000. 

We assume that the requirements of this 

rule are of the less complex nature. 

Similarly, upgrade costs for NSLP/ 

SBP SA modules tended to be greater for 

more complex modules, and less for less 

complex modules. However, between 

20% and 50% of SAs reported no direct 

costs to the SA when upgrading 

modules, so some SAs may be able to 

absorb these functions into their 

existing MIS maintenance with no 

additional costs beyond costs already 

budgeted for planned maintenance. 

Given this wide variation in MIS 

development and maintenance costs, 

FNS is providing both a point estimate 

and range for possible costs for MIS 

upgrades required to implement the 

provisions of the CNI final rule. The 

lower-bound estimate of MIS costs is $0 

per SA, if SAs are able to absorb these 

functions into their MIS as part of their 

existing MIS modules and/or 

maintenance schedule. 

At the upper-bound, it is possible that 

a SA may have to develop a new 

module for reviewing bank account 

activity and may have to upgrade their 

existing module for reviewing sponsors’ 

expenditures. If we assume that the new 

module costs $100,000, and upgrading 

an existing module costs $50,000, then 

our initial upper-bound estimate would 

be $150,000 per SA for initial 

development/upgrade costs. Average 

annual maintenance fees for NSLP/SBP 

SA MIS are approximately $225,000 per 

year; if we assign 5% of these costs to 

the new rule, then we have an average 

annual maintenance cost of $11,250 per 

SA that we assign to this final rule. 

For an intermediate point estimate 

(which we present as our primary 

estimate), FNS expects that SAs will be 

able to implement the requirements of 

this rule with a single upgrade to an 

existing module. FNS assumes the cost 

of this upgrade will be $50,000 per SA, 

and the annual maintenance cost of this 

upgrade will be an additional $1,000 per 

SA above SAs’ baseline MIS 

maintenance costs. Table 9 presents 5- 

year estimates of the cost ranges 

(including inflation). 

TABLE 9—MIS UPGRADE COSTS TO CACFP ADMINISTERING SAS

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

Primary Estimate .............................................................. $2.9 $0.1 $0.1 $0.1 $0.1 $3.1 

Lower-Bound Estimate ..................................................... 0.0 0.0 0.0 0.0 0.0 0.0 

Upper-Bound Estimate ..................................................... 9.1 0.7 0.7 0.7 0.6 11.6 

However, establishing and 

maintaining information systems 

required for the management of Child 

Nutrition Programs is an allowable cost 

covered by SAE funds. In addition, once 

all CACFP audits are funded, CACFP 

audit funds may be used for systems 

improvements reasonably connected to 

monitoring, oversight, and maintaining 

the operational integrity for the CACFP. 

Therefore, SAs may use these funds to 

cover costs to update their State systems 

as a result of changes in Program 

requirements due to this final rule. If 

SAs apply for and receive additional 

audit funding to make the MIS upgrades 

and maintenance necessary for these 

provisions, the net MIS cost to SAs 

because of this final rule could be $0, 

depending on the cost of the upgrades 

and the availability of additional audit 

funding. Furthermore, USDA regularly 

makes available a variety of competitive 

grants that could further defray these 

potential cost increases for SAs (e.g., 

Administrative Review and Training 

Grants and Technology Innovation 

Grants). 

Access Impacts—General: Several of 

the CNI final rule’s provisions restrict 

participation by service providers, 

sponsoring organizations, or 

administering officials in USDA’s child 

nutrition programs who violate program 

rules or have otherwise been 

determined to be risks to program 

integrity. 

State Agency Reporting and 

Recordkeeping: As noted above, several 

of the provisions in the CNI final rule 

increase the information collection 

burden on State and local government 

agencies and on businesses (i.e., CACFP 

sponsors and providers). In total, the 

Department estimates that State and 

local government agencies will spend an 

additional 3,869 hours complying with 

the rule’s reporting requirements each 

year, and an additional 4,297 hours on 

recordkeeping. Businesses will spend 

about an additional 13,399 hours 

complying with the rule’s reporting 

requirements. The total increase in 

burden hours is estimated to be 7,536 

hours per year. These estimates, 

prepared in satisfaction of the 

requirements of the Paperwork 

Reduction Act of 1995, are summarized 

in the preamble to the rule. 

We estimate the State agency cost of 

complying with the CNI final rule’s 

information collection requirements by 

applying an average wage for State and 

local government professional 

employees to these additional reporting 

and recordkeeping hours.8 These costs 

are summarized by program in Table 10. 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 57823 

9Review of Management Controls for the Child 

and Adult Care Food Program, available online at 

https://www.usda.gov/oig/webdocs/27601-0012- 

SF.pdf. 

TABLE 10—PROJECTED REPORTING AND RECORDKEEPING COST DIFFERENCES

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

NSLP: 

State and Local Government—Recordkeeping * ...... $0.17 $0.18 $0.18 $0.19 $0.20 $0.92 

State and Local Government—Reporting * .............. ¥$1.36 ¥$1.40 ¥$1.44 ¥$1.49 ¥$1.54 ¥$7.23 

Total ................................................................... ¥1.18 ¥1.22 ¥1.26 ¥1.30 ¥1.34 ¥6.31 

CACFP: 

State and Local Government—Recordkeeping * ...... 0.19 0.19 0.20 0.21 0.21 1.00 

State and Local Government—Reporting * .............. 0.55 0.57 0.59 0.60 0.62 2.93 

Businesses—Reporting * .......................................... 1.12 1.16 1.20 1.24 1.28 6.00 

Total ................................................................... 1.86 1.92 1.98 2.05 2.11 9.93 

SFSP: 

State and Local Government—Recordkeeping * ...... (*) (*) (*) (*) (*) (*) 

State and Local Government—Reporting * .............. (*) (*) (*) (*) (*) 0.04 

Total ................................................................... (*) (*) (*) (*) (*) 0.04 

Total Difference for Final Rule ................... 0.69 0.71 0.73 0.75 0.78 3.65 

* Estimated at less than $10,000. 

Note: Sums may not match due to rounding or to the addition of sums below $10,000 to totals. 

Benefits: The provisions codified in 

the CNI final rule are designed to 

increase program operators’ 

accountability and operational 

efficiency, while improving the ability 

of FNS and State agencies to address 

severe or repeated violations of program 

requirements. The final rule’s 

provisions add new requirements to 

existing reviews of child nutrition 

program sponsors, subject additional 

sponsors to periodic review, and 

increase USDA and State agency 

authority to fine seriously deficient 

sponsors and prohibit their 

participation in CN programs. 

We note the following specific 

benefits of particular provisions of the 

final rule: 

• Extending the administrative review 

cycle: This maximizes operational 

efficiency by relieving time and 

resources for State Agency staff to focus 

reviews on SFAs at risk of integrity 

issues instead of on SFAs without 

management issues. State agency and 

SFA cooperation with one another to 

administer school meal programs is 

central to ensure the delivery of 

nutritional food to school children. The 

Federal funding that supports school 

meal programs (NSLP and SBP) is to be 

used and protected with the highest 

level of integrity by State agencies and 

SFAs. While the administrative review 

enforces accountability of these Federal 

resources, extending to a 5-year review 

allows State agencies to perform reviews 

more effectively, allocate more time and 

resources towards school meal program 

administration, technical assistance, 

and program improvement. 

• Implementation of fines, referred to 

as assessments in the proposed rule: 

This provision provides a new 

accountability tool for FNS and State 

agencies to use when there are severe or 

repeated non-criminal violations—the 

types of programs abuses that seriously 

threaten the integrity of Federal funds or 

significantly impair the delivery of 

service to eligible students. 

• More frequent reviews of childcare 

institutions and adult care institutions 

that are at risk of having serious 

management problems: This will focus 

additional resources on those providers 

who are at greatest risk of intentionally 

or unintentionally violating program 

requirements. State agencies are invited 

to propose alternative approaches for 

determining review priorities in 

consultation with the FNS Regional 

Offices. 

• Additional State agency funding for 

audits of childcare institutions and 

adult care institutions: This provision 

provides States with additional 

resources to audit CACFP providers to 

ensure program integrity and remedy 

potential wrongdoing. FNS continues to 

encourage all State agencies to make 

wider use of SAE along with the 

additional CACFP audit funds to help 

ease any burden. 

• Increased financial oversight of 

sponsoring organizations’ bank account 

activity and reporting requirements: An 

OIG audit 9 found that reviewing bank 

activity (in addition to reviewing 

budgets) would be effective at 

uncovering and preventing misuse of 

funds in a cost-effective manner. 

• Option to carry over unspent 

federal reimbursement into the new 

fiscal year: This provides State agencies 

the flexibility to rollover up to 10 

percent of unspent reimbursement from 

the previous fiscal year into the 

following fiscal year. 

• Fiscal action discretion: This 

provision provides State agencies with 

more discretion on when to apply fiscal 

action for meal pattern violations during 

an administrative review in the School 

Meals programs. The requirement that 

State agencies must take fiscal action 

against SFAs for repeated violations of 

milk type and vegetable subgroup 

violations is removed, allowing states to 

provide assistance and support instead. 

Removing the fiscal action requirement 

increases operational efficiency for State 

agency staff. States are now only 

required to take fiscal action for a 

missing component violation, which is 

in alignment with the DGA rule. 

We are not able to quantify potential 

nutritional benefits stemming from 

increased accountability and 

operational efficiency, nor can we 

quantify the dollar effects of the actions 

and transfers listed above, as we do not 

know the rates or magnitudes of error in 

the population. Many of the changes are 

already in effect and the variation in 

implementation makes it difficult to 

know the percentage of errors that will 


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57824 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

10Note that the discounted transfer streams 

include two components—3 and 7 percent discount 

rates plus the 3.2% inflation rate used to inflate 

future nominal costs. Therefore, the discount rates 

applied to the nominal streams to generate these 

estimates are approximately 6 percent and 10 

percent, respectively. 

be avoided or rectified due to the 

implementation of these provisions. 

Accounting Statement: As required by 

OMB Circular A–4, available at https:// 

www.whitehouse.gov/wp-content/ 

uploads/legacy_drupal_files/omb/ 

circulars/A4/a-4.pdf, we have prepared 

an accounting statement summarizing 

the annualized estimates of benefits, 

costs and transfers associated with the 

provisions of this rule. 

The benefits of the CNI final rule 

include increasing program operators’ 

accountability and operational 

efficiency, while improving the ability 

of FNS and State agencies to address 

severe or repeated violations of program 

requirements. Monetary benefits are not 

quantified in this analysis. 

The costs associated with provisions 

of the final rule are incurred primarily 

by State agencies, program sponsors, 

and SFAs. These include the following, 

only some of which are quantified in 

Table 11 below: 

• The costs of conducting additional 

CACFP sponsor reviews and 

• The cost of reviewing CACFP 

sponsor bank account statements and 

expenditure reports of unaffiliated 

sponsored centers. 

Transfers include distribution of new 

CACFP audit funds from the USDA to 

State agencies (which has been 

quantified), and the return of (or 

reduction in) misappropriated program 

funds and improper payments (which 

has not been quantified). 

TABLE 11—UNDISCOUNTED STREAM OF QUANTIFIABLE COSTS AND TRANSFERS

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

Nominal cost stream to States ........................................ $2.4 ¥$0.4 ¥$0.4 ¥$0.4 ¥$0.4 $0.7 

Nominal cost stream to Businesses ................................ 1.1 1.2 1.2 1.2 1.3 6.0 

Nominal transfer stream: 

low estimate .............................................................. 5.1 5.2 5.4 5.6 5.9 27.2 

high estimate ............................................................ 20.3 20.9 21.7 22.6 23.4 108.9 

Applying 3 percent and 7 percent real 

discount rates to these nominal streams 

gives present values (in 2023 dollars): 10

TABLE 12—DISCOUNTED COSTS AND TRANSFERS

Fiscal year (millions) 

2025 2026 2027 2028 2029 Total 

Discounted cost stream to States: 

3 percent ................................................................... $2.1 ¥$0.3 ¥$0.3 ¥$0.3 ¥$0.3 $0.9 

7 percent ................................................................... 2.0 ¥0.3 ¥0.3 ¥0.3 ¥0.2 0.9 

Discounted cost stream to Businesses: 

3 percent ................................................................... 1.0 1.0 0.9 0.9 0.9 4.7 

7 percent ................................................................... 0.9 0.9 0.8 0.8 0.7 4.1 

Discounted transfer stream: 

low estimate: 

3 percent ............................................................ 4.5 4.4 4.3 4.2 4.1 21.4 

7 percent ............................................................ 4.2 3.9 3.7 3.5 3.3 18.5 

high estimate: 

3 percent ............................................................ 18.0 17.5 17.1 16.7 16.3 85.5 

7 percent ............................................................ 16.7 15.6 14.7 13.9 13.1 74.0 

Table 13 takes the discounted streams 

from Table 12 and computes annualized 

values in FY 2023 dollars. 

TABLE 13—ACCOUNTING STATEMENT

Range Estimate Year dollar 

Discount 

rate 

(%) 

Period covered 

Benefits 

Qualitative: Increased program integrity and accountability. 

Program participants: 

Annualized Monetized ($millions/year) ................................................................. n.a. n.a. n.a. n.a. FY 2025–2029. 


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TABLE 13—ACCOUNTING STATEMENT—Continued 

Range Estimate Year dollar 

Discount 

rate 

(%) 

Period covered 

Costs 

Quantitative: Cost of a subset of administrative expenses related to additional reviews, documentation, reporting, training, recordkeeping, and MIS upgrades. (Only a 

portion of these costs have been estimated.) 

State agencies, SFAs, and Institutions (Businesses): 

Annualized Monetized ($millions/year) ................................................................. n.a $1.0 2023 10 FY 2025–2029. 

1.1 2023 6 

Transfers 

Quantitative: Distribution of CACFP audit funds to State agencies. 

Non-quantified: The return of (or reduction in) misappropriated program funds and improper payments. 

From USDA to State Agencies: 

Annualized Monetized ($millions/year) ................................................................. low 3.7 2023 10 FY 2025–2029. 

4.3 2023 6 

high 14.8 2023 10 

17.1 2023 6 

Regulatory Flexibility Act 

The Regulatory Flexibility Act, 5 

U.S.C. 601–612, requires agencies to 

analyze the impact of rulemaking on 

small entities and consider alternatives 

that would minimize any significant 

impacts on a substantial number of 

small entities. The FNS Administrator 

has certified that this final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

This rulemaking codifies provisions 

designed to increase program operators’ 

accountability and operational 

efficiency, while improving the ability 

of FNS and State agencies to address 

severe or repeated violations of program 

requirements. While this rulemaking 

will affect State agencies, sponsoring 

organizations, school food authorities, 

and day care homes and centers, any 

economic effect will not be significant. 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandate 

Reform Act of 1995 (UMRA), Public 

Law 104–4, establishes requirements for 

Federal agencies to assess the effects of 

their regulatory actions on State, local, 

and tribal governments, and the private 

sector. Under section 202 of UMRA, 

FNS generally must prepare a written 

statement, including a cost-benefit 

analysis, for proposed and final rules 

with ‘‘Federal mandates’’ that may 

result in expenditures to State, local, or 

tribal governments in the aggregate, or 

to the private sector, of $100 million or 

more in any one year. When such a 

statement is needed for a rulemaking, 

section 205 of UMRA generally requires 

FNS to identify and consider a 

reasonable number of regulatory 

alternatives and adopt the least costly, 

more cost-effective or least burdensome 

alternative that achieves the objectives 

of the rulemaking. This final rule 

contains no Federal mandates, under 

the regulatory provisions of title II of 

UMRA, for State, local, and tribal 

governments, or the private sector, of 

$100 million or more in any one year. 

Therefore, this rulemaking is not subject 

to the requirements of sections 202 and 

205 of UMRA. 

Executive Order 12372 

The Child and Adult Care Food 

Program is listed in the Assistance 

Listings under the Catalog of Federal 

Domestic Assistance Number 10.558. 

The Summer Food Service Program is 

listed under No. 10.559. The National 

School Lunch Program and School 

Breakfast Program are listed under No. 

20.555 and 10.553, respectively. They 

are subject to Executive Order 12372, 

which requires intergovernmental 

consultation with State and local 

officials. Since the Child Nutrition 

Programs are State-administered, FNS 

has formal and informal discussions 

with State and local officials, including 

representatives of Indian tribal 

organizations, on an ongoing basis 

regarding program requirements and 

operations. This provides FNS with the 

opportunity to receive regular input 

from State administrators and local 

program operators, which contributes to 

the development of feasible 

requirements. 

Federalism Summary Impact Statement 

Executive Order 13132 requires 

Federal agencies to consider the impact 

of their regulatory actions on State and 

local governments. Where such actions 

have federalism implications, agencies 

are directed to provide a statement for 

inclusion in the preamble to the 

regulations describing the agency’s 

considerations in terms of the three 

categories called for under section 

6(b)(2)(B) of Executive Order 13132. 

FNS has determined that this final rule 

has federalism implications. 

1. Prior Consultation with State and 

Local Agencies: 

FNS has been gathering input from 

National, State, and local community 

partners through a variety of public 

engagement activities. Webinars, 

listening sessions, and town hall 

meetings have helped FNS monitor 

program operations, identify best 

practices, and take into consideration 

requests from States and local program 

operators. Since Child Nutrition 

Programs are State administered, 

federally-funded programs, FNS 

Regional offices have informal and 

formal discussions with State and local 

officials on an ongoing basis regarding 

program implementation and 

performance. Additionally, FNS 

published rulemaking actions to obtain 

formal public comment. 

2. Nature of Concerns and the Need 

to Issue this Rulemaking: 

State agencies and local program 

operators have provided wide support 

for implementing robust integrity 

practices and valuable suggestions for 

improvement. Most of their concerns 

relate to the current serious deficiency 

process as a model for establishing 

procedures in other Child Nutrition 

Programs, fiscal consequences of the 

provisions addressing fines and State 

liability, and the overall impact of 

provisions that may increase 

administrative burden. This rulemaking 

allows FNS to address these concerns 

while meeting statutory obligations. 

3. Extent to Which We Meet These 

Concerns: 


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FNS has made every effort to address 

these concerns, balancing the goal of 

strengthening program integrity against 

the need to minimize administrative 

burden, within the constraints of 

statutory authority. This final rule is 

responsive to public input requesting 

that FNS make improvements to the 

serious deficiency process, limit the 

assessment of fines, and allow 

exceptions in cases involving State 

liability. There will be a 1-year delay to 

provide the additional time stakeholders 

have requested to implement many of 

the provisions. FNS will provide 

guidance and technical assistance to 

State agencies and local program 

operators to ensure the provisions of 

this final rule are implemented 

efficiently and in a manner that is least 

burdensome. 

Executive Order 12988, Civil Justice 

Reform 

This final rule has been reviewed 

under Executive Order 12988, Civil 

Justice Reform. This rulemaking is 

intended to have preemptive effect with 

respect to any State or local laws, 

regulations, or policies which conflict 

with its provisions or which would 

otherwise impede its full 

implementation. This rulemaking is not 

intended to have retroactive effect. Prior 

to any judicial challenge to the 

application of the provisions of this 

rulemaking, all applicable 

administrative procedures must be 

exhausted. 

Civil Rights Impact Analysis 

FNS has reviewed the final rule, in 

accordance with the Department 

Regulation 4300–004, ‘‘Civil Rights 

Impact Analysis’’ to identify and 

address any major civil rights impacts 

the final rule may have on participants 

on the basis of age, race, color, national 

origin, sex, and disability. Due to the 

unavailability of data, FNS is unable to 

determine whether this rule will have 

an adverse or disproportionate impact 

on protected classes among entities that 

administer and participate in the Child 

Nutrition programs. The promulgation 

of this final rule will impact State 

agencies that administer FNS Child 

Nutrition programs and program 

operators by increasing accountability 

and operational efficiency while 

improving the ability of State agencies 

to address severe or repeated violations 

of program requirements. Children and 

adults participating in NSLP, SMP, SBP, 

SFSP, and CACFP may be impacted by 

the final rule if an operating agreement 

in the CACFP or SFSP is terminated. 

However, the FNS Civil Rights Division 

finds that the current mitigation 

strategies outlined in this CRIA provide 

ample consideration to participants’ 

ability to participate in Child Nutrition 

programs. Additionally, the FNS Civil 

Rights Division finds that mitigation 

strategies, such as delaying 

implementation of several provisions to 

allow FNS to evaluate regulatory 

improvements, developing resources, 

and providing technical assistance, may 

lessen the impacts on State agencies and 

program operators. If deemed necessary, 

the FNS Civil Rights Division will 

propose further mitigation to alleviate 

impacts that may result from the 

implementation of the final rule. 

Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 requires 

Federal agencies to consult and 

coordinate with Tribes on a 

government-to-government basis on 

policies that have Tribal implications, 

including regulations, legislative 

comments or proposed legislation, and 

other policy statements or actions that 

have substantial direct effects on one or 

more Indian Tribes, on the relationship 

between the Federal Government and 

Indian Tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian Tribes. 

Tribal representatives were informed 

about this rulemaking during the FNS 

listening session at the meeting of the 

National Congress of American Indians 

in February 2020 and at the tribal 

consultation that took place on May 23, 

2023. FNS anticipates that this 

rulemaking will have no significant cost 

and no major increase in regulatory 

burden on tribal organizations. 

Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(44 U.S.C. Chapter 35; see 5 CFR part 

1320) requires that the Office of 

Management and Budget (OMB) 

approve all collection of information 

requirements by a Federal agency before 

they can be implemented. Respondents 

are not required to respond to any 

collection of information unless it 

displays a current valid OMB control 

number. This final rule will implement 

statutory requirements and policy 

improvements to strengthen 

administrative oversight and operational 

performance of the Child Nutrition 

Programs. As FNS continues to work 

towards improving integrity in these 

programs, this final rule establishes 

criteria and procedures required under 

the Healthy, Hunger-Free Kids Act of 

2010 to help FNS and State 

administering agencies reduce program 

errors of all types, resulting in more 

effective operations and improved 

compliance with program requirements. 

FNS is also using this opportunity to 

codify statutory requirements that are 

designed to improve the administration 

and operational efficiency of the Child 

and Adult Care Food Program, with less 

paperwork. This rulemaking also 

simplifies monitoring requirements in 

the National School Lunch and School 

Breakfast Programs to reduce 

administrative burden by providing 

targeted flexibilities designed to allow 

States to tailor oversight to meet 

program circumstances. 

In accordance with the Paperwork 

Reduction Act of 1995, this final rule 

revises existing information collection 

requirements and contains new 

information collection requirements, 

which are subject to review and 

approval by the Office of Management 

and Budget. These existing 

requirements are currently approved 

under OMB Control Number 0584–0055, 

‘‘7 CFR part 226 Child and Adult Care 

Food Program,’’ expiration date March 

31, 2025, OMB Control Number 0584– 

0280, ‘‘7 CFR Summer Food Service 

Program,’’ expiration date September 

30, 2025, and OMB Control Number 

0584–0006, ‘‘7 CFR part 210 National 

School Lunch Program,’’ expiration date 

July 31, 2023. 

In connection with the proposed rule, 

‘‘Child Nutrition Program Integrity,’’ 

published in the Federal Register on 

March 29, 2016 (Vol. 81, No. 60, page 

17564), USDA submitted an Information 

Collection Request (ICR) discussing the 

information requirements impacted by 

the rule to OMB for review. The final 

rule codifies into regulations many of 

the provisions incorporated under the 

proposed rule, as well as modifies some 

to ensure compliance by State agencies 

and program operators. It also adds 

additional integrity safeguards, 

including incorporating provisions from 

the proposed rules, ‘‘Simplifying Meal 

Service and Monitoring Requirements in 

the National School Lunch and School 

Breakfast Programs’’ and ‘‘Child and 

Adult Care Food Program: Amendments 

Related to the Healthy, Hunger-Free 

Kids Act of 2010.’’ 

