13150 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

DEPARTMENT OF AGRICULTURE 

Food and Nutrition Service 

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

[FNS–2024–0005] 

RIN 0584–AE83 

Serious Deficiency Process in the 

Child and Adult Care Food Program 

and Summer Food Service Program 

AGENCY: Food and Nutrition Service 

(FNS), USDA. 

ACTION: Proposed rule. 

SUMMARY: This rulemaking proposes 

important modifications to make the 

application of serious deficiency 

procedures in the Child and Adult Care 

Food Program and Summer Food 

Service Program consistent, effective, 

and in line with current requirements 

under the Richard B. Russell National 

School Lunch Act. The serious 

deficiency process provides a systematic 

way for State agencies and sponsoring 

organizations to correct serious 

management problems, and when that 

effort fails, protect Child Nutrition 

Program integrity through due process. 

In response to public comments 

received on a prior rulemaking, the 

Food and Nutrition Service (FNS) 

proposes improvements to ensure that 

application of the serious deficiency 

process is fair and fully implemented. 

FNS proposes to add clarity to the 

serious deficiency process by defining 

key terms, establishing a timeline for 

full correction, and establishing criteria 

for determining when the serious 

deficiency process must be 

implemented. This rulemaking will also 

address termination for cause and 

disqualification, implementation of 

legal requirements for records 

maintained on individuals on the 

National Disqualified List, and 

participation of multi-State sponsoring 

organizations. 

DATES: Written comments must be 

received on or before May 21, 2024 to 

be assured of consideration. 

ADDRESSES: 

Federal eRulemaking Portal: Go to 

https://www.regulations.gov. Follow the 

online instructions for submitting 

comments. 

Mail: Send comments to: Navneet 

Kaur Sandhu, Program Integrity and 

Innovation Division, USDA Food and 

Nutrition Service, 1320 Braddock Place, 

Alexandria, VA 22314. 

All written comments submitted in 

response to the provisions of this 

proposed rule will be included in the 

record and will be made available to the 

public. Please be advised that the 

substance of the comments and the 

identity of the individuals or entities 

submitting the comments will be subject 

to public disclosure. USDA will make 

the written comments publicly available 

on the internet via https://

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Navneet Kaur Sandhu, Program Integrity 

and Innovation Division, USDA Food 

and Nutrition Service, 703–305–2728, 

navneet.sandhu@usda.gov. 

SUPPLEMENTARY INFORMATION: 

I. Background 

II. Section-By-Section Discussion of the 

Regulatory Provisions 

A. Child and Adult Care Food Program 

(CACFP) 

1. The CACFP Serious Deficiency Process 

2. Oversight and Implementation of the 

Serious Deficiency Process in 

Institutions 

3. Oversight and Implementation of the 

Serious Deficiency Process in Day Care 

Homes and Unaffiliated Sponsored 

Centers 

B. Summer Food Service Program (SFSP) 

1. Applying the Serious Deficiency Process 

to SFSP 

2. Oversight and Implementation of the 

Serious Deficiency Process in SFSP 

C. Suspension 

D. Disqualification and the National 

Disqualified List 

1. Termination for Cause and 

Disqualification 

2. Reciprocal Disqualification in Child 

Nutrition Programs 

3. Legal Requirements for Records 

Maintained on Disqualified Individuals 

E. Multi-State Sponsoring Organizations 

F. Summary of Regulatory Provision 

Proposals 

III. Procedural Matters 

A. Executive Orders 12866, 13563 and 

14094 

B. Regulatory Flexibility Act 

C. Unfunded Mandates Reform Act 

D. Executive Order 12372 

E. Federalism Summary Impact Statement 

F. Executive Order 12988, Civil Justice 

Reform 

G. Civil Rights Impact Analysis 

H. Executive Order 13175 

I. Paperwork Reduction Act 

J. E-Government Act Compliance 

I. Background 

Integrity is essential to meeting the 

mission of all Child Nutrition Programs. 

To improve program operations, the 

Food and Nutrition Service (FNS) works 

in close collaboration with State and 

local partners. In the Child and Adult 

Care Food Program (CACFP), State 

agencies are responsible for approving 

and monitoring institutions— 

independent child and adult care 

centers and sponsoring organizations of 

family day care homes and centers—to 

maintain program integrity and ensure 

compliance with program requirements. 

State agencies have a similar 

responsibility for oversight of sponsors 

in the Summer Food Service Program 

(SFSP). 