The majority of the information 

collection requirements and associated 

burdens will remain the same as 

previously proposed. However, there are 

a few changes in the requirements and 

burden. The revisions to the existing 

information collection requirements and 

the introduction of new information 

collection requirements will result in an 

overall increase in burden hours and 

responses on the State agencies, local 

government, and business respondents 

to this final rule. 


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Therefore, FNS is submitting for 

public comment the changes in the 

information collection burden that 

would result from adoption of the 

proposals in this final rule. These 

burden estimates are contingent upon 

OMB approval under the Paperwork 

Reduction Act of 1995. When the final 

rulemaking information collection 

request is approved, the Department 

will publish a separate notice in the 

Federal Register announcing OMB’s 

approval. 

This is a new information collection, 

assigned OMB Control Number 0584– 

0610 by OMB in August 2016 at the 

proposed rule stage, which is being 

submitted in support of the final rule, 

‘‘Child Nutrition Program Integrity (RIN 

0584–AE08).’’ In connection with the 

proposed rule, ‘‘Child Nutrition 

Program Integrity, published in the 

Federal Register on March 29, 2016 (81 

FR 17564),’’ FNS submitted an ICR 

discussing the information requirements 

impacted by the rule to the Office of 

Management and Budget (OMB) for 

review. 

The final rule codifies many of the 

changes proposed by FNS based on 

amendments to the Richard B. Russell 

National School Lunch Act (NSLA), 

enacted under the Healthy, Hunger-Free 

Kids Act of 2010 (HHFKA), Public Law 

111–296. The final rule incorporates 

provisions from the Child and Adult 

Care Food Program: Amendments 

Related to the Healthy, Hunger-Free 

Kids Act of 2010 Proposed Rule and the 

Simplifying Meal Service and 

Monitoring Requirements in the 

National School Lunch and School 

Breakfast Programs Proposed Rule. The 

information collection associated with 

this rule is necessary to ensure 

compliance with legislative and 

regulatory requirements amended to the 

NSLA and contained in HHFKA. 

Since FNS had requested a new 

information collection at the proposed 

rule stage, due to the information 

collection inventories affected by this 

rulemaking undergoing renewal, the 

proposals outlined in this final rule will 

be captured in a new information 

collection under OMB Control Number 

0584–0610 as an increase to the 

information collection inventory. After 

OMB has approved the information 

collection requirements submitted in 

conjunction with the final rule and the 

current renewals of the impacted 

information collections are completed, 

FNS will merge these requirements and 

their burden into OMB Control Number 

0584–0055, ‘‘7 CFR part 226 Child and 

Adult Care Food Program,’’ expiration 

date March 31, 2025, OMB Control 

Number 0584–0280, ‘‘7 CFR Summer 

Food Service Program,’’ expiration date 

September 30, 2025, and OMB Control 

Number 0584–0006, ‘‘7 CFR part 210 

National School Lunch Program,’’ 

expiration date July 31, 2023. At this 

point, the decreases in burden noted 

throughout this section will be fully 

captured in the burden for the various 

collections. 

Comments on the Paperwork 

Reduction Act section of this final rule 

must be received by October 23, 2023. 

Please send comments to Program 

Monitoring and Operational Support 

Division 1320 Braddock Place, 

Alexandria, VA 22314. For further 

information, please contact Megan 

Geiger, megan.geiger@usda.gov. 

Comments are invited on: (a) Whether 

the proposed collection of information 

is necessary for the proper performance 

of the functions of the agency, including 

whether the information shall have 

practical utility; (b) the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information, 

including the validity of the 

methodology and assumptions used; (c) 

ways to enhance the quality, utility, and 

clarity of the information to be 

collected; and (d) ways to minimize the 

burden of the collection of information 

on those who are to respond, including 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology. 

All responses to this notice will be 

summarized and included in the request 

for OMB approval. All comments will 

also become a matter of public record. 

Title: Child Nutrition Program 

Integrity. 

Form Number: None. 

OMB Control Number: 0584–0610. 

Expiration Date: Not Yet Determined. 

Type of Request: New Collection. 

While OMB assigned an OMB Control 

Number to this collection during the 

proposed rule stage, the collection is not 

yet part of the active information 

collection inventory. 

Abstract: This is a new information 

collection that contains new 

information collection requirements that 

will eventually be incorporated into 

OMB Control Number 0584–0055, ‘‘7 

CFR part 226 Child and Adult Care 

Food Program,’’ OMB Control Number 

0584–0280, ‘‘7 CFR Summer Food 

Service Program,’’ and OMB Control 

Number 0584–0006, ‘‘7 CFR part 210 

National School Lunch Program.’’ This 

new information collection also revises 

existing information collection 

requirements in the same OMB Control 

Numbers that are also impacted by this 

final rule. 

This final rule codifies provisions 

designed to increase program operators’ 

accountability and operational 

efficiency, while improving the ability 

of FNS and State agencies to address 

severe or repeated violations of program 

requirements. This rulemaking impacts 

information reporting, recordkeeping, 

and public notification at the State and 

local government levels (State agencies 

and sponsoring organizations) and at the 

businesses level (sponsoring 

organizations) in the Child and Adult 

Care Food Program (CACFP); at the 

State and local government level (State 

agencies and School Food Authorities 

(SFAs)) in the Summer Food Service 

Program (SFSP); and at the State and 

local government level (State agencies 

and SFAs) in the National School Lunch 

Program (NSLP). 

FNS is using the publication of the 

Child Nutrition Program Integrity final 

rule as an opportunity to additionally 

merge sections of two previously 

published rules that were not finalized 

and codified. This includes the 

Simplifying Meal Service and 

Monitoring Requirements in the 

National School Lunch and School 

Breakfast Programs and Child and Adult 

Care Food Program: Amendments 

Related to the Healthy, Hunger-Free 

Kids Act of 2010. 

In the proposed rule, Simplifying 

Meal Service and Monitoring 

Requirements in the National School 

Lunch and School Breakfast Programs 

(85 FR 4094, January 23, 2020), FNS 

included a number of discretionary 

changes to streamline the administrative 

review process for schools, without 

compromising State agency and school 

food authority efforts to maintain 

accountability and integrity. Through 

the Child Nutrition Program Integrity 

final rule, FNS is taking action to codify 

the proposed changes that impact 

monitoring. These amendments will 

give State agencies greater flexibility, 

eliminate redundancy, and target 

limited State resources to higher risk 

school food authorities. Provisions in 

Simplifying Meal Service and 

Monitoring Requirements in the 

National School Lunch and School 

Breakfast Programs unrelated to 

monitoring and oversight will not be 

finalized in the Child Nutrition Program 

Integrity Final Rule and will instead be 

incorporated in other rulemaking. 

The proposed rule, Child and Adult 

Care Food Program: Amendments 

Related to the Healthy, Hunger-Free 

Kids Act of 2010 (77 FR 21018, April 9, 

2012), included amendments to codify 

statutory requirements designed to 

improve the administration and 

operational efficiency of CACFP, with 


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less paperwork. However, in the 

intervening years since publication of 

the proposed rule, FNS was unable to 

publish a subsequent rulemaking to 

incorporate these amendments into 

CACFP regulations under 7 CFR part 

226. Through the Child Nutrition 

Program Integrity final rule, FNS is 

taking action to codify these statutory 

requirements, which will provide clarity 

and consistency in their 

implementation. FNS will not codify 

any of the discretionary provisions 

included in the proposed rule. 

The changes proposed in the Child 

Nutrition Program Integrity Rule that 

will not be finalized are the requirement 

that SFAs contracting with an FSMC 

can no longer use cost-reimbursable 

contracts, reciprocal disqualification in 

CACFP and SFSP, and serious 

deficiency process and disqualification 

in SFSP and CACFP. FNS will pursue 

a separate rule making for the reciprocal 

disqualification in CACFP and SFSP, as 

well as the serious deficiency process 

and disqualification in SFSP and 

CACFP in response to public comments. 

FNS intends to seek more information 

on the fixed-price contract provision in 

response to information collected 

during the COVID–19 public health 

emergency. 

In total, FNS estimates that the 

changes to the Child Nutrition Program 

requirements as a result of this rule 

decrease the burden for the NSLP 

information collection, OMB Control 

Number 0584–0006, by 14,734 hours; 

increase the burden for the SFSP 

information collection, OMB Control 

Number 0584–0280, by 80.81 hours; and 

increase the burden for the CACFP 

information collection, OMB Control 

Number 0584–0055, by 22,190.72 hours. 

The provisions from the previously 

proposed rules that are included in this 

final rule are related to increasing 

program integrity and codifying 

statutory requirements into regulations. 

In the proposed Child Nutrition 

Integrity Rule, FNS expected 23,113 

responses and 16,060.5 burden hours. 

For this final rule, because of changes 

due to merging this rule with two other 

rules, moving some provisions to 

another rulemaking (on Serious 

Deficiency), and other changes due to 

public feedback, FNS has adjusted the 

burden for this final rule. FNS now 

expects that this final rule will increase 

over that estimated in the proposed rule, 

to 225,205 total responses and 190,924 

total burden hours. 

Below is a summary of the changes in 

the final rule and the accompanying 

reporting, recordkeeping, and public 

notification requirements that will 

impact the burden that these program 

requirements have on State agencies, 

local governments, and businesses. 

Reporting: NSLP 

Affected Public: State Agencies 

The changes proposed in this rule 

will impact the existing reporting 

requirements currently approved under 

OMB Control Number 0584–0006 and 

found at 7 CFR part 210, National 

School Lunch Program. The below 

information provides details regarding 

the reporting changes associated with 

OMB Control Number 0584–0006 as a 

result of the Child Nutrition Program 

Integrity final rule OMB Control 

Number 0584–0610. 

The final rule adjusts a requirement at 

Section 210.18(i)(3) for the State 

agencies to notify the School Food 

Authorities (SFAs) in writing of review 

findings, corrective actions, deadlines, 

and potential fiscal action with grounds 

and right to appeal. FNS estimates that 

56 State agencies will respond, for a 

total of 3,808 responses (56 × 68 = 

3,808). The estimated average number of 

burden hours per response is 8 hours 

resulting in an estimated total annual 

burden hours of 30,464 (3,808 × 8 = 

30,464). FNS estimates that this 

information requirement will have 

30,464 burden hours and 3,808 

responses. Once the requirements and 

burden from this new collection are 

merged into OMB Control Number 

0584–0006 (7 CFR PART 210 

NATIONAL SCHOOL LUNCH 

PROGRAM), FNS estimates that this 

final rule will reduce the burden hours 

by 20,160 hours, from 50,624 to 30,464 

hours. It will also reduce the responses 

by 2,520, from 6,328 to 3,808 responses. 

This reduction is due to a program 

change reducing the frequency of the 

administrative review cycle. 

The final rule amends the 

requirements found at Section 

210.5(d)(2)(ii) (now at Section 

210.5(d)(3)) that SAs submit a quarterly 

report to FNS detailing the 

disbursement of performance-based 

reimbursement to SFAs by changing the 

frequency of the report to annually. FNS 

estimates that there are 56 SAs that will 

each file 1 report annually for a total of 

56 responses (56 × 1 = 56). The 

estimated average number of burden 

hours per response is 15 minutes (0.25 

hours) resulting in an estimated total 

annual burden hours of 14 (56 × 0.25 = 

14). FNS estimates that this information 

requirement will have 14 burden hours 

and 56 responses. The previous burden 

(OMB#0584–0006) was 56 hours, so 

with this final rule, FNS estimates that 

the burden will be reduced by 42 

burden hours. The final rule will also 

reduce the responses by 168, from 224 

to 56 responses. These reductions are 

due to a program change reducing the 

frequency of this report. 

The final rule adds a requirement at 

Section 210.18(c)(2) that State agencies 

with a review cycle longer than 3 years 

must submit a plan to FNS describing 

the criteria that it will use to identify 

high-risk SFAs for targeted follow-up 

reviews. FNS estimates there are 56 SAs 

that will each file 1 report for a total of 

56 responses (56 × 1 = 56). The 

estimated average number of burden 

hours per response is 8 hours resulting 

in an estimated total annual burden 

hours of 488 (56 × 8 = 448). FNS 

estimates that this information 

requirement will have 448 burden hours 

and 56 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0006, FNS estimates that this final 

rule will add 448 hours and 56 

responses to OMB’s inventory due to a 

program change. 

This final rule adds a specific 

requirement to Section 210.21(h), that 

State agencies complete procurement 

training requirements annually. FNS 

estimates that each of the 56 SAs will 

complete procurement training 

requirements annually, for a total of 56 

responses annually (56 × 1 = 56). The 

estimated average number of burden 

hours per response is 1 hour resulting 

in estimated total burden hours of 56 

(56 × 1 = 56). FNS estimates that this 

information requirement will have 56 

burden hours and 56 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will add 56 hours and 56 

responses to OMB’s inventory due to a 

program change. 

Section 210.26(b)(4) requires that 

State agencies notify SFAs of fines and 

specific violations or actions that 

constituted the fine, and of appeal rights 

and procedures, and submit a copy of 

the notice to FNS. FNS estimates that 

each of the 56 State agencies will notify 

SFAs of fines, specific violations, 

actions that constituted the fine, appeal 

rights, and procedures, and submit a 

copy of the notice to FNS 0.09 times, for 

a total of 5.04 notifications annually (56 

× 0.09 = 5.04). The estimated average 

number of burden hours per response is 

3 hours, resulting in estimated total 

burden hours of 15.12 (5.04 × 3 = 15.12) 

FNS estimates that this information 

requirement will have 15.12 burden 

hours and 5.04 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0006, FNS estimates that this final 

rule will add 15.12 hours and 5.04 


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responses to OMB’s inventory due to a 

program change. 

Affected Public: SFAs/Local Education 

Agency Level 

Sections 210.15(a)(3) and 210.18(j)(2) 

require SFAs to submit to the SA a 

written response to reviews 

documenting corrective action taken for 

Program deficiencies. FNS estimates 

3,804 SFAs will each file 1 report 

annually for a total of 3,804 responses 

(3,804 × 1 = 3,804). The estimated 

average number of burden hours per 

response is 8 hours resulting in an 

estimated total annual burden hours of 

30,430 (3,804 × 8 = 30,430). FNS 

estimates that this information 

requirement will have 30,430 burden 

hours and 3,804 responses. Once the 

requirements and burden from this new 

collection are merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will reduce the burden 

hours by 20,290 hours, from 50,720 to 

30,430 hours. It will also reduce the 

responses by 2,536, from 6,340 to 3,804 

responses. This reduction is due to a 

program change reducing the frequency 

of the administrative review cycle. 

Section 210.21(h) requires that SFAs 

complete procurement training 

requirements annually. FNS estimates 

that 19,019 SFAs will complete 

procurement training requirements 

annually, for a total of 19,019 records 

annually (19,019 × 1 = 19,019). The 

estimated average number of burden 

hours per response is 1 hour and 15 

minutes (1.25 hours) resulting in 

estimated total burden hours of 23,774 

(19,019 × 1.25 = 23,774). FNS estimates 

that this information requirement will 

have 23,774 burden hours and 19,019 

responses. Once this requirement and 

its associated burden is merged into 

OMB Control Number 0584–0006, FNS 

estimates that this final rule will add 

23,774 hours and 19,019 responses to 

OMB’s inventory due to a program 

change. 

Section 210.26(b)(5) states that SFAs 

may appeal State agency’s 

determination of violations and fines. 

SFAs must submit to the Stage agency 

any pertinent information, explanation, 

or evidence addressing the Program 

violations identified by the SA. Any 

SFA seeking to appeal the SA 

determination must follow SA appeal 

procedures. FNS estimates that 5 SFAs 

will appeal the State agency’s 

determination of violations and fines, 

for a total of 5 records annually (5 × 1 

= 5). The estimated average number of 

burden hours per response is 8 hours 

resulting in estimated total burden 

hours of 40 (5 × 8 = 40). FNS estimates 

that this information requirement will 

have 40 hours and 5 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will add 40 hours and 5 

responses to OMB’s inventory due to a 

program change. 

Recordkeeping: NSLP 

Affected Public: State Agencies 

Section 210.18(h)(2)(iv) requires each 

SA to ensure that the LEA and SFA 

comply with the nutrition standards for 

all competitive food and maintain 

records documenting compliance. FNS 

estimates that 56 SAs will each 

maintain 68 records annually for a total 

estimated number of records of 3,808 

(56 × 68 = 3,808). The estimated average 

number of burden hours per record is 15 

minutes (0.25 hours) resulting in an 

estimated total annual burden hours of 

952 (3,808 × 0.25 = 952). When OMB 

approves the information collection 

request (ICR) for this final rule, FNS 

estimates that this information 

requirement will have 952 burden hours 

and 3,808 responses. Once the 

requirements and burden from this new 

collection are merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will reduce the burden 

hours by 630 hours, from 1,582 hours to 

952 hours. It will also reduce the 

responses by 2,520, from 6,328 

responses to 3,808 responses. This 

reduction is due to a program change 

from the Final Rule, reducing the 

number of compliance reviews. 

Sections 210.20(b)(6); 

210.18(o)(f)(k)(l)(m); and 210.23(c) 

require the SA to maintain records of all 

reviews and audits (including Program 

violations, corrective action, fiscal 

action, and withholding of payments). 

The currently approved burden for this 

activity is 50,638. FNS estimates that 

there are 56 SAs that will each file 68 

records annually for a total of 3,808 

records (56 × 68 = 3,808). The estimated 

average number of burden hours per 

record is 8.00214 hours resulting in a 

revised estimated total annual burden 

hours of 30,472 hours (3,808 × 8.00214 

= 30,472). When OMB approves the 

information collection request (ICR) for 

this final rule, FNS estimates that this 

information requirement will have 

30,472 burden hours and 3,808 

responses. Once the requirements and 

burden from this new collection are 

merged into OMB Control Number 

0584–0006, FNS estimates that this final 

rule will reduce the burden hours by 

20,166 hours, from 50,638 hours to 

30,472 hours. It will also reduce the 

responses by 2,520, from 6,328 to 3,808 

responses. This reduction is due to a 

program change from the Final Rule, 

reducing the number of compliance 

reviews. 

Sections 210.20(b)(7); 210.19(c); and 

210.18(o) require the SA document 

fiscal action taken to disallow improper 

claims submitted by SFAs, as 

determined through claims processing, 

reviews and USDA audits. FNS 

estimates that there are 56 SAs that will 

each file 68 records annually for a total 

of 3,808 records (56 × 68 = 3,808). The 

estimated average number of burden 

hours per record is 30 minutes (0.50 

hours) resulting in an estimated total 

annual burden hours of 1,904 hours 

(3,808 × 0.5 = 1,904). When OMB 

approves the information collection 

request (ICR) for this final rule, FNS 

estimates that this information 

requirement will have 1,904 burden 

hours and 3,808 responses. Once the 

requirements and burden from this new 

collection are merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will reduce the burden 

hours by 1,260 hours, from 3,164 hours 

to 1,904 hours. It will also reduce the 

responses by 2,520, from 6,328 to 3,808 

responses. The reduction in burden is 

due to a program change from the Final 

Rule, reducing the number of 

compliance reviews. 

Sections 210.18(c–h) require the SA to 

complete and maintain documentation 

used to conduct Administrative 

Reviews. FNS estimates there are 56 

SAs that will each file 68 reports 

annually for a total of 3,808 responses 

(56 × 68 = 3,808). The estimated average 

number of burden hours per response is 

30 minutes (.50 hours) resulting in an 

estimated total annual burden hours of 

1,904 (3,808 × .5 = 1,904). When OMB 

approves the information collection 

request (ICR) for this final rule, FNS 

estimates that this information 

requirement will have 1,904 burden 

hours and 3,808 responses. Once the 

requirements and burden from this new 

collection are merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will reduce the burden 

hours by 1,269 hours, from 3,173 hours 

to 1,904 hours. It will also reduce the 

responses by 2,520, from 6,328 to 3,808 

responses. The reduction in burden is 

due to a program change from the Final 

Rule, reducing the number of 

compliance reviews. 

Section 210.18(c) requires the SA to 

complete and maintain documentation 

used to conduct targeted Follow Up 

Administrative Review. FNS estimates 

there are 56 SAs that will each file 23 

reports annually for a total of 1,288 

responses (56 × 23 = 1,288). The 

estimated average number of burden 

hours per response is 16 hours resulting 


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57830 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

in an estimated total annual burden 

hours of 20,608 (1,288 × 16 = 20,608). 

When OMB approves the information 

collection request (ICR) for this final 

rule, FNS estimates that this 

information requirement will have 

20,608 burden hours and 1,288 

responses. Once this requirement and 

its associated burden is merged into 

OMB Control Number 0584–0006, FNS 

estimates that this final rule will add 

20,608 hours and 1,288 responses to 

OMB’s inventory due to a program 

change. 

Section 210.15(b)(8) requires that 

State agencies maintain records to 

document compliance with the 

procurement training requirements. FNS 

estimates that each of the 56 State 

agencies will maintain 1 record to 

document compliance with the 

procurement training requirements, for 

a total of 56 records annually (56 × 1 = 

56). The estimated average number of 

burden hours per response is 15 

minutes (0.25 hours) resulting in 

estimated total burden hours of 14 (56 

× 0.25 = 14). When OMB approves the 

information collection request (ICR) for 

this final rule, FNS estimates that this 

information requirement will have 14 

burden hours and 56 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will add 14 hours and 56 

responses to OMB’s inventory due to a 

program change. 

Section 210.26(b) requires that State 

agencies maintain records related to 

fines and specific violations. FNS 

estimates that each of the 56 State 

agencies will maintain 0.09 records to 

related fines and specific violations, for 

a total of 5.04 records annually (56 × 

0.09 = 5.04). The estimated average 

number of burden hours per response is 

15 minutes (0.25 hours) resulting in 

estimated total burden hours of 1.26 

hours (5.04 × 0.25 = 1.26). When OMB 

approves the information collection 

request (ICR) for this final rule, FNS 

estimates that this information 

requirement will have 1.26 burden 

hours and 5.04 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0006, FNS estimates that this final 

rule will add 1.26 hours and 5.04 

responses to OMB’s inventory due to a 

program change. 

Affected Public SFAs/LEAs 

Section 210.21(h) requires that SFAs 

maintain document compliance with 

the procurement training requirements. 

FNS estimates that 19,019 SFAs will 

maintain document compliance with 

the procurement training requirements, 

for a total of 19,019 records annually 

(19,019 × 1 = 19,019). The estimated 

average number of burden hours per 

response is 15 minutes (0.25 hours) 

resulting in estimated total burden 

hours of 4,755 hours (19,019 × 0.25 = 

4,755). When OMB approves the 

information collection request (ICR) for 

this final rule, FNS estimates that this 

information requirement will have 4,755 

burden hours and 19,019 responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0006, FNS estimates that 

this final rule will add 4,755 hours and 

19,019 responses to OMB’s inventory 

due to a program change. 

Public Notification: NSLP 

Affected Public: State Agencies 

Section 210.18(m)(1) requires SAs to 

make the most recent final 

administrative review results available 

to the public in an easily accessible 

manner (by posting a summary to the 

SA website and making a copy available 

upon request). FNS estimates there are 

56 SAs that will each file 68 reports 

annually for a total of 3,808 responses 

(56 × 68 = 3,808). The estimated average 

number of burden hours per response is 

15 minutes (0.25 hours) resulting in an 

estimated total annual burden hours of 

952 (3,808 × 0.25 = 952). FNS estimates 

that this information requirement will 

have 952 burden hours and 3,808 

responses. The previous burden (OMB# 

0584–0006) was 1,582 hours and 6,328 

responses. Once this requirement and 

its associated burden is merged into 

OMB Control Number 0584–0006, FNS 

estimates that this final rule results in 

a decrease of 630 burden hours and a 

decrease of 2,520 responses, from 6,328 

responses to 3,808 due to a program 

change reducing the frequency of the 

administrative review. 

Reporting SFSP 

Affected Public: State Agencies 

The changes proposed in this rule 

will impact the reporting burden 

currently approved under OMB Control 

Number 0584–0280 and found at 7 CFR 

part 225, Summer Food Service 

Program. The below information 

provides details regarding the reporting 

changes associated with OMB Control 

Number 0584–0280 as a result of the 

Child Nutrition Program Integrity final 

rule, OMB control number 0584–0610. 

Section 225.6(i) requires that State 

agencies consult with FNS prior to 

taking any action to terminate for 

convenience. This is a new information 

requirement resulting from this final 

rule. FNS estimates that each of the 53 

State agencies will consult with FNS 

once prior to taking any action to 

terminate for convenience, for a total of 

53 consultations (53 × 1 = 53). The 

estimated average number of burden 

hours per notification is 30 minutes (0.5 

hours) resulting in estimated total 

burden hours of 27 (53 × 0.5 = 27). FNS 

estimates that this information 

requirement will have 27 burden hours 

and 53 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0280 (7 CFR Summer Food 

Service Program), FNS estimates that 

this final rule results in an increase of 

27 burden hours and 53 responses due 

to a program change. 

Section 225.18(k) requires that State 

agencies notify SFAs of fines and 

submit a copy of the notice to FNS.FNS 

estimates that each of the 53 State 

agencies will notify SFAs of fines and 

submit a copy of the notice to FNS 0.09 

times, for a total of 4.77 notifications 

annually (53 × 0.09 = 4.77). The 

estimated average number of burden 

hours per response is 3 hours, resulting 

in estimated total burden hours of 14.31 

(4.77 × 3 = 14.31). FNS estimates that 

this information requirement will have 

14.31 hours and 4.77 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0280, FNS estimates that 

this final rule results in an increase of 

14.31 burden hours and 4.77 responses 

due to a program change. 

Section 225.18(k) states that SFAs 

may appeal State agency’s 

determination of fines. SFAs must 

submit to the State agency any pertinent 

information, explanation, or evidence 

addressing the Program violations 

identified by the State agency. Any SFA 

seeking to appeal the State agency 

determination must follow State agency 

appeal procedures.FNS estimates that 5 

SFAs will appeal the State agency’s 

determination of violations and fines, 

for a total of 5 records annually (5 × 1 

= 5). The estimated average number of 

burden hours per response is 8 hours 

resulting in estimated total burden 

hours of 40 (5 × 8 = 40). FNS estimates 

that this information requirement will 

have 40 burden hours and 5 responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0280, FNS estimates that 

the final rule will result in an increase 

of 40 burden hours and 5 responses due 

to a program change. 

Record Keeping: SFSP 

There is no change in burden for the 

record keeping requirements in the 

SFSP due to this rulemaking. 


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Reporting: CACFP 

The changes proposed in this rule 

will impact the existing reporting 

requirements currently approved under 

OMB Control Number 0584–0055 and 

found at 7 CFR part 226, Child and 

Adult Care Food Program. The below 

information provides details regarding 

the reporting changes associated with 

OMB Control Number 0584–0055 as a 

result of the Child Nutrition Program 

Integrity final rule, OMB control 

number 0584–0610. 

Affected Public: State Agencies 

Section 226.4(j) requires State 

agencies to submit a plan to FNS for 

additional audit funding. This is a new 

information requirement resulting from 

this final rule. FNS estimates that on 

average there are 8 State agencies that 

will each file 1 report annually for a 

total of 8 responses (8 × 1=8). The 

estimated average number of burden 

hours per response is 4 hours resulting 

in estimated total burden hours of 32 (8 

× 4 =32). FNS estimates that this 

information requirement will have 32 

hours and 8 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055 (7 CFR part 226 Child and 

Adult Care Food Program), FNS 

estimates that this final rule will add 32 

burden hours and 8 responses to OMB’s 

inventory due to a program change. 

Section 226.6(k)(11)(iii) allows the SA 

to submit, for FNS review, information 

supporting a request for a reduction in 

the State’s liability, a reconsideration of 

the State’s liability, or an exception to 

the 60-day deadline, for exceptional 

circumstances. FNS estimates that on 

average there will be 5 State agencies 

that will each file 1 request annually for 

a total of 5 responses (5 × 1 = 5). The 

estimated average number of burden 

hours per response is 4 hours resulting 

in estimated total burden hours of 20 (5 

× 4 = 20). FNS estimates that this 

information requirement will have 20 

burden hours and 5 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this final rule will add 20 hours and 5 

responses to OMB’s inventory due to a 

program change. 

Section 226.6(b)(4)(ii) requires State 

agencies to consult with FNS prior to 

taking action to terminate for 

convenience. FNS estimates that each of 

the 56 State agencies will consult with 

FNS once per year prior to terminating 

a sponsoring organization for 

convenience, for a total of 56 responses 

annually (56 × 1 = 56). The estimated 

average number of burden hours per 

response is 30 minutes (0.5 hours), 

resulting in estimated total burden 

hours of 28 hours (56 × 0.5 = 28). FNS 

estimates that this information 

requirement will have 28 burden hours 

and 56 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that this final 

rule results in an increase of 28 burden 

hours and 56 responses due to a 

program change. 

Section 226.6(m)(6) requires that State 

agencies conduct reviews every two 

years for sponsoring organizations with 

less than 100 facilities and conduct 

activities other than the CACFP or are 

at risk of having serious management 

problems.FNS estimates that each of the 

56 State agencies will each conduct 20 

reviews for sponsoring organizations 

every two years (nationwide, average 10 

with less than 100 centers and conduct 

activities other than CACFP and average 

10 having serious management 

problems), for a total of 1,120 reviews 

biennially (56 × 20 = 1,120). The 

estimated average number of burden 

hours per response is 4 hours resulting 

in estimated total burden hours of 4,480 

(1,064 × 4 = 4,480). FNS estimates that 

this information requirement will have 

4,480 burden hours and 1,120 

responses. Once this requirement and 

its associated burden is merged into 

OMB Control Number 0584–0055, FNS 

estimates that this results in an increase 

of 4,480 burden hours and 1,120 

responses due to a program change. 

Section 226.7(b)(1) requires that State 

agencies have procedures in place for 

annually reviewing at least one month 

of the sponsoring organization’s bank 

account activity against other associated 

records to verify that the transactions 

meet program requirements.FNS 

estimates that each of the 56 State 

agencies will each have reviewing 

procedures in place to review 

sponsoring organization’s bank account 

activity, for a total of 56 procedures 

annually (56 × 1 = 56). The estimated 

average number of burden hours per 

response is 1 hour resulting in estimated 

total burden hours of 56 (56 × 1 = 56). 

FNS estimates that this information 

requirement will have 56 burden hours 

and 56 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055 (7 CFR part 226 Child and 

Adult Care Food Program), FNS 

estimates that this results in an increase 

of 56 burden hours and 56 responses to 

OMB’s inventory due to a program 

change. 

Section 226.7(b)(1)(ii) requires that 

State agencies have procedures for 

annually reviewing a sponsoring 

organization’s actual expenditures of 

CACFP funds and the amount of meal 

reimbursement funds retained from 

unaffiliated centers. FNS estimates that 

there are 56 State agencies that will each 

have reviewing procedures in place to 

review sponsoring organizations’ 

CACFP funds and meal reimbursement 

funds retained from unaffiliated centers, 

for a total of 56 reviewing procedures 

annually (56 × 1 = 56). The estimated 

average number of burden hours per 

reviewing procedures is 1 hour resulting 

in estimated total burden hours of 56 

(56 × 1 = 56). FNS estimates that this 

information requirement will have 56 

burden hours and 56 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this results in an increase of 56 burden 

hours and 56 responses to OMB’s 

inventory due to a program change. 

Section 226.25(j) requires that State 

agencies notify SFAs of fines and 

submit a copy of the notice to FNS. FNS 

estimates that each of the 56 State 

agencies will notify SFAs of fines and 

submit a copy of the notice to FNS 0.09 

times, for a total of 5.04 notifications 

annually (56 × 0.09 = 5.04). The 

estimated average number of burden 

hours per response is 3 hours, resulting 

in estimated total burden hours of 15.12 

(5.04 × 3 = 15.12). FNS estimates that 

this information requirement will have 

15.12 burden hours and 5.04 responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this final rule results in an increase of 

15.12 burden hours and 5.04 responses 

to OMB’s inventory due to a program 

change. 

Section 226.6(b)(2) requires that State 

agencies review annual certification of 

an institution’s eligibility to continue 

participating in CACFP (which replaces 

the renewal application process). FNS 

estimates that there are 56 State 

agencies that will each have to review 

390 certifications, for a total of 21,840 

reviews annually (56 × 390 = 21,840). 

The estimated average number of 

burden hours per review is 20 minutes 

(.334 hours), resulting in estimated total 

burden hours of 7,295 (21,840 × .334 = 

7,295). When OMB approves the 

information collection request (ICR) for 

this final rule, FNS estimates that this 

information requirement will have 7,295 

burden hours and 21,840 responses. 

Once the requirements and burden from 

this new collection are merged into 

OMB Control Number 0584–0055, FNS 

estimates that this final rule will reduce 

the burden hours by 3,625 hours, from 

10,920 to 7,295 hours. The number of 

responses will remain at 21,840 


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responses. This reduction is the result of 

a program change due to the Final Rule, 

due to the reduced number of hours it 

will take State agencies for this review. 

Section 226.6(m)(3)(ix) requires that 

State agencies assess the timing of each 

sponsoring organization’s reviews of 

day care homes and sponsored centers. 

FNS estimates that there are 56 State 

agencies that will each have to review 

the timing of 390 sponsors, for a total of 

21,840 reviews annually (56 × 390 = 

21,840). The estimated average number 

of burden hours per review is 10 

minutes (.167 hours), resulting in 

estimated total burden hours of 3,640 

(21,840 × .17 = 3,640). FNS estimates 

that this information requirement will 

have 3,640 burden hours and 21,840 

responses. Once this requirement and 

its associated burden is merged into 

OMB Control Number 0584–0055, FNS 

estimates that this final rule results in 

an increase of 3,640 burden hours and 

21,840 responses to OMB’s inventory 

due to a program change. 

Section 226.6(p) requires State 

agencies to develop/revise and provide 

a sponsoring organization agreement 

between sponsor and facilities, which 

must have standard provisions. FNS 

estimates that there are 56 State 

agencies that will each have to develop 

1 agreement, for a total of 56 

agreements, as a one-time burden (56 × 

1 = 56). The estimated average number 

of burden hours per agreement is 6 

hours, resulting in estimated total 

burden hours of 336 (56 × 6 = 336). FNS 

estimates that this information 

requirement will have 336 burden hours 

and 56 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that this 

results in an increase of 336 burden 

hours and 56 responses to OMB’s 

inventory due to a program change. 

Section 226.12(a) requires the State 

agency to multiply the appropriate 

administrative reimbursement rate by 

the number of day care homes 

submitting claims for reimbursement 

during the month, to determine the 

amount of payment that sponsoring 

organizations will receive. FNS 

estimates that there are 56 State 

agencies that will each determine 

payments for 11 sponsors, for a total of 

623 sponsors paid annually (56 × 11 = 

623). The estimated average number of 

burden hours per sponsor’s calculation 

is ten minutes per year (.167 hours), 

resulting in estimated total burden 

hours of 104 (623 × .167 = 104). FNS 

estimates that this information 

requirement will have 104 burden hours 

and 623 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that this 

results in an increase of 104 burden 

hours and 623 responses to OMB’s 

inventory due to a program change. 

Section 226.7(g)(2) requires the State 

agency to review the budget and 

supporting documentation prior to 

approval, for sponsoring organizations 

of day care homes seeking to carry over 

administrative funds. FNS estimates 

that there are 56 State agencies that will 

each review and approve 11 budgets, for 

a total of 623 responses (56 × 11 = 623). 

The estimated average number of 

burden hours per State agency is 1 hour, 

resulting in estimated total burden 

hours of 623 (1 × 623 = 623). FNS 

estimates that this information 

requirement will have 623 burden hours 

and responses. Once this requirement 

and its associated burden is merged into 

OMB Control Number 0584–0055, FNS 

estimates that this results in an increase 

of both 623 burden hours and responses 

to OMB’s inventory due to a program 

change. 

Section 226.7(j) requires each State 

agency to establish procedures to 

recover administrative funds from 

sponsoring organizations of day care 

homes that are not properly payable 

under FNS Instruction 796–2, 

administrative funds that are in excess 

of the 10 percent maximum carryover 

amount, and carryover amounts that are 

not expended or obligated by the end of 

the fiscal year following the fiscal year 

in which they were received. FNS 

estimates that there are 56 State 

agencies that will each establish 1 

procedure, for a one-time burden total of 

56 responses (56 × 1 = 56). The 

estimated average number of burden 

hours per State agency is 2 hours, 

resulting in estimated total burden 

hours of 112 (2 × 56 = 112). FNS 

estimates that this information 

requirement will have 112 burden hours 

and 56 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that this 

results in an increase of 112 burden 

hours and 56 responses to OMB’s 

inventory due to a program change. 

Affected Public: Local Governments 

(Sponsoring Organizations) 

Section 226.7(b)(1) requires 

sponsoring organizations to annually 

provide State agencies with bank 

account activity against other associated 

records to verify that the transactions 

meet program requirements. FNS 

estimates that there are 3,257 

sponsoring organizations that are local 

agencies. Each sponsoring organization 

will submit 1 bank statement to their 

respective State agency, resulting in 

3,257 annual records (3,257 × 1 = 3,257). 

FNS estimates that it will take an 

average of 15 minutes (0.25 hours) per 

response; therefore, this change will 

result in an estimated total burden 

hours of 814 hours annually (3,257 × 

0.25 = 814). FNS estimates that this 

information requirement will have 814 

burden hours and 3,257 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this results in an increase of 814 burden 

hours and 3,257 responses to OMB’s 

inventory due to a program change. 

Section 226.7(b)(1)(i) requires 

sponsoring organizations to provide 

State agency with actual expenditures of 

CACFP funds and the amount of meal 

reimbursement funds retained from 

unaffiliated centers to support the 

sponsoring organization’s 

administrative costs. FNS estimates that 

32 sponsoring organizations will 

provide their State agency with 1 actual 

expenditure of CACFP funds and the 

amount of meal reimbursement funds 

retained from unaffiliated centers, for a 

total of 32 expenditures annually (32 × 

1 = 32). FNS estimates that it will take 

an average of 1 hour per submission; 

therefore, this change will result in an 

estimated total burden hours of 32 hours 

annually (32 × 1 = 32). FNS estimates 

that this information requirement will 

have 32 burden hours and responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this results in an increase of both 32 

burden hours and responses to OMB’s 

inventory due to a program change. 

Section 226.6(b) requires that each 

participating institution submit annual 

updates to continue its participation 

(annual certification of information, 

updated licensing information, and a 

budget). This replaces the renewal 

application process in 226.6(f)(2)(i). 

FNS estimates that there are 3,257 

institutions that will each have 1 annual 

update, for a total of 3,257 updates 

annually (3,257 × 1 = 3,257). The 

estimated average number of burden 

hours per review is 20 minutes (.33 

hours), resulting in estimated total 

burden hours of 1,088 (3,257 × .334 = 

1,088). FNS estimates that this 

information requirement will have 1,088 

burden hours and 3,257 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this final rule will reduce the burden 

hours by 541 hours, from 1,629 to 1,088 

hours. The number of responses will 

remain at 3,257 responses. This 

reduction is due to a program change 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 57833 

from the Final Rule, due to the lower 

amount of time it will take institutions 

to submit updates rather than renewal 

applications. 

Sections 226.6(p), 226.17(e), (f), 

226.17a(f), 226.19(d), and 226.19a(d) 

require that each sponsoring 

organization must enter into permanent 

agreements with their unaffiliated 

centers. FNS estimates that there are 32 

sponsoring organizations that will each 

enter into 10 agreements, for a total of 

320 agreements as a one-time burden 

(32 × 10 = 320). The estimated average 

number of burden hours per review is 

30 minutes (.5 hours), resulting in 

estimated total burden hours of 160 (320 

× .5 = 160). FNS estimates that this 

information requirement will have 160 

burden hours and 320 responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this results in an increase of 160 burden 

hours and 320 responses to OMB’s 

inventory due to a program change. 

Section 226.6(f)(1)(iv) requires 

sponsoring organizations of day care 

homes seeking to carry over 

administrative funds to submit an 

amended budget, to include an estimate 

of requested administrative fund 

carryover amounts and a description of 

proposed purpose for which those funds 

would be obligated or expended. FNS 

estimates that there are 83 sponsoring 

organizations that will each file 1 report, 

for a total of 83 reports (83 × 1 = 83). 

The estimated average number of 

burden hours per report is 1 hour, 

resulting in estimated total burden 

hours of 83 (1 × 83 = 83). FNS estimates 

that this information requirement will 

have 83 burden hours and responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this results in an increase of both 83 

burden hours and responses to OMB’s 

inventory due to a program change. 

Section 226.25 states that SFAs may 

appeal the State agency’s determination 

of fines. SFAs must submit to the State 

agency any pertinent information, 

explanation, or evidence addressing the 

Program violations identified by the 

State agency. FNS estimates that 5 SFAs 

will appeal the State agency’s 

determination of violations and fines, 

for a total of 5 records annually (5 × 1 

= 5). The estimated average number of 

burden hours per response is 8 hours 

resulting in estimated total burden 

hours of 40 (5 × 8 = 40). FNS estimates 

that this information requirement will 

have 40 burden hours and 5 responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

the final rule will result in an increase 

of 40 burden hours and 5 responses to 

OMB’s inventory due to a program 

change. 

Section 226.23(e)(1)(vii) states that if 

a tier II day care home elects to assist 

in collecting and transmitting the 

applications to the sponsoring 

organization, sponsoring organizations 

must establish procedures to ensure the 

provider does not review or alter the 

application. FNS estimates that 83 

sponsoring organizations will establish 

procedures, for a total of 83 records as 

a one-time burden (83 × 1 = 83). The 

estimated average number of burden 

hours per response is 1 hour resulting 

in estimated total burden hours of 83 

(83 × 1 = 83). FNS estimates that this 

information requirement will have 83 

burden hours and responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that the final 

rule will result in an increase of both 83 

burden hours and responses to OMB’s 

inventory due to a program change. 

Affected Public: Businesses 

Section 226.7(b)(1)(i) requires 

sponsoring organizations to annually 

provide State agencies with bank 

account activity against other associated 

records to verify that the transactions 

meet program requirements. FNS 

estimates that there are 18,601 

sponsoring organizations that are 

businesses, each of which will submit 1 

month’s bank statement to their State 

agency for a total of 18,601 annual 

records. FNS expects it will take an 

average of 15 minutes (0.25 hours) for 

the sponsoring organization to report 

their bank activity to the State agency, 

resulting in estimated total burden 

hours of 4,650 (18,601 × 0.25 = 4,650). 

FNS estimates that this information 

requirement will have 4,650 burden 

hours and 18,601 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that the final 

rule will result in an increase of 4,650 

burden hours and 18,601 responses to 

OMB’s inventory due to a program 

change. 

Section 226.7(b) requires that 

sponsoring organizations provide the 

State agency with actual expenditures of 

CACFP funds and the amount of meal 

reimbursement funds retained from 

unaffiliated centers to support the 

sponsoring organization’s 

administrative costs. FNS estimates that 

1,030 sponsoring organizations of 

unaffiliated centers will provide their 

State agency with actual expenditures of 

CACFP funds and the amount of meal 

reimbursement funds retained from 1 

unaffiliated center to support the 

sponsoring organization’s 

administrative costs for a total of 1,030 

annual records (1,030 × 1 = 1,030). FNS 

expects it will take an average of 1 hour 

for the sponsoring organization to report 

CACFP funds and meal reimbursement 

funds to the State agency, resulting in 

an estimated total burden hours of 1,030 

(1,030 × 1 = 1,030). FNS estimates that 

this information requirement will have 

1,030 burden hours and responses. Once 

this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this final rule results in an increase of 

both 1,030 burden hours and responses 

to OMB’s inventory due to a program 

change. 

Section 226.6(b) requires that each 

participating institution submit annual 

updates to continue its participation 

(annual certification of information, 

updated licensing information, and a 

budget). This replaces the renewal 

application process in 226.6(f)(2)(i). 

FNS estimates that there are 18,601 

institutions that will each have 1 annual 

update, for a total of 18,601 updates 

annually (18,601 × 1 = 18,601). The 

estimated average number of burden 

hours per review is 20 minutes (.334 

hours), resulting in estimated total 

burden hours of 6,213 (18,601 × .334 = 

6,138). FNS estimates that this 

information requirement will have 6,213 

burden hours and 18,601 responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

this final rule will reduce the burden 

hours by 3,088 hours, from 9,301 to 

6,213 hours. The number of responses 

will remain at 18,601 responses. This 

reduction is due to a program change 

due to the Final Rule, due to the lower 

amount of time it will take institutions 

to submit updates rather than renewal 

applications. 

Sections 226.6(p), 226.17(e), (f), 

226.17a(f), 226.19(d), and 226.19a(d) 

require that each sponsoring 

organization must enter into permanent 

agreements with their unaffiliated 

centers. FNS estimates that there are 

1,030 institutions that will each enter 

into 10 agreements, for a total of 10,300 

agreements as a one-time burden (1,030 

× 10 = 10,300). The estimated average 

number of burden hours per review is 

30 minutes (0.5 hours), resulting in 

estimated total burden hours of 5,150 

(10,300 × .5 = 5,150). FNS estimates that 

this information requirement will have 

5,150 burden hours and 10,300 

responses. Once this requirement and 

its associated burden is merged into 

OMB Control Number 0584–0055, FNS 

estimates that this final rule results in 


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57834 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

an increase of 5,150 burden hours and 

10,300 responses to OMB’s inventory 

due to a program change. 

Section 226.23(e)(1)(vii) states that if 

a tier II day care home elects to assist 

in collecting and transmitting the 

applications to the sponsoring 

organization, sponsoring organizations 

must establish procedures to ensure the 

provider does not review or alter the 

application. FNS estimates that 540 

sponsoring organizations will establish 

procedures, for a total of 540 records as 

a one-time burden (540 × 1 = 540). The 

estimated average number of burden 

hours per response is 1 hour resulting 

in estimated total burden hours of 540 

(540 × 1 = 540). FNS estimates that this 

information requirement will have 540 

burden hours and responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that the final 

rule will result in an increase of both 

540 burden hours and responses to 

OMB’s inventory due to a program 

change. 

Section 226.6(f)(1)(iv) requires 

sponsoring organizations of day care 

homes seeking to carry over 

administrative funds to submit an 

amended budget, to include an estimate 

of requested administrative fund 

carryover amounts and a description of 

proposed purpose for which those funds 

would be obligated or expended. FNS 

estimates that there are 540 sponsoring 

organizations that will each file 1 report, 

for a total of 540 reports (540 × 1 = 540). 

The estimated average number of 

burden hours per report is 1 hour, 

resulting in estimated total burden 

hours of 540 (1 × 540 = 540). FNS 

estimates that this information 

requirement will have 540 burden hours 

and responses. Once this requirement 

and its associated burden is merged into 

OMB Control Number 0584–0055, FNS 

estimates that the final rule will result 

in an increase of both 540 burden hours 

and responses to OMB’s inventory due 

to a program change. 