More than 20 years ago, FNS 

established a system for protecting 

CACFP against the incidence of 

mismanagement, abuse, and fraud by 

institutions and facilities participating 

in the program. The serious deficiency 

process was implemented in response to 

Federal reviews that revealed critical 

weaknesses in State agency and 

institution management controls over 

program operations. The reviews 

uncovered examples of regulatory 

noncompliance by institutions and 

facilities, including improper use of 

program funds, inadequate financial and 

administrative controls, and 

documented instances of 

mismanagement and, in some cases, 

fraud, by program participants. 

These findings raised questions 

regarding Federal and State 

administration of CACFP that led to 

increased focus on program 

management and integrity in CACFP. 

The Agricultural Risk Protection Act of 

2000, Public Law 106–224, established 

statutory requirements under section 17 

of the Richard B. Russell National 

School Lunch Act (NSLA), at 42 U.S.C. 

1766(d)(5), for terminating or 

suspending participating institutions 

and day care home providers. The 

Grains Standards and Warehouse 

Improvement Act of 2000 and Healthy 

Hunger-Free Kids Act of 2010, Public 

Laws 106–472 and 111–296, 

respectively, further amended those 

provisions. 

In response to the Federal reviews, 

FNS published guidance to help State 

agencies implement the statutory 

requirements relating to a serious 

deficiency determination, corrective 

action, suspension, termination, and 

disqualification of institutions and 

responsible principals and responsible 

individuals in CACFP. FNS 

implemented these as requirements 

through publication of the Child and 

Adult Care Food Program; 

Implementing Legislative Reforms to 

Strengthen Program Integrity interim 

rule, 67 FR 43447, June 27, 2002; and 

Child and Adult Care Food Program 

Improving Management and Integrity 

final rule, 76 FR 34542, June 13, 2011. 

These rulemakings established a serious 

deficiency process at 7 CFR 226.6 and 

226.16 that requires a process for 

addressing severe and pervasive 

problems, with a structured series of 

steps that give CACFP institutions and 

day care homes the opportunity for 

corrective action and due process. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13151 

To protect program integrity, these 

rulemakings implemented procedures 

that would correct problems in a timely 

manner. That is why there are corrective 

action timeframes for completion of 

corrective action and milestones for 

monitoring progress towards meeting 

the deadline. The serious deficiency 

process for CACFP starts when the State 

agency identifies a serious problem and 

concludes when that serious problem is 

resolved, either through corrective 

action or by termination and 

disqualification. The regulations 

identify lists of serious deficiencies and 

describe corrective action, termination, 

and disqualification procedures. 

The current CACFP serious deficiency 

process at 7 CFR 226.6(c) includes 

procedures to help the State agency 

document the case to terminate and 

disqualify non-performing CACFP 

institutions that are unwilling to or 

incapable of resolving their serious 

deficiencies. The process also includes 

procedures to provide seriously 

deficient institutions the opportunity to 

appeal the State agency’s adverse 

actions and to continue to receive 

payments of valid claims while they 

receive a fair hearing. CACFP 

sponsoring organizations implement a 

similar process to correct serious 

problems of noncompliance in day care 

homes, as described in 7 CFR 226.16(l). 

Until enactment of the Healthy, 

Hunger-Free Kids Act of 2010 (HHFKA), 

there were no corresponding statutory 

requirements for implementing a serious 

deficiency process for SFSP. However, 

through HHFKA, Congress established 

requirements relating to the termination 

of participation of service institutions 

which included maintaining a list of 

disqualified service institutions and 

individuals. The regulations under 7 

CFR 225.6(h) specify criteria State 

agencies must consider when approving 

sites for participation; provide authority 

for the State agency to terminate 

sponsor participation at 7 CFR 

225.11(c); and establish procedures for 

sponsors to appeal adverse actions, 

including termination of a sponsor or 

site and denial of an application for 

participation, at 7 CFR 225.13. However, 

SFSP regulations do not currently 

reflect the statutory requirement to 

disqualify service institutions and 

individuals that are seriously deficient 

from participating in SFSP, or any other 

Child Nutrition Program, the provision 

for a fair hearing and prompt 

determination, or placement on a list of 

disqualified institutions and 

individuals. 

In developing the proposed rule, 

Child Nutrition Program Integrity, 81 FR 

17563, March 29, 2016, FNS applied 

existing serious deficiency requirements 

to establish a serious deficiency process 

for service institutions and individuals, 

i.e., sponsors and sites in SFSP and 

unaffiliated child care centers and 

unaffiliated adult day care centers in 

CACFP. To strengthen management 

practices and eliminate gaps that put 

program integrity at risk, FNS proposed 

amendments that would: 

• Extend the serious deficiency 

process to unaffiliated centers in 

CACFP; 

• Implement a serious deficiency 

process in SFSP; 

• Require each SFSP State agency to 

provide appeal procedures to sponsors, 

annually and upon request; 

• Specify the types of adverse actions 

that cannot be appealed in SFSP; 

• Establish a list of disqualified 

institutions and individuals 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; 

• Require the State agency to deny 

the application of any applicant that has 

been terminated for cause from any 

Child Nutrition Program or placed on a 

CACFP or SFSP list of disqualified 

institutions and individuals; 

• Require the State agency to 

terminate an agreement whenever a 

program operator’s participation ends; 

and 

• Require action by the State agency 

to terminate an agreement for cause, 

through the serious deficiency process 

or placement on list of disqualified 

institutions and individuals. 

FNS also published a notice, Request 

for Information: The Serious Deficiency 

Process in the Child and Adult Care 

Food Program, 84 FR 22431, May 17, 

2019, to gather information to help FNS 

understand firsthand the experiences of 

State agencies and program operators. 

An analysis of the comments on the 

proposed rule and responses to the 

notice convinced FNS that important 

modifications were needed to make the 

application of the serious deficiency 

process consistent and effective, and to 

ensure it is in line with current statutory 

requirements. 

On August 23rd, 2023, FNS published 

the Child Nutrition Program Integrity 

final rule, 88 FR 57792, which codifies 

changes required under HHFKA to 

strengthen administration of Child 

Nutrition Programs, at all levels, 

through enhanced oversight and 

enforcement tools. As proposed, the 

Child Nutrition Program Integrity final 

rule included amendments related to 

serious deficiency and termination 

procedures in SFSP, serious deficiency 

and termination procedures for 

unaffiliated sponsored centers in 

CACFP, and reciprocal disqualification 

of applicants terminated for cause and 

placed on the National Disqualified List. 

However, FNS received comments 

expressing concern about using the 

CACFP serious deficiency process as a 

model for establishing procedures in 

other Child Nutrition Programs. The 

comments suggested that FNS further 

investigate and attempt to address 

potential inconsistencies in 

implementation of the serious 

deficiency process among States. 

Ultimately, FNS agreed that further 

changes from what was proposed in the 

Child Nutrition Program Integrity rule 

are needed to improve the serious 

deficiency process and ensure its 

application is fair and fully 

implemented. Instead of finalizing the 

proposed rule as it related to the serious 

deficiency process, FNS decided to 

pursue a separate rulemaking in order to 

consider improvements to the serious 

deficiency process before extending 

serious deficiency, termination, and 

disqualification procedures to SFSP. 

To better serve administering agencies 

and program operators, this proposed 

rule is intended to make the application 

of the serious deficiency process for 

CACFP and SFSP consistent, effective 

and in line with current statutory 

requirements. FNS proposes 

improvements to ensure that the serious 

deficiency process is fair, equitable, and 

effective. This new rulemaking proposes 

amendments to CACFP and SFSP 

regulations that are designed to increase 

program operators’ accountability and 

operational efficiency, while improving 

the ability of administering agencies to 

address severe or repeated violations of 

Federal requirements. 

While minimizing changes to 

procedures, FNS proposes to add clarity 

to the serious deficiency process by 

defining key terms, establishing a 

timeline for full correction, and 

establishing criteria for determining 

when the serious deficiency process 

must be implemented. This proposed 

rule also addresses agreements that are 

terminated for cause, disqualification 

from participation in CACFP or SFSP, 

reciprocal disqualification from any 

Child Nutrition Program, legal 

requirements for records maintained on 

individuals on the National Disqualified 

List, and participation of multi-State 

sponsoring organizations. 