Affected Public: Business Level 

(Facilities) 

Section 226.18(b)(12) allows tier II 

day care homes to assist in collecting 

meal benefit forms from households and 

transmitting the forms to the sponsoring 

organization on the household’s behalf. 

FNS estimates that there are 9,321 tier 

II day care homes that will each collect 

and transmit 5.88 forms, for a total of 

54,804 forms annually (9,321 × 5.88 = 

54,804). The estimated average number 

of burden hours per form is five minutes 

(.0835 hours), resulting in estimated 

total burden hours of 4,576 (54,804 × 

.0835 = 4,576). FNS estimates that this 

information requirement will have 4,576 

burden hours and 54,804 responses. 

Once this requirement and its associated 

burden is merged into OMB Control 

Number 0584–0055, FNS estimates that 

the final rule will result in an increase 

of 4,576 burden hours and 54,804 

responses to OMB’s inventory due to a 

program change. 

Recordkeeping: CACFP 

Affected Public: State Agencies 

Section 226.4(j) requires that State 

agencies maintain a plan for additional 

audit funds. FNS estimates that on 

average there are 8 State agencies that 

will each file 1 report annually for a 

total of 8 responses (8 × 1 = 8). The 

estimated average number of burden 

hours per response is 30 minutes (0.5 

hours) resulting in estimated total 

burden hours of 4 (8 × 0.5 = 4). FNS 

estimates that this information 

requirement will have 4 burden hours 

and 8 responses. Once this requirement 

and its associated burden is merged into 

OMB Control Number 0584–0055, FNS 

estimates that the final rule will result 

in an increase of 4 burden hours and 8 

responses to OMB’s inventory due to a 

program change. 

Section 226.6(m)(6) requires that State 

agencies maintain records for reviewing 

Sponsoring organizations with less than 

100 facilities and conduct activities 

other than the CACFP, or are at risk of 

having serious management problems 

every two years. FNS estimates that 

there are 56 State agencies that will each 

maintain 20 records for reviewing 

sponsoring organizations with less than 

100 facilities and conducting activities 

other than the CACFP, for a total of 

1,120 records annually (56 × 20 = 

1,120). The estimated average number of 

burden hours per response is 2 hours 

resulting in estimated total burden 

hours of 2,240 (1,120 × 2 = 2,240). FNS 

estimates that this information 

requirement will have 2,240 burden 

hours and 1,120 responses. Once this 

requirement and its associated burden is 

merged into OMB Control Number 

0584–0055, FNS estimates that the final 

rule will result in an increase of 2,240 

burden hours and 1,120 responses due 

to a program change. 

Annualized Costs 

For the CACFP, given the wide 

variation in MIS development and 

maintenance costs across State agencies, 

FNS estimates a cost of $50,000 per 

State agency to perform system 

upgrades and an additional cost of 

$1,000 per State agency for annual 

maintenance for respondents of this 

final rule ICR. Therefore, as a result of 

the proposals outlined in this final rule, 

FNS estimates that this collection is 

expected to have $2,800,000 in costs 

related to system upgrades and $56,000 

in annual maintenance. As a result of 

the provisions in this final rule, FNS 

estimates that a total of $2,856,000 in 

combined system upgrades and annual 

maintenance costs will be added to the 

currently approved burden for the 

CACFP under OMB Control Number 

0584–0055. 

As a result of the proposals outlined 

in this final rule, FNS estimates that this 

new information collection will have 

46,997 respondents, 225,205 responses, 

and 190,924 burden hours. The average 

burden per response and the annual 

burden hours are explained below and 

summarized in the charts that follow. 

Once the ICR for the final rule is 

approved, the information collection 

requirements and their associated 

burden will be merged into the 

corresponding existing collections. In 

the case of OMB Control Number 0584– 

0006, FNS estimates that this final rule 

will increase the burden by 21,666 

responses from the currently approved 

47,631,996 responses to 47,653,662 and 

will decrease the burden by 14,734 

burden hours from the currently 

approved 9,808,454 hours to 9,793,720. 

It will not change the burden for the 

number of respondents (it will remain at 

115,935). For OMB Control Number 

0584–0280, FNS estimates that this final 

rule will not change the burden for the 

number of respondents (it will remain at 

63,942), but the rule will increase the 

responses by 63 from 391,795 to 391,858 

and will increase the burden by 80.81 

burden hours from the currently 

approved 462,698.97 hours to 

462,779.78. For OMB Control Number 

0584–0055, FNS estimates that this final 

rule will increase the burden by 115,171 

responses from the currently approved 

16,213,093 responses to 16,328,263.76 

and will increase the burden by 

22,190.724 burden hours from the 

currently approved 4,213,210.886 hours 

to 4,235,401.61. It will not change the 

number of respondents (it will remain at 

3,794,949). 

NSLP 

Reporting 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

identified respondent groups include 56 

State agencies and 19,019 School Food 

Authorities that will participate in this 

collection. 

Estimated Number of Respondents: 

19,075. 

Estimated Number of Responses per 

Respondent: 1.41. 


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Estimated Total Annual Responses: 

26,809. 

Estimate Time per Response: 3.18 

hours. 

Estimated Total Annual Burden: 

85,241 hours. 

Recordkeeping 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

identified respondent groups include an 

estimated 56 State agencies and 19,019 

School Food Authorities that will 

participate in this collection. 

Estimated Number of Respondents: 

19,075. 

Estimated Number of Responses per 

Respondent: 1.87. 

Estimated Total Annual Responses: 

35,600. 

Estimate Time per Response: 1.70 

hours. 

Estimated Total Annual Burden: 

60,610 hours. 

Public Notification 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

identified respondent groups include 56 

State agencies that will participate in 

this collection. 

Estimated Number of Respondents: 

56. 

Estimated Number of Responses per 

Respondent: 68. 

Estimated Total Annual Responses: 

3,808. 

Estimate Time per Response: .25 

hours. 

Estimated Total Annual Burden: 952 

hours. 

SFSP 

Reporting 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

identified respondent groups include 53 

State agencies and 5 local governments 

that will participate in this collection. 

Estimated Number of Respondents: 

58. 

Estimated Number of Responses per 

Respondent: 1.08. 

Estimated Total Annual Responses: 

62.77. 

Estimate Time per Response: 1.29 

hours. 

Estimated Total Annual Burden: 

80.81 hours. 

CACFP 

Reporting 

Respondents (Affected Public): State, 

Local, and Tribal Government, For 

Profit, and Non-Profit Businesses. The 

respondent groups include 56 State 

agencies, 3,257 Local governments, 

18,601 sponsoring organizations, and 

9,321 facilities that will participate in 

this collection. 

Estimated Number of Respondents: 

31,235. 

Estimated Number of Responses per 

Respondent: 5.05. 

Estimated Total Annual Responses: 

157,797.04. 

Estimate Time per Response: 0.26 

hours. 

Estimated Total Annual Burden: 

41,795.72 hours. 

Recordkeeping 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

respondent groups include 56 State 

agencies that will participate in this 

collection. 

Estimated Number of Respondents: 

56. 

Estimated Number of Responses per 

Respondent: 20.14. 

Estimated Total Annual Responses: 

1,128. 

Estimate Time per Response: 1.99 

hours. 

Estimated Total Annual Burden: 

2,244 hours. 

OMB Control Number 0584–0006, ‘‘7 

CFR Part 210 National School Lunch 

Program’’ 


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57836 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

REPORTING

Program rule CFR citation Title 

Estimated 

# 

respondents 

Responses 

per 

respondents 

Total 

annual 

records 

Estimated 

avg. # of 

hours per 

response 

Estimated 

total hours 

Current 

OMB 

approved 

burden hrs 

Due to 

program 

change 

Total 

difference 

State Agency Level 

210.18(i)(3) ............. SA notifies SFAs in writing of review findings, corrective actions, deadlines, and potential fiscal 

action with grounds and right to appeal.

56 68 3,808 8.00 30,464 50,624 ¥20,160 ¥20,160 

210.5(d)(3) .............. SAs submit an annual report to FNS detailing the 

disbursement of performance-based reimbursement to SFAs (in FPRS).

56 1 56 0.25 14 56 ¥42 ¥42 

210.18(c)(2) ............ SAs with a review cycle longer than 3-years submit 

a plan to FNS describing the criteria that it will use to identify high-risk SFAs for targeted followup reviews.

56 1 56 8.00 448 0 448 448 

CN Integrity ............. 210.21(h) ................ State agencies must complete procurement training requirements annually. 56 1 56 1.00 56 0 56 56 CN Integrity ............. 210.26(b)(4) ............ SAs must notify SFAs of fine and specific violations or actions that constituted the fine, and of 

appeal rights and procedures; submit a copy of the notice to FNS.

56 0.09 5.04 3.00 15.12 0 15.12 15.12 

State Agency Level Total ............................................................................................................ 56.00 71.09 3,981.04 7.79 30,997.12 50,680.00 ¥19,683 ¥19,683 

School Food Authority/Local Education Agency Level 

210.15(a)(3) & 

210.18(j)(2).

SFA submits to the SA a written response to reviews documenting corrective action for Program 

deficiencies.

3,804 1 3,804 8.00 30,430 50,720 ¥20,290 ¥20,290 

CN Integrity ............. 210.21(h) ................ SFAs must complete procurement training requirements annually. 19,019 1 19,019 1.25 23,774 0 23,774 23,774 CN Integrity ............. 210.26(b)(5) ............ SFAs may appeal SA’s determination of violations 

and fines. SFAs must submit to the State agency any pertinent information, explanation, or evidence addressing the Program violations identified by the SA. Any SFA seeking to appeal the SA determination must follow SA appeal procedures.

5 1 5 8.00 40 0 40 40 

School Food Authority Level Total .............................................................................................. 19,019 1.200 22,828 2.38 54,244 50,720 3,525 3,525 

School Level 

Total Reporting Burden ............................................................................................................... 19,075 1.41 26,809 3.18 85,241 101,400 ¥16,158 (16,158) 

RECORDKEEPING

Program rule CFR citation Title 

Estimated 

# 

recordkeepers 

Records per 

recordkeeper 

Total 

annual 

records 

Estimated 

avg. # of 

hours per 

record 

Estimated 

total hours 

Current 

OMB 

approved 

burden hrs 

Due to 

program 

change— 

rule 

Total 

difference 

A B C = (A * B) D E = (C * D) F G = E¥F 

State Agency Level 

210.18(h)(2)(iv) ....... SA maintains documentation of LEA/SFA compliance with nutrition standards for competitive 

foods.

56 68 3,808 0.25 952 1,582 ¥630 ¥630 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 57837 

210.20(b)(6) & 

210.18(o)(f)(k,l,m) & 210.23(c).

SA maintains records of all reviews and audits (including Program violations, corrective action, fiscal action and withholding of payments). 56 68 3,808 8.00 30,472 50,638 ¥20,166 ¥20,166 

210.20(b)(7) & 

210.19(c) & 210.18(o).

SA maintains documentation of fiscal action taken 

to disallow improper claims submitted by SFAs, as determined through claims processing, reviews, and USDA audits.

56 68 3,808 0.50 1,904 3,164 ¥1,260 ¥1,260 

210.18(c–h) ............ SA completes and maintains documentation used 

to conduct Administrative Review.

56 68 3,808 0.50 1,904 3,173 ¥1,269 ¥1,269 

210.18(c) ................ SA completes and maintains documentation used 

to conduct targeted Follow Up Administrative Review.

56 23 1,288 16.00 20,608 0 20,608 20,608 

CN Integrity ............. 210.15(b)(8) ............ State agencies must maintain records to document 

compliance with the procurement training requirements.

56 1 56 0.25 14 0 14 14 

CN Integrity ............. 210.26(b) ................ State agencies must maintain records to related 

fines and specific violations.

56 0.09 5.04 0.25 1.26 0 1.26 1.26 

State Agency Level Total ............................................................................................................ 56 296 16,581 3.37 55,855 58,557 ¥2,702 ¥2,702 

School Food Authority/Local Education Agency Level 

CN Integrity ............. 210.21(h) ................ School food authorities must maintain document 

compliance with the procurement training requirements.

19,019 1 19,019 0.25 4,755 0 4,755 4,755 

School Food Authority Level Total .............................................................................................. 19,019 1 19,019 0.25 4,755 0 4,756 4,756 

School Level 

0 0 0 0 0 

School Level Total ....................................................................................................................... 0 .................... .................... .................... .................... .................... 0 0 Total Recordkeeping Burden ....................................................................................................... 19,075 1.87 35,600 1.70 60,610 58,557 2,054 2,054 

PUBLIC

NOTIFICATION

Program rule CFR citation Title Form No. Estimated # respondents Responses per respondents Total annual records Estimated avg. # of hours per response Estimated total hours Current OMB approved burden hrs Due to authorizing statute Due to program change— final rule Due to an adjustment Total difference 

A B C = (A * B) D E = (C * D) F G = E ¥ F 

210.18(m)(1) SA must post a summary of the most recent administrative review results of SFAs 

on the SA website and make a copy available upon request.

............ 56 68 3,808 0.25 952.0 1,582.0 ...................... ¥630 .................... ¥630 

State Agency Level Total .............................................. ............ 56 68.00 3,808 0.25 952 1,582 0 ¥630 0 ¥630 

Local Educational Agency/School Food Authority Level 

Total.

............ 0 #DIV/0! 0 #DIV/0! 0 0 0 0 0 0 

School Level Total ................................................................ ............ ...................... ...................... ...................... ................ ...................... ................ ...................... 0 .................... 0 

Total Public Notification Burden .................................... ............ 56 68.00 3,808 0.25 952 1,582 0 ¥630 0 ¥630 

Grand Total for NSLP Due to Final Rule (as 

shown in OMB#0584–0610).

............ 19,075 3.47 66,217 2.22 146,803 0 0 146,803 0 146,803 


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57838 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

OMB Control Number 0584–0280, ‘‘7 

CFR Summer Food Service Program’’ 


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REPORTING

Program rule CFR citation Title 

Estimated 

# 

respondents 

Responses 

per 

respondents 

Total 

annual 

records 

Estimated 

avg. # of 

hours per 

response 

Estimated 

total 

hours 

Current 

OMB 

approved 

burden hrs 

Due to 

program 

adjustment 

Total 

difference 

A B C = (A * B) D E = (C * D) F G = E ¥ F 

State/Local/Tribal Governments 

Integrity .................... 225.6(i) ................... State agency must consult with FNS prior to taking 

any action to terminate for convenience.

53.00 1.00 53.00 0.50 26.50 0.00 26.50 26.50 

Integrity .................... 225.18(k) ................ State agencies must notify SFAs of fines and submit a copy of the notice to FNS. 53.00 0.09 4.77 3.00 14.31 0.00 14.31 14.31 Integrity .................... 225.18(k) ................ SFAs may appeal State agency’s determination of 

fines. SFAs must submit to the State agency any pertinent information, explanation, or evidence addressing the Program violations identified by the State agency. Any SFA seeking to appeal the State agency determination must follow State agency appeal procedures.

5.00 1.00 5.00 8.00 40.00 .................... 40.00 40.00 

State/Local/Tribal Governments Total ......................................................................................... 58 1 63 1.29 81 0 81 80.81 

Businesses (Non-profit Institutions and Camps) 

.................... .................... .................... .................... .................... 0 0.00 0.00 .................... .................... .................... .................... .................... 0.00 0 0 .................... .................... .................... .................... .................... 0.00 0 0.00 

Total Reporting Burden ........................................................................................................ 58 1.08 62.77 1.29 80.81 0.00 81 81 


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57840 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

OMB Control Number 0584–0055, ‘‘7 

CFR Part 226 Child and Adult Care 

Food Program’’ 


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REPORTING

CFR citation Title 

Estimated 

# 

respondents 

Responses 

per 

respondents 

Total 

annual 

records 

Estimated 

avg. # of 

hours per 

response 

Estimated 

total hours 

Current 

OMB 

approved 

burden hrs 

Due to 

program 

change— 

rulemaking 

Total 

difference 

State and Local Government Level 

State Agency 

226.4(j) ...................................... SAs may submit plan to FNS for additional audit funding ......... 8 1 8 4 32 0 32.00 32 226.6(k)(11)(iii) .......................... SA to submit, for FNS review, information supporting a request 

for a reduction in the State’s liability, a reconsideration of the State’s liability, or an exception to the 60-day deadline, for exceptional circumstances.

5 1 5 4 20 0 20.00 20 

226.6(b)(4)(ii) ............................ State agency must consult with FNS prior to any taking action 

to terminate for convenience.

56 1 56 0.50 28 0 28.00 28 

226.6(m)(6) ............................... SAs to conduct reviews every two years for sponsoring organizations with less than 100 facilities and conduct activities 

other than the CACFP or are at risk of having serious management problems.

56 20 1120 4.00 4,480 0 4,480.00 4,480 

226.7(b)(1) ................................ Have procedures in place for annually reviewing at least one 

month of the sponsoring organization’s bank account activity against other associated records to verify that the transactions meet program requirements.

56 1 56 1.00 56 0 56.00 56 

226.7(b)(1)(ii) ............................ State agency must have procedures for annually reviewing a 

sponsoring organization’s actual expenditures of CACFP funds and the amount of meal reimbursement funds retained from unaffiliated centers.

56 1 56 1.00 56 0 56.00 56 

226.25(j) .................................... State agencies must notify SFAs of fines and submit a copy of 

the notice to FNS.

56 0.09 5.04 3.00 15.12 0 15.12 15.12 

226.6(b)(2) ................................ SAs must review annual certification of an institution’s eligibility 

to continue participating in CACFP (replaces the renewal application process).

56 390 21,840 0.334 7,295 10,920 ¥3,625.44 ¥3,625 

226.6(m)(3)(ix) .......................... The State agency is required to assess the timing of each 

sponsoring organization’s reviews of day care homes and sponsored centers.

56 390 21,840 0.167 3,640 0 3,640.00 3,640 

226.6(p) ..................................... The SA must develop/revise and provide a sponsoring organization agreement between sponsor and facilities, which must 

have standard provisions.

56 1 56 6.00 336 0 336.00 336 

226.12(a) ................................... SAs must multiply the appropriate administrative reimbursement rate by the number of day care homes submitting 

claims for reimbursement during the month, to determine the amount of payment that sponsoring organizations will receive.

56 11 623 0.167 104 0 103.83 104 

226.7(g)(2) ................................ State agency must review the budget and supporting documentation prior to approval, for sponsoring organizations of 

day care homes seeking to carry over administrative funds.

56 11 623 1.00 623 0 623.00 623 

226.7(j) ...................................... State agency must establish procedures to recover administrative funds from sponsoring organizations of day care homes 

that are not properly payable under FNS Instruction 796–2, administrative funds that are in excess of the 10 percent maximum carryover amount, and carryover amounts that are not expended or obligated by the end of the fiscal year following the fiscal year in which they were received.

56 1 56 2.00 112 0 112.00 112 

State agency Subtotal ................................................................................................................. 56 827.57 46,344 0.36 16,797 10,920 5,877 5,877 

Local Governments (Sponsoring Organizations) 

226.7(b)(1) ................................ Sponsoring organizations have to annually provide State agencies with bank account activity against other associated 

records to verify that the transactions meet program requirements.

3,257 1 3,257 0.25 814 0 814 814 


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57842 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

REPORTING—Continued 

CFR citation Title 

Estimated 

# 

respondents 

Responses 

per 

respondents 

Total 

annual 

records 

Estimated 

avg. # of 

hours per 

response 

Estimated 

total hours 

Current 

OMB 

approved 

burden hrs 

Due to 

program 

change— 

rulemaking 

Total 

difference 

226.7(b)(1)(i) ............................. Sponsoring organizations must provide State agency with actual expenditures of CACFP funds and the amount of meal 

reimbursement funds retained from unaffiliated centers to support the sponsoring organization’s administrative costs.

32 1 32 1 32 0 32 32.00 

226.6(b) ..................................... Each participating institution must submit annual updates to 

continue its participation (annual certification of information, updated licensing information, and a budget).

3,257 1 3,257 0.33 1,088 1,629 ¥541 ¥540.66 

226.6(p), 226.17(e),(f), 

226.17a(f), 226.19(d), and 226.19a(d).

Sponsoring organizations must enter into permanent agreements with their unaffiliated centers. 32 10 320 0.50 160 0 160 160.00 

226.6(f)(1)(iv) ............................ Sponsoring organizations of day care homes seeking to carry 

over administrative funds must submit an amended budget, to include an estimate of requested administrative fund carryover amounts and a description of proposed purpose for which those funds would be obligated or expended.

83 1 83 1.00 83 0 83 83.00 

226.25 ....................................... SFAs may appeal the State agency’s determination of fines. 

SFAs must submit to the State agency any pertinent information, explanation, or evidence addressing the Program violations identified by the State agency.

5 1 5 8.00 40 0 40 40.00 

226.23(e)(1)(vii) ......................... If a tier II day care home elects to assist in collecting and 

transmitting the applications to the sponsoring organization, sponsoring organizations must establish procedures to ensure the provider does not review or alter the application.

83 1 83 1.00 83 0 83 83 

Local Govt Subtotal ..................................................................................................................... 3,257 2.16 7,037 0.33 2,300.09 1,629 671.59 671.59 

Reporting burden for State and Local Government Level ................................................... 3,313 16.11 53,381 0.36 19,096.60 12,549 6,548.10 6,548.10 

Businesses Level (Institutions) 

226.7(b)(1)(i) ............................. Sponsoring organizations have to annually provide State agencies with bank account activity against other associated 

records to verify that the transactions meet program requirements.

18,601 1.00 18,601 0.25 4,650 0 4,650 4,650 

226.7(b) ..................................... Sponsoring organizations must provide State agency with actual expenditures of CACFP funds and the amount of meal 

reimbursement funds retained from unaffiliated centers to support the sponsoring organization’s administrative costs.

1,030 1 1,030 1 1,030 0 1,030 1,030.00 

226.6(b) ..................................... Each participating institution must submit annual updates to 

continue its participation (annual certification of information, updated licensing information, and a budget).

18,601 1 18,601 0.33 6,213 9301 (3,088) (3,088) 

226.6(p), 226.17(e),(f), 

226.17a(f), 226.19(d), and 226.19a(d).

Sponsoring organizations must enter into permanent agreements with their unaffiliated centers. 1,030 10 10,300 0.50 5,150 0 5,150 5,150 

226.23(e)(1)(vii) ......................... If a tier II day care home elects to assist in collecting and 

transmitting the applications to the sponsoring organization, sponsoring organizations must establish procedures to ensure the provider does not review or alter the application.

540 1 540 1.00 540 0 540 540 

226.6(f)(1)(iv) ............................ Sponsoring organizations of day care homes seeking to carry 

over administrative funds must submit an amended budget, to include an estimate of requested administrative fund carryover amounts and a description of proposed purpose for which those funds would be obligated or expended.

540 1 540 1.00 540 0 540 540 

Total Burden for Businesses (Sponsoring Organizations) .......................................................... 18,601 2.67 49,612.00 0.37 18,122.98 9,301 8,822.48 8,822.48 


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Business Level (Facilities) 

226.18(b)(12) ............................ Tier II day care homes may assist in collecting meal benefit 

forms from households and transmitting the forms to the sponsoring organization on the household’s behalf.

9,321 5.88 54,804 0.08 4,576 0 4,576 4,576 

Total Burden for Businesses (Facilities) ..................................................................................... 9,321 5.88 54,804.00 0.08 4,576.13 0.00 4,576.13 4,576.13 Total for Businesses .................................................................................................................... 27,922 3.74 104,416 .217 22,699.11 9,301 13,398.61 13,398.61 

Total Reporting Burden ........................................................................................................ 31,235 5.05 157,797.04 0.26 41,795.72 21,849 19,946.72 19,946.72 

RECORDKEEPING

Program rule Title 

Estimated 

# 

recordkeepers 

Records per 

recordkeeper 

Total 

annual 

records 

Estimated 

avg. # of 

hours per 

record 

Estimated 

total 

hours 

Current 

OMB 

approved 

burden hrs 

Due to 

program 

change— 

rulemaking 

Total 

difference 

State and Local Government Level 

State Agency 

226.4(j) .............. SAs to maintain a plan for additional audit funds ............................... 8 1 8 0.50 4 0 4 4 226.6(m)(6) ....... Maintain records for reviewing Sponsoring organizations with less 

than 100 facilities and conduct activities other than the CACFP, or are at risk of having serious management problems every two years.

56 20 1,120 2 2,240 0 2,240 2,240 

State agency subtotal .................................................................................................. 56 20.14 1,128 1.99 2,244 0 2,244 2,244 

Local Governments (Sponsoring Organizations) 

Total Recordkeeping Burden ....................................................................................... 56 20.14 1,128 1.99 2,244.00 0.00 2,244.00 2,244.00 

Grand Total for CACFP Due to Final Rule (as shown in OMB#0584–0610) ...... 31,235 5 158,925.04 .28 44,039.72 0 44,039.72 44,039.72 


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57844 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

OMB #0584–0280 

due to final rule 

Once merged with 

OMB #0584–0280 

Total No. Respondents ................................................................................................................................ 58 63,942 

Average No. Responses Per Respondent .................................................................................................. 1.08 6.13 

Total Annual Responses ............................................................................................................................. 63 391,858 

Average Hours Per Response ..................................................................................................................... 1.29 1.181 

Total Burden Hours ..................................................................................................................................... 80.81 462,779.78 

Current OMB Inventory ................................................................................................................................ 0 462,698.97 

Difference Due To Rulemaking ................................................................................................................... 80.81 80.81 

OMB #0584–0055 

due to final rule 

Once merged with 

OMB #0584–0055 

Total No. Respondents ................................................................................................................................ 31,235 3,794,949 

Average No. Responses Per Respondent .................................................................................................. 5 4 

Total Annual Responses ............................................................................................................................. 158,925.04 16,328,263.76 

Average Hours Per Response ..................................................................................................................... 0.28 .26 

Total Burden Hours ..................................................................................................................................... 44,039.72 4,235,401.61 

Current OMB Inventory ................................................................................................................................ 0 4,213,210.886 

Difference Due To Rulemaking ................................................................................................................... 44,039.72 22,190.72 

E-Government Act Compliance 

FNS is committed to complying with 

the E-Government Act, to promote the 

use of the internet and other 

information technologies to provide 

increased opportunities for citizen 

access to Government information and 

services, and for other purposes. 

List of Subjects 

7 CFR Part 210 

Grant programs—education, Grant 

programs—health, Infants and children, 

Nutrition, Penalties, Reporting and 

recordkeeping requirements, School 

breakfast and lunch programs, Surplus 

agricultural commodities. 

7 CFR Part 215 

Food assistance programs, Grant 

programs—education, Grant programs— 

health, Infants and children, Milk, 

Reporting and recordkeeping 

requirements. 

7 CFR Part 220 

Grant programs—education, Grant 

programs—health, Infants and children, 

Nutrition, Reporting and recordkeeping 

requirements, School breakfast and 

lunch programs. 

7 CFR Part 225 

Food assistance programs, Grant 

programs—health, Infants and children, 

Labeling, Reporting and recordkeeping 

requirements. 

7 CFR Part 226 

Accounting, Aged, Day care, Food 

assistance programs, Grant programs, 

Grant programs—health, American 

Indians, Individuals with disabilities, 

Infants and children, Intergovernmental 

relations, Loan programs, Reporting and 

recordkeeping requirements, Surplus 

agricultural commodities. 

7 CFR Part 235 

Administrative practice and 

procedure, Food assistance programs, 

Grant programs—education, Grant 

programs—health, Infants and children, 

Reporting and recordkeeping 

requirements, School breakfast and 

lunch programs. 

Accordingly, 7 CFR parts 210, 215, 

220, 225, 226, and 235 are amended as 

follows: 

PART 210—NATIONAL SCHOOL 

LUNCH PROGRAM 

■ 1. The authority citation for part 210 

continues to read as follows: 

Authority: 42 U.S.C. 1751–1760, 1779. 

■ 2. Amend § 210.2 by adding, in 

alphabetical order, the definition of 

‘‘Fixed-price contract’’ to read as 

follows: 

§ 210.2 Definitions. 

* * * * * 

Fixed-price contract means a contract 

that charges a fixed cost per meal, or a 

fixed cost for a certain time period. 

Fixed-price contracts may include an 

economic price adjustment tied to a 

standard index. 

* * * * * 

■ 3. In § 210.5, revise paragraphs (d)(2) 

and (3) to read as follows: 

§ 210.5 Payment process to States. 

* * * * * 

(d) * * * 

(2) Quarterly report. Each State 

agency administering the National 

School Lunch Program must submit to 

FNS a quarterly Financial Status Report 

(FNS–777) on the use of Program funds. 

Such reports must be postmarked and/ 

or submitted no later than 30 days after 

the end of each fiscal year quarter. 

(3) End of year reports. (i) Each State 

agency must submit an annual report 

detailing the disbursement of 

performance-based cash assistance 

described in § 210.4(b)(1). The report 

must be submitted no later than 30 days 

after the end of each fiscal year. The 

report must include the total number of 

school food authorities in the State and 

the names of certified school food 

authorities. If all school food authorities 

in the State have been certified, the 

State agency is no longer required to 

submit the report. 

(ii) Each State agency must submit a 

final Financial Status Report (FNS–777) 

for each fiscal year. This final fiscal year 

grant closeout report must be 

postmarked or submitted to FNS within 

120 days after the end of each fiscal year 

or part thereof that the State agency 

administered the Program. Obligations 

must be reported only for the fiscal year 

in which they occur. FNS will not be 

responsible for reimbursing Program 

obligations reported later than 120 days 

after the close of the fiscal year in which 

they were incurred. Grant closeout 

procedures are to be carried out in 

accordance with 2 CFR part 200, subpart 

D and USDA implementing regulations 

2 CFR part 400 and part 415. 

■ 4. In § 210.7, revise paragraph (d) to 

read as follows: 

§ 210.7 Reimbursement for school food 

authorities. 

* * * * * 

(d) Performance-based cash 

assistance. The State agency must 

provide performance-based cash 


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assistance as authorized under 

§ 210.4(b)(1) for lunches served in 

school food authorities certified by the 

State agency to be in compliance with 

meal pattern and nutrition requirements 

set forth in § 210.10 and, if the school 

food authority participates in the School 

Breakfast Program (7 CFR part 220), 

§ 220.8 or § 220.23 of this chapter, as 

applicable. State agencies must establish 

procedures to certify school food 

authorities for performance-based cash 

assistance in accordance with guidance 

established by FNS. Such procedures 

must ensure State agencies: 

(1) Make certification procedures 

readily available to school food 

authorities and provide guidance 

necessary to facilitate the certification 

process. 

(2) Require school food authorities to 

submit documentation to demonstrate 

compliance with meal pattern 

requirements set forth in § 210.10 and 

§ 220.8 of this chapter, as applicable. 

Such documentation must reflect meal 

service at or about the time of 

certification. 

(3) State agencies must review 

certification documentation submitted 

by the school food authority to ensure 

compliance with meal pattern 

requirements set forth in § 210.10, or 

§ 220.8 of this chapter, as applicable. 

For certification purposes, State 

agencies should consider any school 

food authority compliant: 

(i) If when evaluating daily and 

weekly range requirements for grains 

and meat/meat alternates, the 

certification documentation shows 

compliance with the daily and weekly 

minimums for these two components, 

regardless of whether the school food 

authority has exceeded the maximums 

for the same components. 

(ii) If when evaluating the service of 

frozen fruit, the school food authority 

serves products that contain added 

sugar. 

(4) Certification procedures must 

ensure that no performance-based cash 

assistance is provided to school food 

authorities for meals served prior to 

October 1, 2012. 

(5) Within 60 calendar days of a 

certification submission or as otherwise 

authorized by FNS, review submitted 

materials and notify school food 

authorities of the certification 

determination, the date that 

performance-based cash assistance is 

effective, and consequences for noncompliance, 

(6) Disburse performance-based cash 

assistance for all lunches served 

beginning with the start of certification 

provided that documentation reflects 

meal service in the calendar month the 

certification materials are submitted or, 

in the month preceding the calendar 

month of submission. 

* * * * * 

■ 5. In § 210.16, add paragraph (c)(4) to 

read as follows: 

§ 210.16 Food service management 

companies. 

* * * * * 

(c) * * * 

(4) Provisions in part 250, subpart D 

of this chapter must be included to 

ensure the value of donated foods, i.e., 

USDA Foods, are fully used in the 

nonprofit food service and credited to 

the nonprofit school food service 

account. 

* * * * * 

■ 6. In § 210.18: 

■ a. Amend paragraph (b) by revising 

the definitions of ‘‘Administrative 

review’’ and ‘‘General areas’’; 

■ b. Revise paragraphs (c), (f), (g) 

introductory text, (h) introductory text, 

and (h)(1); 

■ c. Add paragraph (h)(2)(xi); 

■ d. Revise paragraph (l) introductory 

text and paragraph (l)(2); and 

■ e. Revise the first sentence of 

paragraph (p) introductory text and 

paragraph (p)(1). 

The addition and revisions read as 

follows: 

§ 210.18 Administrative Reviews. 

* * * * * 

(b) * * * 

Administrative reviews means the 

comprehensive evaluation of all school 

food authorities participating in the 

programs specified in paragraph (a) of 

this section. It includes a review of both 

critical and general areas in accordance 

with paragraphs (g) and (h) of this 

section, as applicable for each reviewed 

program. With FNS approval, the 

administrative review may include 

other areas of program operations 

determined by the State agency. 

* * * * * 

General areas means the areas of 

review specified in paragraph (h) of this 

section. These areas include free and 

reduced-price process, civil rights, 

school food authority on-site 

monitoring, reporting and 

recordkeeping, food safety, competitive 

food services, water, program outreach, 

resource management, Buy American, 

and other areas identified by FNS. 

* * * * * 

(c) Review cycle. State agencies must 

conduct administrative reviews of all 

school food authorities participating in 

the National School Lunch Program 

(including Afterschool Snacks and the 

Seamless Summer Option) and the 

School Breakfast Program at least once 

during a 5-year review cycle, provided 

that each school food authority is 

reviewed at least once every 6 years, 

depending on review cycle observed. At 

a minimum, the on-site portion of the 

administrative review must be 

completed during the school year in 

which the review began. 

(1) Targeted follow-up reviews. A 

State agency that reviews school food 

authorities on a cycle longer than 3 

years must identify school food 

authorities that are high-risk to receive 

a targeted follow-up review. A State 

agency must develop and receive FNS 

approval of a plan to identify school 

food authorities that meet the high-risk 

criteria. 

(2) High-risk criteria for targeted 

follow-up reviews. At a minimum, a 

State plan should identify as high-risk 

those school food authorities that during 

the most recent administrative review 

conducted in accordance with this 

§ 210.18 had one or more of the 

following risk factors as determined by 

the State Agency: a 10 percent or greater 

certification and benefit issuance error 

rate; incomplete verification for the 

review year; or one or more significant 

or systemic errors in Performance 

Standard 1 as defined at (g)(1) of this 

section, Performance Standard 2 as 

defined at paragraph (g)(2) of this 

section, or allowable costs. 

(3) Timing and scope of targeted 

follow-up reviews. Within two years of 

the review, high-risk school food 

authorities must receive a targeted 

follow-up review. Targeted follow-up 

reviews must include the areas of 

significant or systemic error identified 

in the previous review, and may include 

other areas at the discretion of the State 

agency. The State agency may conduct 

targeted follow-up reviews in the same 

school year as the administrative 

review, and may conduct any additional 

reviews at its discretion. 

* * * * * 

(f) Scope of review. During the course 

of an administrative review for the 

National School Lunch Program and the 

School Breakfast Program, the State 

agency must monitor compliance with 

the critical and general areas in 

paragraphs (g) and (h) of this section, 

respectively. Selected critical and 

general areas must be monitored when 

reviewing the National School Lunch 

Program’s Afterschool Snacks and the 

Seamless Summer Option, the Special 

Milk Program, and the Fresh Fruit and 

Vegetable Program, as applicable and as 

specified in the FNS Administrative 

Review Manual. State agencies may add 


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57846 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

additional review areas with FNS 

approval. 

(1) Review forms. State agencies must 

use the administrative review forms, 

tools and workbooks prescribed by FNS. 

(2) Timeframes covered by the review. 

(i) The timeframes covered by the 

administrative review include the 

review period and the day of review, as 

defined in paragraph (b) of this section. 

(ii) Subject to FNS approval, the State 

agency may conduct a review early in 

the school year, prior to the submission 

of a Claim for Reimbursement. In such 

cases, the review period must be the 

prior month of operation in the current 

school year, provided that such month 

includes at least 10 operating days. 

(3) Audit results. The State agency 

may use any recent and currently 

applicable results from Federal, State, or 

local audit activity to meet FNS 

monitoring requirements. Such results 

may be used only when they pertain to 

the reviewed school(s) or the overall 

operation of the school food authority, 

when they are relevant to the review 

period, and when they adhere to audit 

standards contained in 2 CFR part 200, 

subpart F. The State agency must 

document the source and the date of the 

audit. The content of local level audits 

activity requires the approval of FNS to 

ensure that these audits align with 

Federal audit standards. 

(4) Completion of review requirements 

outside the administrative review. State 

agencies may, with FNS approval, omit 

specific, redundant areas of the 

administrative review, when sufficient 

oversight is conducted outside of the 

administrative review. 

(5) Error reduction strategies. State 

agencies may omit designated areas of 

review, in part or entirely, where a 

school food authority or State agency 

has implemented FNS-approved error 

reduction strategies or utilized FNSapproved monitoring efficiencies. 

(g) Critical areas of review. The 

performance standards listed in this 

paragraph are directly linked to meal 

access and reimbursement, and to the 

meal pattern and nutritional quality of 

the reimbursable meals offered. These 

critical areas must be monitored by the 

State agency when conducting 

administrative reviews of the National 

School Lunch Program and the School 

Breakfast Program. Selected aspects of 

these critical areas must also be 

monitored, as applicable, when 

conducting administrative reviews of 

the National School Lunch Program’s 

Afterschool Snacks and the Seamless 

Summer Option, and of the Special Milk 

Program. State agencies may omit 

designated critical areas of review, in 

part or entirely, where school food 

authority or State agency has 

implemented FNS-specified error 

reduction strategies or utilized FNSspecified monitoring efficiencies. 

* * * * * 

(h) General areas of review. The 

general areas listed in this paragraph 

reflect requirements that must be 

monitored by the State agency when 

conducting administrative reviews of 

the National School Lunch Program and 

the School Breakfast Program. Selected 

aspects of these general areas must also 

be monitored, as applicable and as 

specified in the FNS Administrative 

Review Manual, when conducting 

administrative reviews of the National 

School Lunch Program’s Afterschool 

Snacks and Seamless Summer Option, 

the Fresh Fruit and Vegetable Program, 

and the Special Milk Program. State 

agencies may omit designated general 

areas of review, in part or entirely, 

where the school food authority or State 

agency has implemented FNS-specified 

error reduction strategies or utilized 

FNS-specified monitoring efficiencies. 

State agencies may omit designated 

general areas of review, in part or 

entirely, where the school food 

authority or State agency has 

implemented FNS-specified error 

reduction strategies or utilized FNSspecified monitoring efficiencies. The 

general areas of review must include, 

but are not limited to, the following: 

(1) Resource management. The State 

agency must conduct an assessment of 

the school food authority’s nonprofit 

school food service account to evaluate 

the risk of noncompliance with resource 

management requirements. If risk 

indicators show that the school food 

authority is at high risk for 

noncompliance with resource 

management requirements, the State 

agency must conduct a comprehensive 

review including, but not limited to, the 

following areas using procedures 

specified in the FNS Administrative 

Review Manual. 

* * * * * 

(2) * * * 

(xi) Buy American. The State agency 

must ensure that the school food 

authority complies with the Buy 

American requirements set forth in 

§ 210.21(d) and 7 CFR 220.16(d), as 

specified in the FNS Administrative 

Review Manual. 

* * * * * 

(l) Fiscal action. The State agency 

must take fiscal action for all 

Performance Standard 1 violations and 

specific Performance Standard 2 

violations identified during an 

administrative review, including 

targeted follow-up review or other 

reviews, as specified in this section. 

Fiscal action must be taken in 

accordance with the principles in 

§ 210.19(c) and the procedures 

established in the FNS Administrative 

Review Manual. The State agency must 

follow the fiscal action formula 

prescribed by FNS to calculate the 

correct entitlement for a school food 

authority or a school. While there is no 

fiscal action required for general area 

violations, the State agency has the 

ability to withhold funds for repeat or 

egregious violations occurring in the 

majority of the general areas as 

described in paragraph (k)(1)(iv) of this 

section. 

* * * * * 

(2) Performance Standard 2 

violations. Fiscal action for Performance 

Standard 2 violations applies as follows: 

(i) For missing food components or 

missing production records cited under 

paragraph (g)(2) of this section, the State 

agency must apply fiscal action. 

(ii) For repeated violations involving 

food quantities, whole grain-rich foods, 

milk type, and vegetable subgroups 

cited under paragraph (g)(2) of this 

section, the State agency has discretion 

to apply fiscal action as follows: 

(A) If the meals contain insufficient 

quantities of the required food 

components, the deficient meals may be 

disallowed and reclaimed. 

(B) If no whole grain-rich foods are 

offered during the week of review, 

meals for up to the entire week of 

review may be disallowed and 

reclaimed. 

(C) If insufficient whole grain-rich 

foods are offered during the week of 

review, meals for up to the entire week 

of review may be disallowed and/or 

reclaimed. 

(D) If an unallowable milk type is 

offered, or no milk variety is offered, the 

deficient meals may be disallowed and 

reclaimed. 

(E) If one vegetable subgroup is not 

offered over the course of the week of 

review, meals for up to the entire week 

of review may be disallowed and 

reclaimed. 

(F) If a weekly vegetable subgroup is 

offered in insufficient quantity to meet 

the weekly vegetable subgroup 

requirement, meals for one day of the 

week of review may be disallowed and 

reclaimed. 

(G) If the amount of juice offered 

exceeds the weekly limitation, meals for 

up to the entire week of review may be 

disallowed and/or reclaimed. 

(iii) For repeated violations of calorie, 

saturated fat, sodium, and trans fat 

dietary specifications cited under 

paragraph (g)(2)(ii) of this section, the 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 57847 

State agency has discretion to apply 

fiscal action to the reviewed school as 

follows: 

(A) If the average meal offered over 

the course of the week of review does 

not meet one of the dietary 

specifications, meals for the entire week 

of review may be disallowed and 

reclaimed; and 

(B) Fiscal action is limited to the 

school selected for the targeted menu 

review and must be supported by a 

nutrient analysis of the meals at issue 

using USDA-approved software. 

(iv) The following conditions must be 

met prior to applying fiscal action as 

described in paragraphs (l)(2)(ii) and 

(iii) of this section: 

(A) Technical assistance has been 

given by the State agency; 

(B) Corrective action has been 

previously required and monitored by 

the State agency; and 

(C) The school food authority remains 

noncompliant with the meal 

requirements established in part 210 

and part 220 of this chapter. 

* * * * * 

(p) * * * Except for FNS-conducted 

reviews authorized under § 210.29(d)(2), 

each State agency must establish an 

appeal procedure to be followed by a 

school food authority requesting a 

review of a denial of all or a part of the 

Claim for Reimbursement, withholding 

payment arising from administrative or 

follow-up review activity conducted by 

the State agency under this § 210.18, or 

fines established under § 210.26, or 

§ 215.15 or § 220.18 of this chapter. 

* * * 

(1) The written request for a review 

must be postmarked within 15 calendar 

days of the date the appellant received 

the notice of the denial of all or a part 

of the Claim for Reimbursement, 

withholding of payment, or fines 

established under § 210.26, or § 215.15 

or § 220.18 of this chapter, and the State 

agency must acknowledge the receipt of 

the request for appeal within 10 

calendar days; 

* * * * * 

■ 7. In § 210.19, revise paragraph (a)(5) 

to read as follows: 

§ 210.19 Additional Responsibilities. 

(a) * * * 

(5) Food service management 

companies. (i) The State agency must 

annually review and approve each 

contract and contract amendment, 

including all supporting documentation, 

between any school food authority and 

food service management company 

before implementation of the contract 

by either party to ensure compliance 

with all the provisions and standards set 

forth in this part. 

(A) When the State agency develops a 

prototype contract for use by the school 

food authority that meets the provisions 

and standards set forth in this part, this 

annual review may be limited to 

changes made to that contract. 

(B) The State agency may establish 

due dates for submission of the contract 

or contract amendment documents. 

(ii) The State agency must perform a 

review of each school food authority 

that contracts with a food service 

management company, at least once 

during each 5-year period. The reviews 

must examine the school food 

authority’s compliance with § 210.16 of 

this part. 

(iii) The State agency may require all 

food service management companies to 

register with the State agency prior to 

contracting for food service with any 

school food authority in the State. 

(iv) State agencies must provide 

assistance to school food authorities 

upon request to assure compliance with 

the requirements for contracting with a 

food service management company. 

* * * * * 

§ 210.20 [Amended] 

■ 8. In § 210.20, amend paragraph 

(b)(14) by removing the term 

‘‘§ 235.11(g)’’ and adding in its place the 

term ‘‘§ 235.11(h)’’. 

■ 9. In § 210.21 add paragraph (h) to 

read as follows: 

§ 210.21 Procurement. 

* * * * * 

(h) Procurement training. (1) State 

directors of school nutrition programs, 

State directors of distributing agencies, 

and school nutrition program directors, 

management, and staff tasked with 

National School Lunch Program 

procurement responsibilities must 

complete annual training on Federal 

procurement standards annually. 

(2) Procurement training may count 

towards the professional standards 

training standards at § 210.30(g) of this 

part and § 235.11(h) of this chapter. 

(3) State agencies and school food 

authorities must retain records to 

document compliance with the 

requirement in this section. 

■ 10. Revise § 210.26 to read as follows: 

§ 210.26 Penalties and fines. 

(a) Penalties. Whomever embezzles, 

willfully misapplies, steals, or obtains 

by fraud any funds, assets, or property 

provided under this part whether 

received directly or indirectly from the 

Department will, if such funds, assets, 

or property are of a value of $100 or 

more, be fined no more than $25,000 or 

imprisoned not more than 5 years or 

both; or if such funds, assets, or 

property are of a value of less than $100, 

be fined not more than $1,000 or 

imprisoned not more than 1 year or 

both. Whomever receives, conceals, or 

retains for personal use or gain, funds, 

assets, or property provided under this 

part, whether received directly or 

indirectly from the Department, 

knowing such funds, assets, or property 

have been embezzled, willfully 

misapplied, stolen, or obtained by fraud, 

will be subject to the same penalties. 

(b) Fines. (1) The State agency may 

establish a fine against any school food 

authority when it has determined that 

the school food authority or a school 

under its agreement has: 

(i) Failed to correct severe 

mismanagement of this Program or a 

Child Nutrition Program under parts 

225 or 226 of this chapter; 

(ii) Disregarded a Program 

requirement of which the school food 

authority or school had been informed; 

or 

(iii) Failed to correct repeated 

violations of Program requirements 

under this part or under parts 225 or 

226 of this chapter. 

(2) FNS may direct the State agency 

to establish a fine against any school 

food authority when it has determined 

that the school food authority or school 

meets the criteria set forth under 

paragraph (b)(1) of this section. 

(3) Funds used to pay fines 

established under this paragraph must 

be derived from non-Federal sources. 

The State agency must calculate the fine 

based on the amount of Program 

reimbursement earned by the school 

food authority or school for the most 

recent fiscal year for which full year 

data is available, provided that the fine 

does not exceed the equivalent of: 

(i) For the first fine, 1 percent of the 

amount of meal reimbursement earned 

for the fiscal year; 

(ii) For the second fine, 5 percent of 

the amount of meal reimbursement 

earned for the fiscal year; and 

(iii) For the third or subsequent fine, 

10 percent of the amount of meal 

reimbursement earned for the fiscal 

year. 

(4) The State agency must inform FNS 

at least 30 days prior to establishing the 

fine under this paragraph. The State 

agency must send the school food 

authority written notification of the fine 

established under this paragraph and 

provide a copy of the notification to 

FNS. The notification must: 

(i) Specify the violations or actions 

which constitute the basis for the fine 

and indicate the amount of the fine; 

(ii) Inform the school food authority 

that it may appeal the fine and advise 


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the school food authority of the appeal 

procedures established under 

§ 210.18(p); 

(iii) Indicate the effective date and 

payment procedures should the school 

food authority not exercise its right to 

appeal within the specified timeframe. 

(5) Any school food authority subject 

to a fine under paragraph (b)(1) of this 

section may appeal the State agency’s 

determination. In appealing a fine, the 

school food authority must submit to 

the State agency any pertinent 

information, explanation, or evidence 

addressing the Program violations 

identified by the State agency. Any 

school food authority seeking to appeal 

the State agency determination must 

follow State agency appeal procedures. 

(6) The decision of the State agency 

review official is final and not subject to 

further administrative or judicial 

review. Failure to pay a fine established 

under this paragraph may be grounds 

for suspension or termination. 

(7) Money received by the State 

agency as a result of a fine established 

under this paragraph against a school 

food authority and any interest charged 

in the collection of these fines must be 

remitted to FNS, and then remitted to 

the United States Treasury. 

■ 11. In § 210.30, add paragraph (g)(3) to 

read as follows: 

§ 210.30 School nutrition program 

professional standards. 

* * * * * 

(g) * * * 

(3) Each employee tasked with 

Program procurement has completed 

annual procurement training, as 

required under § 210.21(h), by the end 

of each school year. 

■ 12. Revise § 210.32 to read as follows: 

§ 210.32 Program information. 

Persons seeking information about 

this Program should contact their State 

administering agency or the appropriate 

FNSRO. The FNS website has contact 

information for State agencies at https:// 

www.fns.usda.gov/contacts and 

FNSROs at https://www.fns.usda.gov/ 

fns-regional-offices. 

PART 215—SPECIAL MILK PROGRAM 

■ 13. The authority citation for part 215 

continues to read as follows: 

Authority: 42 U.S.C. 1772 and 1779. 

■ 14. Revise § 215.15 to read as follows: 

§ 215.15 Withholding payments and 

establishing fines. 

(a) Withholding payments. In 

accordance with Departmental 

regulations 2 CFR 200.338 through 

200.342, the State agency must withhold 

Program payments, in whole or in part, 

from any school food authority which 

has failed to comply with the provisions 

of this part. Program payments must be 

withheld until the school food authority 

takes corrective action satisfactory to the 

State agency, or gives evidence that 

such corrective actions will be taken, or 

until the State agency terminates the 

grant in accordance with § 215.16. 

Subsequent to the State agency’s 

acceptance of the corrective actions, 

payments will be released for any milk 

served in accordance with the 

provisions of this part during the period 

the payments were withheld. 

(b) Fines. (1) The State agency may 

establish a fine against any school food 

authority when it has determined that 

the school food authority or a school 

under its agreement has: 

(i) Failed to correct severe 

mismanagement of the Program; 

(ii) Disregarded a Program 

requirement of which the school food 

authority or school had been informed; 

or 

(iii) Failed to correct repeated 

violations of Program requirements. 

(2) FNS may direct the State agency 

to establish a fine against any school 

food authority when it has determined 

that the school food authority or school 

meets the criteria set forth under 

paragraph (b)(1) of this section. 

(3) Funds used to pay a fine 

established under this paragraph must 

be derived from non-Federal sources. 

The State agency must calculate the fine 

based on the amount of Program 

reimbursement earned by the school 

food authority or school for the most 

recent fiscal year for which full year 

data is available, provided that the fine 

does not exceed the equivalent of: 

(i) For the first fine, 1 percent of the 

amount of reimbursement for milk 

earned for the fiscal year; 

(ii) For the second fine, 5 percent of 

the amount of reimbursement for milk 

earned for the fiscal year; and 

(iii) For the third or subsequent fine, 

10 percent of the amount of 

reimbursement for milk earned for the 

fiscal year. 

(4) The State agency must inform FNS 

at least 30 days prior to establishing a 

fine under this paragraph. The State 

agency must send the school food 

authority written notification of the fine 

established under this paragraph and 

provide a copy of the notification to 

FNS. The notification must: 

(i) Specify the violations or actions 

which constitute the basis for the fine 

and indicate the amount of the fine; 

(ii) Inform the school food authority 

that it may appeal the fine and advise 

the school food authority of the appeal 

procedures established under 

§ 210.18(p) of this chapter; 

(iii) Indicate the effective date and 

payment procedures should the school 

food authority not exercise its right to 

appeal within the specified timeframe. 

(5) Any school food authority subject 

to a fine under paragraph (b)(1) of this 

section may appeal the State agency’s 

determination. In appealing a fine, the 

school food authority must submit to 

the State agency any pertinent 

information, explanation, or evidence 

addressing the Program violations 

identified by the State agency. Any 

school food authority seeking to appeal 

the State agency determination must 

follow State agency appeal procedures. 

(6) The decision of the State agency 

review official is final and not subject to 

further administrative or judicial 

review. Failure to pay a fine established 

under this paragraph may be grounds 

for suspension or termination. 

(7) Money received by the State 

agency as a result of a fine established 

under this paragraph against a school 

food authority and any interest charged 

in the collection of these fines must be 

remitted to FNS, and then remitted to 

the United States Treasury. 

■ 15. Revise § 215.17 to read as follows: 

§ 215.17 Program information. 

Persons seeking information about 

this Program should contact their State 

administering agency or the appropriate 

FNSRO. The FNS website has contact 

information for State agencies at https:// 

www.fns.usda.gov/contacts and 

FNSROs at https://www.fns.usda.gov/ 

fns-regional-offices. 

PART 220—SCHOOL BREAKFAST 

PROGRAM 

■ 16. The authority citation for part 220 

continues to read as follows: 

Authority: 42 U.S.C. 1773, 1779, unless 

otherwise noted. 

■ 17. In § 220.2, add in alphabetical 

order the definition ‘‘Fixed-price 

contract’’ to read as follows: 

§ 220.2 Definitions. 

* * * * * 

Fixed-price contract means a contract 

that charges a fixed cost per meal, or a 

fixed cost for a certain time period. 

Fixed-price contracts may include an 

economic price adjustment tied to a 

standard index. 

* * * * * 

■ 18. In § 220.7, add paragraph (d)(3)(iv) 

to read as follows: 

§ 220.7 Requirements for participation. 

* * * * * 


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(d) * * * 

(3) * * * 

(iv) Provisions in part 250, subpart D 

of this chapter must be included to 

ensure the value of donated foods, i.e., 

USDA Foods, are fully used in the 

nonprofit food service and credited to 

the nonprofit school food service 

account. 

* * * * * 

■ 19. Revise § 220.18 to read as follows: 

§ 220.18 Withholding payments and 

establishing fines. 

(a) Withholding payments. In 

accordance with 2 CFR 200.338 through 

342, the State agency must withhold 

Program payments, in whole or in part, 

from any school food authority which 

has failed to comply with the provisions 

of this part. Program payments must be 

withheld until the school food authority 

takes corrective action that is 

satisfactory to the State agency, or gives 

evidence that such corrective actions 

will be taken, or until the State agency 

terminates the grant in accordance with 

§ 220.19. Subsequent to the State 

agency’s acceptance of the corrective 

actions, payments will be released for 

any breakfasts served in accordance 

with the provisions of this part during 

the period the payments were withheld. 

(b) Fines. (1) The State agency may 

establish a fine against any school food 

authority when it has determined that 

the school food authority or a school 

under its agreement has: 

(i) Failed to correct severe 

mismanagement of the Program or a 

Child Nutrition Program under parts 

225 or 226 of this chapter; 

(ii) Disregarded a Program 

requirement of which the school food 

authority or school had been informed; 

or 

(iii) Failed to correct repeated 

violations of Program requirements 

under this part or under parts 225 or 

226 of this chapter. 

(2) FNS may direct the State agency 

to establish a fine against any school 

food authority when it has determined 

that the school food authority or school 

meets the criteria set forth under 

paragraph (b)(1) of this section. 

(3) Funds used to pay a fine 

established under this paragraph must 

be derived from non-Federal sources. 

The State agency must calculate the fine 

based on the amount of Program 

reimbursement earned by the school 

food authority or school for the most 

recent fiscal year for which full year 

data are available, provided that the fine 

does not exceed the equivalent of: 

(i) For the first fine, 1 percent of the 

amount of meal reimbursement earned 

for the fiscal year; 

(ii) For the second fine, 5 percent of 

the amount of meal reimbursement 

earned for the fiscal year; and 

(iii) For the third or subsequent fine, 

10 percent of the amount of meal 

reimbursement earned for the fiscal 

year. 

(4) The State agency must inform FNS 

at least 30 days prior to establishing a 

fine under this paragraph. The State 

agency must send the school food 

authority written notification of the fine 

established under this paragraph and 

provide a copy of the notification to 

FNS. The notification must: 

(i) Specify the violations or actions 

which constitute the basis for the fine 

and indicate the amount of the fine; 

(ii) Inform the school food authority 

that it may appeal the fine, and advise 

the school food authority of the appeal 

procedures established under 

§ 210.18(p) of this chapter; 

(iii) Indicate the effective date and 

payment procedures should the school 

food authority not exercise its right to 

appeal within the specified timeframe. 

(5) Any school food authority subject 

to a fine under paragraph (b)(1) of this 

section may appeal the State agency’s 

determination. In appealing a fine, the 

school food authority must submit to 

the State agency any pertinent 

information, explanation, or evidence 

addressing the Program violations 

identified by the State agency. Any 

school food authority seeking to appeal 

the State agency determination must 

follow State agency appeal procedures. 

(6) The decision of the State agency 

review official is final and not subject to 

further administrative or judicial 

review. Failure to pay a fine established 

under this paragraph may be grounds 

for suspension or termination. 

(7) Money received by the State 

agency as a result of a fine established 

under this paragraph against a school 

food authority and any interest charged 

in the collection of these fines must be 

remitted to FNS, and then remitted to 

the United States Treasury. 

■ 20. Revise § 220.21 to read as follows: 

§ 220.21 Program information. 

Persons seeking information about 

this Program should contact their State 

administering agency or the appropriate 

FNSRO. The FNS website has contact 

information for State agencies at https:// 

www.fns.usda.gov/contacts and 

FNSROs at https://www.fns.usda.gov/ 

fns-regional-offices. 

PART 225—SUMMER FOOD SERVICE 

PROGRAM 

■ 21. The authority citation for part 225 

continues to read as follows: 

Authority: Secs. 9, 13, and 14, Richard B. 

Russell National School Lunch Act, as 

amended, 42 U.S.C. 1758, 1761 and 1762a. 

■ 22. In § 225.2, add in alphabetical 

order a definition for ‘‘Termination for 

convenience’’ to read as follows: 

§ 225.2 Definitions. 

* * * * * 

Termination for convenience means: 

(1) Termination of a State agency’s 

participation in the Program in whole, 

or in part, when FNS and the State 

agency agree that the continuation of the 

Program would not produce beneficial 

results commensurate with the further 

expenditure of funds; or 

(2) Termination of a permanent 

operating agreement by a State agency 

or sponsor due to considerations 

unrelated to either party’s performance 

of Program responsibilities under the 

agreement. 

* * * * * 

■ 23. In § 225.6, revise paragraph 

(c)(1)(i) and paragraph (i) introductory 

text to read as follows: 

§ 225.6 State agency responsibilities. 

* * * * * 

(c) * * * 

(1) * * * 

(i) The sponsor must submit a written 

application to the State agency for 

participation in the Program. The State 

agency may use the application form 

developed by FNS, or develop its own 

application form, provided that the form 

requests the full legal name, any 

previously used names, mailing address; 

date of birth of the sponsor’s responsible 

principals, which include the executive 

director and board chair; and the 

sponsor’s Federal Employer 

Identification Number (FEIN) or Unique 

Entity Identifier (UEI). Application to 

sponsor the Program must be made on 

a timely basis within the deadlines 

established under paragraph (b)(1) of 

this section. 

* * * * * 

(i) State-Sponsor agreement. A 

sponsor approved for participation in 

the Program must enter into a 

permanent written agreement with the 

State agency. The existence of a valid 

permanent agreement does not limit the 

State agency’s ability to terminate the 

agreement, as provided under 

§ 225.11(c). The State agency must 

terminate the sponsor’s agreement 

whenever a sponsor’s participation in 

the Program ends. The State agency or 

sponsor may terminate the agreement at 

its convenience for considerations 

unrelated to the sponsor’s performance 

of Program responsibilities under the 

agreement. However, any action 


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initiated by the State agency to 

terminate an agreement for its 

convenience requires prior consultation 

with FNS. All sponsors must agree in 

writing to: 

* * * * * 

■ 24. In § 225.18, add paragraph (k) to 

read as follows: 

§ 225.18 Miscellaneous administrative 

provisions. 

* * * * * 

(k) Fines. (1) A sponsor that is a 

school food authority may be subject to 

fines. The State agency may establish an 

assessment when it has determined that 

the sponsor or its site has: 

(i) Failed to correct severe 

mismanagement of the Program; 

(ii) Disregarded a Program 

requirement of which the sponsor or its 

site had been informed; or 

(iii) Failed to correct repeated 

violations of Program requirements. 

(2) FNS may direct the State agency 

to establish a fine against any sponsor 

when it has determined that the sponsor 

or its site has committed one or more 

acts under paragraph (k)(1) of this 

section. 

(3) Funds used to pay a fine 

established under this paragraph must 

be derived from non-Federal sources. In 

calculating an assessment, the State 

agency must calculate the fine based on 

the amount of Program reimbursement 

earned by the sponsor or its site for the 

most recent fiscal year for which full 

year data is available, provided that the 

fine does not exceed the equivalent of: 

(i) For the first fine, 1 percent of the 

amount of meal reimbursement earned 

for the fiscal year; 

(ii) For the second fine, 5 percent of 

the amount of meal reimbursement 

earned for the fiscal year; and 

(iii) For the third or subsequent fine, 

10 percent of the amount of meal 

reimbursement earned for the fiscal 

year. 

(4) The State agency must inform FNS 

at least 30 days prior to establishing the 

fine under this paragraph. The State 

agency must send the sponsor written 

notification of the fine established 

under this paragraph and provide a 

copy of the notification to FNS. The 

notification must: 

(i) Specify the violations or actions 

which constitute the basis for the fine 

and indicate the amount of the fine; 

(ii) Inform the institution that it may 

appeal the fine and advise the sponsor 

of the appeal procedures established 

under § 225.13; 

(iii) Indicate the effective date and 

payment procedures should the sponsor 

not exercise its right to appeal within 

the specified timeframe. 

(5) Any sponsor subject to a fine 

under paragraph (k)(1) of this section 

may appeal the State agency’s 

determination. In appealing a fine, the 

sponsor must submit to the State agency 

any pertinent information, explanation, 

or evidence addressing the Program 

violations identified by the State 

agency. Any sponsor seeking to appeal 

the State agency determination must 

follow State agency appeal procedures. 

(6) The decision of the State agency 

review official is final and not subject to 

further administrative or judicial 

review. Failure to pay a fine established 

under this paragraph may be grounds 

for suspension or termination. 

(7) Money received by the State 

agency as a result of a fine established 

under this paragraph against a sponsor 

and any interest charged in the 

collection of these fines must be 

remitted to FNS, and then remitted to 

the United States Treasury. 

■ 25. Revise § 225.19 to read as follows: 

§ 225.19 Program information. 

Persons seeking information about 

this Program should contact their State 

administering agency or the appropriate 

FNSRO. The FNS website has contact 

information for State agencies at https:// 

www.fns.usda.gov/contacts and FNSRO 

at https://www.fns.usda.gov/fnsregional-offices. 

PART 226—CHILD AND ADULT CARE 

FOOD PROGRAM 

■ 26. The authority citation for 7 CFR 

part 226 continues to read as follows: 

Authority: Secs. 9, 11, 14, 16, and 17, 

Richard B. Russell National School Lunch 

Act, as amended, 42 U.S.C. 1758, 1759a, 

1762a, 1765 and 1766. 

■ 27. In § 226.2: 

■ a. Revise the definitions for ‘‘Facility’’ 

and ‘‘New institution’’; 

■ b. Add in alphabetical order 

definitions for ‘‘Participating 

institution’’; 

■ c. Revise the definition of ‘‘Renewing 

institution’’; 

■ d. Add the definition of ‘‘Sponsored 

center’’; 

■ e. Revise the definitions for 

‘‘Sponsoring organization’’, ‘‘TANF 

recipient’’, and ‘‘Termination for 

convenience’’. 

The revisions and additions read as 

follows: 

§ 226.2 Definitions. 

* * * * * 

Facility means a sponsored center or 

a day care home. 

* * * * * 

New institution means a sponsoring 

organization or an independent center 

making an application to participate in 

the Program or applying to participate 

in the Program after a lapse in 

participation. 

* * * * * 

Participating institution means a 

sponsoring organization or an 

independent center, including a 

renewing institution, that holds a 

current agreement with the State agency 

to operate the Program. 

* * * * * 

Renewing institution means a 

sponsoring organization or an 

independent center that is participating 

in the Program at the time it submits 

annual renewal information. 

* * * * * 

Sponsored center means a child care 

center, an at-risk afterschool care center, 

an adult day care center, an emergency 

shelter, or an outside-school-hours care 

center that operates the Program under 

the auspices of a sponsoring 

organization. The two types of 

sponsored centers are as follows: 

(1) An affiliated center is a part of the 

same legal entity as the CACFP 

sponsoring organization; or 

(2) An unaffiliated center is legally 

distinct from the sponsoring 

organization. 

Sponsoring organization means a 

public or nonprofit private organization 

that is entirely responsible for the 

administration of the food program in: 

(1) One or more day care homes; 

(2) A child care center, emergency 

shelter, at-risk afterschool care center, 

outside-school-hours care center, or 

adult day care center which is a legally 

distinct entity from the sponsoring 

organization; 

(3) Two or more child care centers, 

emergency shelters, at-risk afterschool 

care centers, outside-school-hours care 

center, or adult day care centers; or 

(4) Any combination of child care 

centers, emergency shelters, at-risk 

afterschool care centers, outside-schoolhours care centers, adult day care 

centers, and day care homes. 

The term ‘‘sponsoring organization’’ 

also includes an organization that is 

entirely responsible for administration 

of the Program in any combination of 

two or more child care centers, at-risk 

afterschool care centers, adult day care 

centers or outside-school-hours care 

centers, which meet the definition of 

For-profit center in this section and are 

part of the same legal entity as the 

sponsoring organization. 

* * * * * 

TANF recipient means an individual 

or household receiving assistance (as 

defined in 45 CFR 260.31) under a StateVerDate Sep<11>2014 19:54 Aug 22, 2023 Jkt 259001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4700 E:\FR\FM\23AUR4.SGM 23AUR4

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administered Temporary Assistance for 

Needy Families program. 

Termination for convenience means 

termination of a Program agreement due 

to considerations unrelated to either 

party’s performance of Program 

responsibilities under the agreement 

between: 

(1) A State agency and the 

independent center, 

(2) A State agency and the sponsoring 

organization, 

(3) A sponsoring organization and the 

unaffiliated center, or 

(4) A sponsoring organization and the 

day care home. 

* * * * * 

■ 28. In § 226.4, revise paragraph (j) to 

read as follows: 

§ 226.4 Payments to States and use of 

funds. 

* * * * * 

(j) Audit funds. (1) Funds are 

available to each State agency in an 

amount equal to 1.5 percent of the 

Program funds used by the State during 

the second fiscal year preceding the 

fiscal year for which these funds are to 

be made available. These funds are for 

the expense of conducting audits under 

§ 226.8 and Program monitoring under 

§ 226.6(m). 

(2) State agencies may request an 

increase in the amount of funds made 

available under this paragraph. 

(i) FNS approval for increased 

funding will be based on the State 

agency’s expressed need for an increase 

in resources to meet audit requirements, 

fulfill monitoring requirements, or 

effectively improve Program 

management. 

(ii) The total amount of audit funds 

made available to any State agency 

under this paragraph may not exceed 2 

percent of Program funds used by the 

State during the second fiscal year 

preceding the fiscal year for which the 

funds are made available. 

(iii) The amount of assistance 

provided to a State agency under this 

paragraph in any fiscal year may not 

exceed the State’s expenditures under 

§§ 226.6(m) and 226.8 during the fiscal 

year in which the funds are made 

available. 

* * * * * 

■ 29. In § 226.6: 

■ a. Revise paragraph (b) introductory 

text, paragraphs (b)(1)(xv), (b)(2), (3), (4), 

and (f)(1)(iv); 

■ b. Remove paragraph (f)(2) and 

redesignate paragraph (f)(3) as 

paragraph (f)(2); 

■ c. Add a sentence at the end of 

paragraph (k)(5)(ii); 

■ d. Add a sentence at the end of 

paragraph (k)(5)(ix); 

■ e. Add paragraph (k)(11); and 

■ f. Revise paragraphs (m)(3), (m)(6); 

and (p). 

The additions and revisions read as 

follows: 

§ 226.6 State agency administrative 

responsibilities. 

* * * * * 

(b) Program applications and 

agreements. Each State agency must 

establish application review procedures, 

as described in paragraph (b)(1) of this 

section, to determine the eligibility of 

new institutions and facilities for which 

applications are submitted by 

sponsoring organizations. Each State 

agency must establish procedures for 

the review of renewal information, as 

described in paragraph (b)(2) of this 

section, to determine the continued 

eligibility of renewing institutions. The 

State agency must enter into written 

agreements with institutions, as 

described in paragraph (b)(4) of this 

section. 

(1) * * * 

(xv) Certification of truth of 

applications and submission of names 

and addresses. Institutions must submit 

a certification that all information on 

the application is true and correct, along 

with the names, mailing addresses, and 

dates of birth of the institution’s 

executive director and chair of the board 

of directors or the owner, in the case of 

a for-profit center that does not have an 

executive director or is not required to 

have a board of directors. In addition, 

the institution’s Federal Employer 

Identification Number (FEIN) or the 

Unique Entity Identifier (UEI) must be 

provided; 

* * * * * 

(2) Annual information submission 

requirements for State agency review of 

renewing institutions. Each State agency 

must establish annual information 

submission procedures to confirm the 

continued eligibility of renewing 

institutions under this part. Renewing 

institutions must not be required to 

submit a free and reduced-price policy 

statement or a nondiscrimination 

statement unless they make substantive 

changes to either statement. In addition, 

the State agency’s review procedures 

must ensure that institutions annually 

submit information or certify that 

certain information is still true based on 

the requirements of this section. For 

information that must be certified, any 

new changes made in the past year and 

not previously reported to the State 

agency must be updated in the annual 

renewal information submission. Any 

additional information submitted in the 

renewal must be certified by the 

institution to be true. 

(i) This paragraph (b)(2) contains the 

information that must be certified. The 

State agency must ensure that renewing 

independent centers certify the 

following to be true: 

(A) The institution and its principals 

are not currently on the National 

disqualified list, per paragraph 

(b)(1)(xii) of this section; 

(B) A list of any publicly funded 

programs that the sponsoring 

organization and its principals have 

participated in, in the past 7 years, is 

current, per paragraph (b)(1)(xiii)(B) of 

this section; 

(C) The institution and its principals 

have not been determined ineligible for 

any other publicly funded programs due 

to violation of that program’s 

requirements, in the past 7 years, per 

paragraphs (b)(1)(xiii)(B) and (C) of this 

section; 

(D) No principals have been convicted 

of any activity that occurred during the 

past 7 years and that indicated a lack of 

business integrity, per paragraph 

(b)(1)(xiv)(B) of this section; 

(E) The names, mailing addresses, and 

dates of birth of all current principals 

have been submitted to the State agency, 

per paragraph (b)(1)(xv) of this section; 

(F) The institution is currently 

compliant with the required 

performance standards of financial 

viability and management, 

administrative capability, and program 

accountability, per paragraph 

(b)(1)(xviii) of this section; and 

(G) Licensing or approval status of 

each child care center or adult day care 

center is up-to-date. 

(ii) The State agency must ensure that 

renewing sponsoring organizations 

certify the following to be true: 

(A) All of the requirements under 

paragraph (b)(2)(i) of this section are 

certified to be true; 

(B) The management plan on file with 

the State agency is complete and up to 

date, per paragraph (b)(1)(iv) of this 

section; 

(C) No sponsored facility or principal 

of a sponsored facility is currently on 

the National disqualified list, per 

paragraph (b)(1)(xii) of this section; 

(D) The outside employment policy 

most recently submitted to the State 

agency remains current and in effect, 

per paragraph (b)(1)(xvi) of this section; 

(E) Licensing or approval status of 

each sponsored child care center, adult 

day care center, or day care home is upto-date; 

(F) The list of the sponsoring 

organization’s facilities on file with the 

State agency is up-to-date; and 

(G) All facilities under the sponsoring 

organization’s oversight have adhered to 

Program training requirements. 


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(iii) State agency review of institution 

information. The State agency’s review 

of information that must be submitted, 

certified or updated annually is as 

follows: 

(A) Management plan. The State 

agency must ensure that renewing 

sponsoring organizations certify that the 

sponsoring organization has reviewed 

the current management plan on file 

with the State agency and that it is 

complete and up to date. If the 

management plan has changed, the 

sponsoring organization must submit 

updates to the management plan that 

meet the requirements of § 226.16(b)(1). 

The State agency must establish factors, 

consistent with § 226.16(b)(1), that it 

will consider in determining whether a 

renewing sponsoring organization has 

sufficient staff to perform required 

monitoring responsibilities at all of its 

sponsored facilities. As part of its 

management plan review, the State 

agency must determine the appropriate 

level of staffing for the sponsoring 

organization, consistent with the 

staffing range of monitors set forth at 

§ 226.6(b)(1) and the factors the State 

agency has established. 

(B) Administrative budget submission. 

The State agency must ensure that 

renewing sponsoring organizations 

submit an administrative budget for the 

upcoming year with sufficiently 

detailed information concerning 

projected CACFP administrative 

earnings and expenses, as well as other 

non-Program funds to be used in 

Program administration. The State 

agency must be able to determine the 

allowability, necessity, and 

reasonableness of all proposed 

expenditures, and to assess the 

sponsoring organization’s capability to 

manage Program funds. The 

administrative budget must demonstrate 

that the sponsoring organization will 

expend and account for funds in 

accordance with regulatory 

requirements, FNS Instruction 796–2 

(Financial Management in the Child 

and Adult Care Food Program), 2 CFR 

part 200, subpart D and USDA 

implementing regulations 2 CFR part 

400 and part 415, and applicable Office 

of Management and Budget circulars. 

The administrative budget submitted by 

a sponsoring organization of centers 

must demonstrate that the 

administrative costs to be charged to the 

Program do not exceed 15 percent of the 

meal reimbursements estimated or 

actually earned during the budget year, 

unless the State agency grants a waiver, 

as described in § 226.7(g). For 

sponsoring organizations of day care 

homes seeking to carry over 

administrative funds, as described in 

§ 226.12(a)(3), the budget must include 

an estimate of requested administrative 

fund carryover amounts and a 

description of proposed purpose for 

which those funds would be obligated 

or expended. 

(C) Presence on the National 

disqualified list. The State agency must 

ensure that renewing institutions certify 

that neither the institution nor its 

principals are on the National 

disqualified list. The State agency must 

also ensure that renewing sponsoring 

organizations certify that no sponsored 

facility or facility principal is on the 

National disqualified list. 

(D) Ineligibility for other publicly 

funded programs. A State agency is 

prohibited from approving a renewing 

institution or facility’s application if, 

during the past 7 years, the institution, 

facility, responsible principals, or 

responsible individuals 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, facility, 

responsible principals, or responsible 

individuals have been fully reinstated in 

or determined eligible for that program, 

including the payment of any debts 

owed. 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. 

(E) Information on criminal 

convictions. The State agency must 

ensure that renewing institutions certify 

that the institution’s principals have not 

been convicted of any activity that 

occurred during the past 7 years and 

that indicates a lack of business 

integrity, as defined in paragraph 

(c)(1)(ii)(A) of this section. 

(F) Submission of names and 

addresses. The State agency must 

ensure that renewing institutions submit 

a certification attesting to the validity of 

the following information: full legal 

name and any names previously used, 

mailing address, and dates of birth of 

the institution’s executive director and 

chair of the board of directors or the 

owner, in the case of a for-profit center 

that does not have an executive director 

or is not required to have a board of 

directors. In addition, the institution’s 

Federal Employer Identification Number 

(FEIN) or the Unique Entity Identifier 

(UEI) must be provided. 

(G) Outside employment policy. The 

State agency must ensure that renewing 

sponsoring organizations certify that the 

outside employment policy most 

recently submitted to the State agency 

remains current and in effect or the 

sponsoring organization must submit an 

updated outside employment policy at 

the time of renewal. The policy must 

restrict other employment by employees 

that interferes with an employee’s 

performance of Program-related duties 

and responsibilities, including outside 

employment that constitutes a real or 

apparent conflict of interest. 

(H) Compliance with performance 

standards. The State agency must 

ensure that each renewing institution 

certifies that it is still in compliance 

with the performance standards 

described in paragraph (b)(1)(xviii) of 

this section, meaning 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. 

(I) Licensing. The State agency must 

ensure that each independent center 

certifies that its licensing or approval 

status is up-to-date and that it continues 

to meet the licensing requirements 

described in paragraphs (d) and (e) of 

this section. Sponsoring organizations 

must certify that the licensing or 

approval status of their facilities is upto-date and that they continue to meet 

the licensing requirements described in 

paragraphs (d) and (e) of this section. If 

the independent center or facility has a 

new license not previously on file with 

the State agency, a copy must be 

submitted, unless the State agency has 

other means of confirming the licensing 

or approval status of any independent 

center or facility providing care. 

(J) Facility lists. The State agency 

must ensure that each sponsoring 

organization certifies that the list of all 

of their applicant day care homes, child 

care centers, outside-school-hours-care 

centers, at-risk afterschool care centers, 

emergency shelters, and adult day care 

centers on file with the State agency is 

up-to-date. 

(K) Facility training. The State agency 

must ensure that renewing sponsoring 

organizations certify that all facilities 

under their oversight have adhered to 

the training requirements set forth in 

Program regulations. 

(iv) Additional Information collection. 

Institutions must provide information to 

the State agency as specified in 

paragraphs (f)(3), (f)(4), and (f)(7) of this 

section. 

(3) State agency notification 

requirements. (i) Any new institution 

applying for participation in the 

Program must be notified in writing of 

approval or disapproval by the State 

agency, within 30 calendar days of the 

State agency’s receipt of a complete 

application. Whenever possible, State 

agencies should provide assistance to 

institutions that have submitted an 


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incomplete application. Any 

disapproved applicant institution must 

be notified of the reasons for its 

disapproval and its right to appeal, as 

described in paragraph (k) of this 

section. Any disapproved applicant day 

care home or unaffiliated center must be 

notified of the reasons for its 

disapproval and its right to appeal, as 

described in paragraph (l) of this 

section. 

(ii) Any renewing institution must be 

provided written notification indicating 

whether it has completely and 

sufficiently met all renewal information 

requirements within 30 days of the 

submission of renewal information. 

Whenever possible, State agencies 

should provide assistance to institutions 

whose information is incomplete. 

(4) Program agreements. (i) The State 

agency must require each institution 

that has been approved for participation 

in the Program to enter into a permanent 

agreement governing the rights and 

responsibilities of each party. The 

existence of a valid permanent 

agreement, however, does not eliminate 

the need for an institution to comply 

with the annual information submission 

requirements and related provisions at 

paragraphs (b) and (f) of this section. 

(ii) The existence of a valid 

permanent agreement does not limit the 

State agency’s ability to terminate the 

agreement, as provided under paragraph 

(c)(3) of this section. The State agency 

must terminate the institution’s 

agreement whenever an institution’s 

participation in the Program ends. The 

State agency must terminate the 

agreement for cause based on violations 

by the institution, facility, responsible 

principals, or responsible individuals, 

as described in paragraph (c) of this 

section. The State agency or institution 

may terminate the agreement at its 

convenience for considerations 

unrelated to the institution’s 

performance of Program responsibilities 

under the agreement. However, any 

action initiated by the State agency to 

terminate an agreement for its 

convenience requires prior consultation 

with FNS. Termination for convenience 

does not result in ineligibility for any 

program authorized under this part or 

parts 210, 215, 220, or 225 of this 

chapter. 

(iii) The Program agreement must 

include the following requirements: 

(A) The responsibility of the 

institution to accept final financial and 

administrative management of a proper, 

efficient, and effective food service, and 

comply with all requirements under this 

part. 

(B) The responsibility of the 

institution to comply with all 

requirements of title VI of the Civil 

Rights Act of 1964, title IX of the 

Education Amendments of 1972, section 

504 of the Rehabilitation Act of 1973, 

the Age Discrimination Act of 1975, and 

the Department’s regulations concerning 

nondiscrimination (parts 15, 15a and 

15b of this title), including requirements 

for racial and ethnic participation data 

collection, public notification of the 

nondiscrimination policy, and reviews 

to assure compliance with the 

nondiscrimination policy, to the end 

that no person may, on the grounds of 

race, color, national origin, sex, age, or 

disability, be excluded from 

participation in, be denied the benefits 

of, or be otherwise subjected to 

discrimination under, the Program. 

(C) 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. 

(f) * * * 

(1) * * * 

(iv) Require each sponsoring 

organization to submit an administrative 

budget with sufficiently detailed 

information concerning projected 

CACFP administrative earnings and 

expenses, as well as other non-Program 

funds to be used in Program 

administration, for the State agency to 

determine the allowability, necessity, 

and reasonableness of all proposed 

expenditures, and to assess the 

sponsoring organization’s capability to 

manage Program funds. The 

administrative budget must demonstrate 

that the sponsoring organization will 

expend and account for funds in 

accordance with regulatory 

requirements, FNS Instruction 796–2 

(Financial Management—Child and 

Adult Care Food Program), 2 CFR part 

200, subpart D, and USDA 

implementing regulations 2 CFR part 

400 and part 415, and applicable Office 

of Management and Budget circulars. 

The administrative budget submitted by 

a sponsoring organization of centers 

must demonstrate that the 

administrative costs to be charged to the 

Program do not exceed 15 percent of the 

meal reimbursements estimated or 

actually earned during the budget year, 

unless the State agency grants a waiver, 

as described in § 226.7(g). For 

sponsoring organizations of day care 

homes seeking to carry over 

administrative funds, as described in 

§ 226.12(a)(3), the budget must include 

an estimate of requested administrative 

fund carryover amounts and a 

description of proposed purpose for 

which those funds would be obligated 

or expended. 

* * * * * 

(k) * * * 

(5) * * * 

(ii) * * * The State agency must 

provide a copy of the written request for 

an administrative review, including the 

date of receipt of the request to FNS 

within 10 days of its receipt of the 

request. 

* * * * * 

(ix) * * * State agencies failing to 

meet the timeframe set forth in this 

paragraph are liable for all valid claims 

for reimbursement to aggrieved 

institutions, as specified in paragraph 

(k)(11)(i) of this section. 

* * * * * 

(11) State liability for payments. (i) A 

State agency that fails to meet the 60- 

day timeframe set forth in paragraph 

(k)(5)(ix) of this section must pay, from 

non-Federal sources, all valid claims for 

reimbursement to the institution during 

the period beginning on the 61st day 

and ending on the date on which the 

hearing determination is made, unless 

FNS determines that an exception 

should be granted. 

(ii) FNS will notify the State agency 

of its liability for reimbursement at least 

30 days before liability is imposed. The 

timeframe for written notice from FNS 

is an administrative requirement and 

may not be used to dispute the State’s 

liability for reimbursement. 

(iii) The State agency may submit, for 

FNS review, information supporting a 

request for a reduction in the State’s 

liability, a reconsideration of the State’s 

liability, or an exception to the 60-day 

deadline, for exceptional circumstances. 

After review of this information, FNS 

will recover any improperly paid 

Federal funds. 

* * * * * 

(m) * * * 

(3) Review content. As part of its 

conduct of reviews, the State agency 

must assess each institution’s 

compliance with the requirements of 

this part pertaining to: 

(i) Recordkeeping; 

(ii) Meal counts; 

(iii) Administrative costs; 

(iv) Any applicable instructions and 

handbooks issued by FNS and the 

Department to clarify or explain this 

part, and any instructions and 

handbooks issued by the State agency 

which are not inconsistent with the 

provisions of this part; 

(v) Facility licensing and approval; 


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57854 Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 

(vi) Compliance with the 

requirements for annual updating of 

enrollment forms; 

(vii) Compliance with the 

requirements for submitting and 

ensuring the accuracy of the annual 

renewal information; 

(viii) If an independent center, 

observation of a meal service; 

(ix) If a sponsoring organization, 

training and monitoring of facilities, 

including the timing of reviews, as 

described in § 226.16(d)(4)(iii); 

(x) If a sponsoring organization, 

implementation of the household 

contact system established by the State 

agency pursuant to paragraph (m)(5) of 

this section; 

(xi) If a sponsoring organization of 

day care homes, the requirements for 

classification of tier I and tier II day care 

homes; and 

(xii) All other Program requirements. 

* * * * * 

(6) Frequency and number of required 

institution reviews. The State agency 

must annually review at least 33.3 

percent of all institutions. At least 15 

percent of the total number of facility 

reviews required must be unannounced. 

The State agency must review 

institutions according to the following 

schedule: 

(i) At least once every 3 years, 

independent centers and sponsoring 

organizations that operate 1 to 100 

facilities must be reviewed. A 

sponsoring organization review must 

include reviews of 10 percent of the 

sponsoring organization’s facilities. 

(ii) At least once every 2 years, 

sponsoring organizations that operate 

more than 100 facilities, that conduct 

activities other than CACFP, that have 

been identified during a recent review 

as having serious management 

problems, or that are at risk of having 

serious management problems must be 

reviewed. These reviews must include 

reviews of 5 percent of the sponsoring 

organization’s first 1,000 facilities and 

2.5 percent of the sponsoring 

organization’s facilities in excess of 

1,000. 

(iii) At least once every 2 years, 

independent centers that conduct 

activities other than CACFP, that have 

been identified during a recent review 

as having serious management 

problems, or that are at risk of having 

serious management problems must be 

reviewed. 

(iv) New sponsoring organizations 

that operate five or more facilities must 

be reviewed within the first 90 days of 

Program operations. 

* * * * * 

(p) Sponsoring organization 

agreement. (1) Each State agency must 

develop and provide for the use of a 

standard form of written permanent 

agreement between each sponsoring 

organization and the day care homes or 

unaffiliated child care centers, outsideschool-hours-care centers, at-risk 

afterschool care centers, emergency 

shelters, or adult day care centers for 

which it has responsibility for Program 

operations. The agreement must specify 

the rights and responsibilities of both 

parties. The State agency may, at the 

request of the sponsoring organization, 

approve an agreement developed by the 

sponsoring organization. Nothing in this 

paragraph limits the ability of the 

sponsoring organization to suspend or 

terminate the permanent agreement, as 

described in § 226.16(l). 

(2) At a minimum, the standard 

agreement must require day care homes 

and centers to: 

(i) Allow visits by sponsoring 

organizations or State agencies to review 

meal service and records; 

(ii) Promptly inform the sponsoring 

organization about any change in its 

licensing or approval status; 

(iii) Meet any State agency approved 

time limit for submission of meal 

records; and 

(iv) Distribute to parents a copy of the 

sponsoring organization’s notice to 

parents if directed to do so by the 

sponsoring organization. 

(3) The agreement must include the 

right of day care homes and centers to 

receive timely reimbursement. The 

sponsoring organization must pay 

program funds to day care homes and 

centers within 5 working days of receipt 

from the State agency. 

(4) The State agency must include in 

this agreement its policy to restrict 

transfers of day care homes among 

sponsoring organizations. The policy 

must restrict the transfers to no more 

frequently than once per year, except 

under extenuating circumstances, such 

as termination of the sponsoring 

organization’s agreement or other 

circumstances defined by the State 

agency. 

(5) The State agency may, at the 

request of the sponsoring organization, 

approve an agreement developed by the 

sponsoring organization. 

* * * * * 

■ 30. In § 226.7: 

■ a. Revise paragraphs (b), (g), and (j); 

and 

■ b. Remove paragraph (m). 

The revisions read as follows: 

§ 226.7 State agency responsibilities for 

financial management. 

* * * * * 

(b) Financial management system. 

Each State agency must establish and 

maintain an acceptable financial 

management system, adhere to financial 

management standards and otherwise 

carry out financial management policies 

in accordance with 2 CFR parts 200, 

400, 415, 416, 417, 418, and 421, and 

FNS Instruction 796–2, as applicable, 

and related FNS guidance to identify 

allowable Program costs and establish 

standards for institutional 

recordkeeping and reporting. The State 

agency must provide guidance on 

financial management requirements to 

each institution. 

(1) State agencies must also have a 

system in place for: 

(i) Annually reviewing at least 1 

month’s bank account activity of all 

sponsoring organizations against 

documents adequate to support that the 

financial transactions meet Program 

requirements. The State agency may 

expand the review to examine 

additional months of bank account 

activity if discrepancies are found. If the 

State agency identifies and is unable to 

verify any expenditures that have the 

appearance of violating Program 

requirements, or if the discrepancy is 

significant, the State agency must refer 

the sponsoring organization’s bank 

account activity to the appropriate State 

authorities. 

(ii) Annually reviewing actual 

expenditures reported of Program funds 

and the amount of meal reimbursement 

funds retained from centers, if any, for 

administrative costs for all sponsoring 

organizations of unaffiliated centers. 

State agencies must reconcile reported 

expenditures with Program payments to 

ensure that funds are fully accounted 

for, and use the reported actual 

expenditures as the basis for selecting a 

sample of expenditures for validation. If 

the State agency identifies and is unable 

to verify any expenditures that have the 

appearance of violating Program 

requirements, the State agency must 

refer the sponsoring organization’s bank 

account activity to the appropriate State 

authorities. 

(iii) Monitoring and reviewing the 

institutions’ documentation of their 

nonprofit status to ensure that all 

Program reimbursement funds are used 

solely for the conduct of the food 

service operation or to improve food 

service operations, principally for the 

benefit of children or adult participants. 

(2) The financial management system 

standards for institutional 

recordkeeping and reporting must: 

(i) Prohibit claiming reimbursement 

for meals provided by a child or an 

adult participant’s family, except as 

authorized at §§ 226.18(e) and 

226.20(b)(2), (g)(1)(ii), and (g)(2)(ii); and 


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(ii) Allow the cost of meals served to 

adults who perform necessary food 

service labor under the Program, except 

in day care homes. 

* * * * * 

(g) Budget approval. The State agency 

must review institution budgets and 

must limit allowable administrative 

claims by each sponsoring organization 

to the administrative costs approved in 

its budget, except as provided in this 

section. The budget must demonstrate 

the institution’s ability to manage 

Program funds in accordance with this 

part, FNS Instruction 796–2, 2 CFR part 

200, subpart D and USDA implementing 

regulations 2 CFR part 400 and part 415, 

and applicable Office of Management 

and Budget circulars. Sponsoring 

organizations must submit an 

administrative budget to the State 

agency annually, and independent 

centers must submit budgets as 

frequently as required by the State 

agency. Budget levels may be adjusted 

to reflect changes in Program activities. 

If the institution does not intend to use 

non-CACFP funds to support any 

required CACFP functions, the 

institution’s budget must identify a 

source of non-Program funds that could 

be used to pay overclaims or other 

unallowable costs. If the institution 

intends to use any non-Program 

resources to meet CACFP requirements, 

these non-Program funds should be 

accounted for in the institution’s 

budget, and the institution’s budget 

must identify a source of non-Program 

funds that could be used to pay 

overclaims or other unallowable costs. 

(1) For sponsoring organizations of 

centers, the State agency is prohibited 

from approving the sponsoring 

organization’s administrative budget, or 

any amendments to the budget, if the 

administrative budget shows the 

Program will be charged for 

administrative costs in excess of 15 

percent of the meal reimbursements 

estimated to be earned during the 

budget year. However, the State agency 

may waive this limit if the sponsoring 

organization provides justification that 

it requires Program funds in excess of 15 

percent to pay its administrative costs 

and if the State agency is convinced that 

the institution will have adequate 

funding to provide meals meeting the 

requirements of § 226.20. The State 

agency must document all waiver 

approvals and denials in writing and 

provide a copy of all such letters to the 

appropriate FNSRO. 

(2) For sponsoring organizations of 

day care homes seeking to carry over 

administrative funds, as described in 

§ 226.12(a)(3), the State agency must 

require the budget to include an 

estimate of the requested administrative 

fund carryover amount and a 

description of the purpose for which 

those funds would be obligated or 

expended by the end of the fiscal year 

following the fiscal year in which they 

were received. In approving a carryover 

request, State agencies must take into 

consideration whether the sponsoring 

organization has a financial 

management system that meets Program 

requirements and is capable of 

controlling the custody, documentation, 

and disbursement of carryover funds. As 

soon as possible after fiscal year closeout, the State agency must require 

sponsoring organizations carrying over 

administrative funds to submit an 

amended budget for State agency review 

and approval. The amended budget 

must identify the amount of 

administrative funds actually carried 

over and describe the purpose for which 

the carry-over funds have been or will 

be used. 

* * * * * 

(j) Recovery of overpayments. Each 

State agency must 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. In addition, each State 

agency must establish procedures to 

recover administrative funds from 

sponsoring organizations of day care 

homes that are not properly payable 

under FNS Instruction 796–2, 

administrative funds that are in excess 

of the 10 percent maximum carryover 

amount, and carryover amounts that are 

not expended or obligated by the end of 

the fiscal year following the fiscal year 

in which they were received. 

* * * * * 

■ 31. In § 226.10, revise paragraph (c) to 

read as follows: 

§ 226.10 Program payment procedures. 

* * * * * 

(c) Claims for Reimbursement must 

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 must 

certify that the claim is correct and that 

records are available to support that 

claim. 

(1) Prior to submitting its 

consolidated monthly claim to the State 

agency, each sponsoring organization 

must perform edit checks on each 

facility’s meal claim. At a minimum, the 

sponsoring organization’s edit checks 

must: 

(i) Verify that each facility has been 

approved to serve the types of meals 

claimed; and 

(ii) Compare the number of children 

or eligible adult participants enrolled 

for care at each facility, multiplied by 

the number of days on which the facility 

is approved to serve meals, to the total 

number of meals claimed by the facility 

for that month. Discrepancies between 

the facility’s meal claim and its 

enrollment must be subjected to more 

thorough review to determine if the 

claim is accurate. 

(2) Sponsoring organizations of 

unaffiliated centers must make available 

to the State agency an annual report 

detailing actual expenditures of Program 

funds and the amount of meal 

reimbursement funds retained from 

centers, if any, for administrative costs 

for the year to which the claims apply. 

The report must use the same cost 

categories as the approved annual 

budget submitted by the sponsoring 

organization. 

(3) Sponsoring organizations of forprofit child care centers or for-profit 

outside-school-hours care centers must 

submit the number and percentage of 

children in care—enrolled or licensed 

capacity, whichever is less—that 

documents that at least 25 percent are 

eligible for free or reduced-price meals 

or are title XX beneficiaries. Sponsoring 

organizations must not submit a claim 

for any for-profit center in which less 

than 25 percent of the children in care— 

enrolled or licensed capacity, whichever 

is less—during the claim month were 

eligible for free or reduced-price meals 

or were title XX beneficiaries. 

(4) For each month they claim 

reimbursement, independent for-profit 

child care centers and independent forprofit outside-school-hours care centers 

must submit the number and percentage 

of children in care—enrolled or licensed 

capacity, whichever is less—that 

documents at least 25 percent are 

eligible for free or reduced-price meals 

or are title XX beneficiaries. However, 

children who only receive at-risk 

afterschool meals or snacks must not be 

considered in determining this 

eligibility. 

(5) For each month they claim 

reimbursement, independent for-profit 

adult day care centers must submit the 

percentages of enrolled adult 

participants receiving title XIX or title 

XX benefits for months in which not 

less than 25 percent of enrolled adult 

participants were title XIX or title XX 

beneficiaries. For the claim, sponsoring 


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organizations of adult day care centers 

must submit the percentage of enrolled 

adult participants receiving title XIX or 

title XX benefits for each center. 

Sponsoring organizations must not 

submit claims for adult day care centers 

for months in which less than 25 

percent of enrolled adult participants 

were title XIX or title XX beneficiaries. 

* * * * * 

■ 32. In § 226.12, revise paragraph (a) to 

read as follows: 

§ 226.12 Administrative payments to 

sponsoring organizations for day care 

homes. 

(a) General. Sponsoring organizations 

of day care homes receive payments for 

administrative costs, subject to the 

following conditions: 

(1) Sponsoring organizations will 

receive reimbursement for the 

administrative costs of the sponsoring 

organization in an amount that is not 

less than the product obtained each 

month by multiplying: 

(i) The number of day care homes of 

the sponsoring organization submitting 

a claim for reimbursement during the 

month, by 

(ii) The appropriate administrative 

rates announced annually in the Federal 

Register. 

(2) FNS determines administrative 

reimbursement by annually adjusting 

the following base administrative rates, 

as set forth in § 226.4(i): 

(i) Initial 50 day care homes, 42 

dollars; 

(ii) Next 150 day care homes, 32 

dollars; 

(iii) Next 800 day care homes, 25 

dollars; 

(iv) Additional day care homes, 22 

dollars. 

(3) With State agency approval, a 

sponsoring organization may carry over 

a maximum of 10 percent of 

administrative funds received under 

paragraph (a)(1) of this section for use 

in the following fiscal year. If any 

carryover funds are not obligated or 

expended in the following fiscal year, 

they must be returned to the State 

agency, as described in § 226.7(j). 

(4) State agencies must recover any 

administrative funds not properly 

payable, as described in FNS Instruction 

796–2. 

* * * * * 

■ 33. In § 226.13, revise paragraph (a) to 

read as follows: 

§ 226.13 Food service payments to 

sponsoring organizations for day care 

homes. 

(a) Payments will 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. 

Each State agency must base 

reimbursement to each approved day 

care home on daily meal counts 

recorded by the provider. 

* * * * * 

■ 34. In § 226.15, revise paragraph (b) to 

read as follows: 

§ 226.15 Institution provisions. 

* * * * * 

(b) New applications and renewals. 

Each new institution must submit to the 

State agency an application with all 

information required for its approval, as 

set forth in §§ 226.6(b)(1) and 226.6(f). 

This information must demonstrate that 

a new institution has the administrative 

and financial capability to operate the 

Program, as described in the 

performance standards set forth in 

§ 226.6(b)(1)(xviii). Renewing 

institutions must annually certify that 

they are capable of operating the 

Program, as set forth in § 226.6(b)(2). 

* * * * * 

■ 35. Amend § 226.16 as follows: 

■ a. In paragraphs (b)(2) and (b)(3), 

remove the words ‘‘child care and adult 

day care’’; 

■ b. In paragraph (b)(4), remove the 

words ‘‘on or after June 20, 2000’’; 

■ c. Remove the word ‘‘and’’ at the end 

of paragraph (b)(7); 

■ d. Remove the ‘‘.’’ at the end of 

paragraph (b)(8) and add in its place ‘‘; 

and’’; 

■ e. Add paragraph (b)(9); 

■ f. In paragraphs (c) and (d)(1), remove 

the words ‘‘child care and adult day 

care’’; 

■ g. Revise paragraph (d)(3); 

■ h. Add paragraphs (d)(4)(iii)(E) and 

(F); 

■ i. In paragraph (i), remove the words 

‘‘child and adult day care’’; 

■ j. Revise paragraph (m). 

The additions and revisions read as 

follows: 

§ 226.16 Sponsoring organization 

provisions. 

* * * * * 

(b) * * * 

(9) For sponsoring organizations of 

unaffiliated centers, the name and 

mailing address of each center. 

* * * * * 

(d) * * * 

(3) Additional mandatory training 

sessions, as defined by the State agency, 

for key staff from all sponsored facilities 

not less frequently than annually. At a 

minimum, this training must include 

instruction, appropriate to the level of 

staff experience and duties, on the 

Program’s meal patterns, meal counts, 

claims submission and review 

procedures, recordkeeping 

requirements, and reimbursement 

system. 

(4) * * * 

(iii) * * * 

(E) The timing of unannounced 

reviews must be varied so that they are 

unpredictable to the facility; and 

(F) All types of meal service must be 

subject to review and sponsoring 

organizations must vary the meal 

service reviewed. 

* * * * * 

(m) Sponsoring organizations of day 

care homes or unaffiliated centers must 

not make payments to employees or 

contractors solely on the basis of the 

number of homes or centers recruited. 

However, employees or contractors may 

be paid or evaluated on the basis of 

recruitment activities accomplished. 

■ 36. In § 226.17, add paragraphs (e) and 

(f) to read as follows: 

§ 226.17 Child care center provisions. 

* * * * * 

(e) Unaffiliated sponsored child care 

centers must enter into a written 

permanent agreement with the 

sponsoring organization. The agreement 

must specify the rights and 

responsibilities of both parties. At a 

minimum, the agreement must include 

the provisions set forth in paragraph (b) 

of this section. 

(f) Independent child care centers 

must enter into a written permanent 

agreement with the State agency. The 

agreement must specify the rights and 

responsibilities of both parties as 

required by § 226.6(b)(4). At a 

minimum, the agreement must include 

the provisions set forth in paragraph (b) 

of this section. 

■ 37. In § 226.17a, revise paragraphs 

(f)(2) and (g) to read as follows: 

§ 226.17a At-risk afterschool care center 

provisions. 

* * * * * 

(f) * * * 

(2) Agreements. The State agency 

must enter into a permanent agreement 

with an institution approved to operate 

one or more at-risk afterschool care 

centers, as described in § 226.6(b)(4). 

The agreement must describe the 

approved afterschool care programs and 

list the approved centers. The agreement 

must also require the institution to 

comply with the applicable 

requirements of this part 226. 

(i) Unaffiliated sponsored afterschool 

care centers must enter into a written 

permanent agreement with the 


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sponsoring organization. The agreement 

must specify the rights and 

responsibilities of both parties. At a 

minimum, the agreement must include 

the applicable provisions set forth in 

this section. 

(ii) Independent afterschool care 

centers must enter into a written 

permanent agreement with the State 

agency. The agreement must specify the 

rights and responsibilities of both 

parties as required by § 226.6(b)(4). At a 

minimum, the agreement must include 

the applicable provisions set forth in 

this section. 

(g) Application process in subsequent 

years. To continue participating in the 

Program, independent at-risk 

afterschool care centers must comply 

with the annual information submission 

requirements, as described in 

§§ 226.6(b)(2)(i) and (f)(3)(ii). 

Sponsoring organizations of at-risk 

afterschool care centers must comply 

with the annual information submission 

requirements, as described in in 

§ 226.6(b)(2)(ii), and provide area 

eligibility data, as described in 

§ 226.15(g). 

* * * * * 

■ 38. In § 226.18: 

■ a. Revise paragraph (b)(11); 

■ b. Redesignate paragraphs (b)(13) 

through (b)(16) as paragraphs (b)(14) 

through (b)(17), respectively; and 

■ c. Add new paragraph (b)(13). 

The addition and revision read as 

follows: 

§ 226.18 Day care home provisions. 

* * * * * 

(b) * * * 

(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: 

(i) Receiving tier I rates for the meals 

served to eligible enrolled children, by 

electing to have the sponsoring 

organization identify all income-eligible 

children through the collection of free 

and reduced-price applications and the 

sponsoring organization or day care 

home’s possession of other proof of a 

child or household’s participation in a 

categorically eligible program; 

(ii) Receiving tier I rates for the meals 

served to eligible enrolled children, by 

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, as described in § 226.23(e)(1); 

or 

(iii) Receiving tier II rates of 

reimbursement for all meals served to 

enrolled children; 

* * * * * 

(13) The right of the tier II day care 

home to assist in collecting applications 

from households and transmitting the 

applications to the sponsoring 

organization. However, a tier II day care 

home may not review the collected 

applications. The sponsoring 

organizations may prohibit a tier II day 

care home from assisting in collection 

and transmittal of applications if the 

day care home does not comply with the 

process, as described in 

§ 226.23(e)(2)(viii); 

* * * * * 

■ 39. In § 226.19, add paragraphs (d) 

and (e) to read as follows: 

§ 226.19 Outside-school-hours care center 

provisions. 

* * * * * 

(d) Unaffiliated sponsored outsideschool-hours-care centers must enter 

into a written permanent agreement 

with the sponsoring organization. The 

agreement must specify the rights and 

responsibilities of both parties. At a 

minimum, the agreement must include 

the provisions set forth in paragraph (b) 

of this section. 

(e) Independent outside-school-hours 

care centers must enter into a written 

permanent agreement with the State 

agency. The agreement must specify the 

rights and responsibilities of both 

parties as required by § 226.6(b)(4). At a 

minimum, the agreement must include 

the provisions described in paragraph 

(b) of this section. 

■ 40. In § 226.19a, add paragraphs (d) 

and (e) to read as follows: 

§ 226.19a Adult day care center 

provisions. 

* * * * * 

(d) Unaffiliated sponsored adult day 

care centers must enter into a written 

permanent agreement with the 

sponsoring organization. The agreement 

must specify the rights and 

responsibilities of both parties. At a 

minimum, the agreement must address 

the provisions set forth in paragraph (b) 

this section. 

(e) Independent adult day care centers 

must enter into a written permanent 

agreement with the State agency. The 

agreement must specify the rights and 

responsibilities of both parties as 

required by § 226.6(b)(4). At a 

minimum, the agreement must include 

the provisions described in paragraph 

(b) of this section. 

■ 41. In § 226.21, revise paragraph (a) 

introductory text to read as follows: 

§ 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 

must 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 must 

adhere to the procurement standards set 

forth in § 226.22 and comply with the 

following procedures intended to 

prevent fraud, waste, and Program 

abuse: 

* * * * * 

■ 42. Revise § 226.22 to read as follows: 

§ 226.22 Procurement standards. 

(a) General. 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 goods and services are 

obtained efficiently and economically 

and in compliance with the provisions 

of applicable Federal law and Executive 

orders. 

(b) Compliance. Institutions may use 

their own procedures for procurement 

with Program funds to the extent that: 

(1) Procurements by public 

institutions comply with applicable 

State or local laws and standards set 

forth in 2 CFR part 200, subpart D and 

USDA implementing regulations 2 CFR 

parts 400 and 415; and 

(2) Procurements by private nonprofit 

institutions comply with standards set 

forth in 2 CFR part 200, subpart D and 

USDA implementing regulations 2 CFR 

parts 400 and 415. 

(c) Geographic preference. (1) 

Institutions participating in the Program 

may apply a geographic preference 

when procuring unprocessed locally 

grown or locally raised agricultural 

products. When utilizing the geographic 

preference to procure such products, the 

institution making the purchase has the 

discretion to determine the local area to 

which the geographic preference option 

will be applied; 

(2) For the purpose of applying the 

optional geographic preference in 

paragraph (c)(1) of this section, 

‘‘unprocessed locally grown or locally 

raised agricultural products’’ means 

only those agricultural products that 

retain their inherent character. The 

effects of the following food handling 

and preservation techniques will not be 

considered as changing an agricultural 

product into a product of a different 


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kind or character: Cooling; refrigerating; 

freezing; size adjustment made by 

peeling, slicing, dicing, cutting, 

chopping, shucking, and grinding; 

forming ground products into patties 

without any additives or fillers; drying/ 

dehydration; washing; packaging (such 

as placing eggs in cartons), vacuum 

packing and bagging (such as placing 

vegetables in bags or combining two or 

more types of vegetables or fruits in a 

single package); addition of ascorbic 

acid or other preservatives to prevent 

oxidation of produce; butchering 

livestock and poultry; cleaning fish; and 

the pasteurization of milk. 

■ 43. In § 226.23, add paragraph 

(e)(1)(vii) to read as follows: 

§ 226.23 Free and reduced-price meals. 

* * * * * 

(e) * * * 

(1) * * * 

(vii) If a tier II day care home elects 

to assist in collecting and transmitting 

the applications to the sponsoring 

organization, it is the responsibility of 

the sponsoring organization to establish 

procedures to ensure the provider does 

not review or alter the application. The 

household consent form must explain 

that: 

(A) The household is not required to 

complete the income eligibility form in 

order for their children to participate in 

CACFP: 

(B) The household may return the 

application to either the sponsoring 

organization or the day care home 

provider; 

(C) By signing the letter and giving it 

to the day care home provider, the 

household has given the day care home 

provider written consent to collect and 

transmit the household’s application to 

the sponsoring organization; and 

(D) The application will not be 

reviewed by the day care home 

provider. 

* * * * * 

■ 44. In § 226.25, add paragraph (j) to 

read as follows: 

§ 226.25 Other provisions. 

* * * * * 

(j) Fines. (1) An institution that is a 

school food authority may be subject to 

fines. The State agency may establish an 

assessment when it has determined that 

the institution or its facility has: 

(i) Failed to correct severe 

mismanagement of the Program; 

(ii) Disregarded a Program 

requirement of which the institution or 

its facility had been informed; or 

(iii) Failed to correct repeated 

violations of Program requirements. 

(2) FNS may direct the State agency 

to establish a fine against any institution 

when it has determined that the 

institution or its facility has committed 

one or more acts under paragraph (j)(1) 

of this section. 

(3) Funds used to pay a fine 

established under this paragraph must 

be derived from non-Federal sources. In 

calculating an assessment, the State 

agency must calculate the fine based on 

the amount of Program reimbursement 

earned by the institution or its facility 

for the most recent fiscal year for which 

full year data is available, provided that 

the fine does not exceed the equivalent 

of: 

(i) For the first fine, 1 percent of the 

amount of meal reimbursement earned 

for the fiscal year; 

(ii) For the second fine, 5 percent of 

the amount of meal reimbursement 

earned for the fiscal year; and 

(iii) For the third or subsequent fine, 

10 percent of the amount of meal 

reimbursement earned for the fiscal 

year. 

(4) The State agency must inform FNS 

at least 30 days prior to establishing the 

fine under this paragraph. The State 

agency must send the institution written 

notification of the fine established 

under this paragraph and provide a 

copy of the notification to FNS. The 

notification must: 

(i) Specify the violations or actions 

which constitute the basis for the fine 

and indicate the amount of the fine; 

(ii) Inform the institution that it may 

appeal the fine and advise the 

institution of the appeal procedures 

established under § 226.6(k); 

(iii) Indicate the effective date and 

payment procedures should the 

institution not exercise its right to 

appeal within the specified timeframe. 

(5) Any institution subject to a fine 

under paragraph (j)(1) of this section 

may appeal the State agency’s 

determination. In appealing a fine, the 

institution must submit to the State 

agency any pertinent information, 

explanation, or evidence addressing the 

Program violations identified by the 

State agency. Any institution seeking to 

appeal the State agency determination 

must follow State agency appeal 

procedures. 

(6) The decision of the State agency 

review official is final and not subject to 

further administrative or judicial 

review. Failure to pay a fine established 

under this paragraph may be grounds 

for suspension or termination. 

(7) Money received by the State 

agency as a result of a fine established 

under this paragraph against an 

institution and any interest charged in 

the collection of these fines must be 

remitted to FNS, and then remitted to 

the United States Treasury. 

■ 45. Revise § 226.26 to read as follows: 

§ 226.26 Program information. 

Persons seeking information about 

this Program should contact their State 

administering agency or the appropriate 

FNSRO. The FNS website has contact 

information for State agencies at https:// 

www.fns.usda.gov/fns-contacts and 

FNSROs at https://www.fns.usda.gov/ 

fns-regional-offices. 

PART 235—STATE ADMINISTRATIVE 

EXPENSE FUNDS 

■ 46. The authority citation for part 235 

continues to read as follows: 

Authority: Secs. 7 and 10 of the Child 

Nutrition Act of 1966, 80 Stat. 888, 889, as 

amended (42 U.S.C. 1776, 1779). 

§ 235.4 [Amended] 

■ 47. In § 235.4, amend paragraph (b)(2) 

by removing the term ‘‘§ 235.11(g)’’ and 

add in its place the term ‘‘§ 235.11(h)’’. 

■ 48. In § 235.5: 

■ a. Revise paragraph (d); and 

■ b. Amend paragraph (e)(2) by 

removing the word ‘‘unexpended’’ and 

adding in its place the word 

‘‘unobligated’’. 

The revision reads as follows: 

§ 235.5 Payments to States. 

* * * * * 

(d) Reallocation of funds. Annually, 

between March 1 and May 1 on a date 

specified by FNS, of each year, each 

State agency shall submit to FNS a State 

Administrative Expense Funds 

Reallocation Report (FNS–525) on the 

use of SAE funds. At such time, a State 

agency may release to FNS any funds 

that have been allocated, reallocated or 

transferred to it under this part or may 

request additional funds in excess of its 

current grant level. Based on this 

information or on other available 

information, FNS shall reallocate, as it 

determines appropriate, any funds 

allocated to State agencies in the current 

fiscal year which will not be obligated 

in the following fiscal year and any 

funds carried over from the prior fiscal 

year which remain unobligated at the 

end of the current fiscal year. 

Reallocated funds shall be made 

available for payment to a State agency 

upon approval by FNS of the State 

agency’s amendment to the base year 

plan which covers the reallocated funds, 

if applicable. Notwithstanding any other 

provision of this part, a State agency 

may, at any time, release to FNS for 

reallocation any funds that have been 

allocated, reallocated or transferred to it 

under this part and are not needed to 


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Federal Register / Vol. 88, No. 162 / Wednesday, August 23, 2023 / Rules and Regulations 57859 

implement its approved plan under this 

section. 

* * * * * 

§ 235.6 [Amended] 

■ 49. In § 235.6, amend paragraph (a) 

by: 

■ a. Redesignating as paragraph (a–1) as 

paragraph (a)(1); 

■ b. In newly redesignated paragraph 

(a)(1), removing the term 

‘‘§ 235.11(g)(3)’’ and adding in its place 

the term ‘‘§ 235.11(h)(3)’’ and removing 

the term ‘‘§ 235.11(g)(1) and (2)’’ and 

adding in its place the term 

‘‘§§ 235.11(h)(1) and (2)’’; and 

■ c. Redesignating paragraph (a–2) as 

paragraph (a)(2). 

■ 50. In § 235.11: 

■ a. Redesignate paragraphs (c) through 

(g) as paragraphs (d) through (h), 

respectively, and add new paragraph (c); 

■ b. In newly redesignated paragraph 

(e), remove the term ‘‘paragraphs (b) or 

(c)’’ and add in its place the term 

‘‘paragraphs (b), (c), or (d)’’; 

■ c. In redesignated paragraph (g), 

remove the term ‘‘paragraph (b)’’ and 

add in its place the term ‘‘paragraphs (b) 

and (c)’’ and add the words ‘‘or fine’’ 

after the word ‘‘sanction’’ each time it 

appears; and 

■ d. Revise redesignated paragraph 

(h)(3). 

The addition and revision read as 

follows: 

§ 235.11 Other provisions. 

* * * * * 

(c) Fines. (1) FNS may establish a fine 

against any State agency administering 

the programs under parts 210, 215, 220, 

225, 226, and 250 of this chapter, as it 

applies to the operation of the Food 

Distribution Program in schools and 

child and adult care institutions, when 

it has determined that the State agency 

has: 

(i) Failed to correct severe 

mismanagement of the programs; 

(ii) Disregarded a program 

requirement of which the State has been 

informed; or 

(iii) Failed to correct repeated 

violations of program requirements. 

(2) Funds used to pay a fine 

established under paragraph (c)(1) of 

this section must be derived from nonFederal sources. The amount of the fine 

will not exceed the equivalent of: 

(i) For the first fine, 1 percent of all 

allocations made available under § 235.4 

during the most recent fiscal year for 

which full year data are available; 

(ii) For the second fine, 5 percent of 

all allocations made available under 

§ 235.4 during the most recent fiscal 

year for which full year data are 

available; and 

(iii) For the third or subsequent fines, 

10 percent of all allocations made 

available under § 235.4 during the most 

recent fiscal year for which full year 

data are available. 

(3) State agencies seeking to appeal a 

fine established under this paragraph 

must follow the procedures set forth in 

this paragraph (g). 

* * * * * 

(h) * * * 

(3) Continuing education and training 

standards for State directors of school 

nutrition programs and distributing 

agencies. Each school year, all State 

directors with responsibility for the 

National School Lunch Program under 

part 210 of this chapter and the School 

Breakfast Program under part 220 of this 

chapter, as well as those responsible for 

the distribution of USDA donated foods 

under part 250 of this chapter, must 

complete a minimum of 15 hours of 

training in core areas that may include 

nutrition, operations, administration, 

communications and marketing. State 

directors tasked with National School 

Lunch Program procurement 

responsibilities must complete annual 

procurement training, as required under 

§ 210.21(h) of this chapter. Additional 

hours and topics may be specified by 

FNS, as needed, to address program 

integrity and other critical issues. 

* * * * * 

Cynthia Long, 

Administrator, Food and Nutrition Service. 

[FR Doc. 2023–17992 Filed 8–22–23; 8:45 am] 

BILLING CODE 3410–30–P 


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