This rulemaking also re-examines the 

concept of good standing in light of 

recent rulemaking. The final rule, 

Streamlining Program Requirements 

and Improving Integrity in the Summer 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13152 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

Food Service Program (SFSP), 87 FR 

57304, September 19, 2022, established 

that a program operator would be 

considered in ‘‘good standing’’ if it were 

reviewed by the State agency with no 

major program findings or it had 

completed and implemented all 

corrective actions from the last 

compliance review. Good standing 

reflects a program operator’s status and 

is considered by State agencies as a 

factor when making decisions around 

frequency of reviews. Therefore, FNS 

recognized that providing further 

clarification to determine what good 

standing means across all Child 

Nutrition Programs would benefit State 

agencies and program operators. This 

proposed rule would define the status of 

good standing as a program operator 

that meets its program responsibilities, 

is current with its financial obligations, 

and, if applicable, has fully 

implemented all corrective actions 

within the required period of time. This 

would serve as a general definition that 

would apply to all program operators 

across Child Nutrition Programs and 

would be added to 7 CFR 210.2, 215.2, 

220.2, 225.2, and 226.2. 

FNS also proposes to reorganize the 

CACFP and SFSP regulations to 

improve readability and reduce 

duplication of information in the 

serious deficiency process. For CACFP, 

references to program operations that 

are seriously deficient and 

corresponding requirements pertaining 

to appeals, suspension of participation, 

termination of agreements, and 

disqualification are found in multiple 

sections of existing regulations. This 

proposed rule would move these 

requirements into a new single 

subchapter under 7 CFR 226.25. The 

other provisions described under 7 CFR 

part 226, subpart G would be 

renumbered to correspond with this 

proposed change. FNS also proposes to 

reorganize SFSP regulations by 

collecting all provisions of the serious 

deficiency process under a single 

subchapter at 7 CFR 225.18 and 

renumbering the other sections of 7 CFR 

part 225, subpart D. 

This proposed rule gives the public 

the opportunity to provide comments 

that will inform the development of a 

final rule on the oversight and 

implementation of the serious 

deficiency process in CACFP and SFSP. 

FNS will consider all relevant 

comments submitted during the 60-day 

comment period for this rulemaking. 

FNS invites the public to submit 

comments on all aspects of this 

proposed rule, including comments in 

response to specific program changes 

that are found throughout this preamble 

and alternatives that are suggested for 

certain provisions. FNS also invites 

comments from administering agencies 

and program operators on the 

administrative cost of compliance and 

the potential impact on program access 

of any of the provisions in this 

rulemaking. 

Please select those issues that most 

concern and affect you, or that you best 

understand, and include examples of 

how the proposed rule would impact 

you, positively or negatively. Consider 

what could be done to foster incentives 

for flexibility, consistency, eliminating 

duplication, ensuring compliance, and 

protecting program integrity. Your 

written comments should be specific to 

the issues raised in this proposed rule 

and explain the reasons for any changes 

you recommend or proposals you 

oppose. Where possible, please 

reference the specific section or 

paragraph of the proposal you are 

addressing and whether the concern is 

related to either CACFP or SFSP, or 

both. 

II. Section-By-Section Discussion of the 

Regulatory Provisions 

A. Child and Adult Care Food Program 

(CACFP) 

1. The CACFP Serious Deficiency 

Process 

Defining Serious Deficiency 

Underlying the concerns of the 

serious deficiency process is the 

broader, systemic issue of what 

constitutes a serious deficiency and how 

State agencies and sponsoring 

organizations should utilize the serious 

deficiency process as an effective tool in 

managing program operations. Public 

comments that FNS has received in 

response to previous rulemakings and 

informal feedback from CACFP 

professionals and advocates consistently 

point out that the lack of defined 

terminology confuses program 

administrators and contributes to errors 

in responding to serious management 

problems. Before extending the serious 

deficiency process to unaffiliated 

centers or establishing a process for 

SFSP, these stakeholders asked FNS to 

define terms in 7 CFR 226.2 that align 

with the statutory structure and are 

consistent across CACFP and SFSP. 

As explained in the Child and Adult 

Care Food Program; Implementing 

Legislative Reforms to Strengthen 

Program Integrity interim rule, prior to 

2002, the term ‘‘serious deficiency’’ was 

used to describe program performance 

at two very different stages of an 

oversight process. In the first instance, 

an institution failing to perform under 

the terms of its agreement was notified 

by its State agency that it was seriously 

deficient in its operation of CACFP and 

was given an opportunity to take 

corrective action. Later, if the institution 

failed to take corrective action during 

the specified time, its agreement was 

terminated by the State agency and the 

institution was placed on a list of 

seriously deficient institutions. The use 

of the same term in both instances, as 

stakeholders pointed out, caused 

confusion for State agencies and 

institutions. 

The concept of serious deficiency 

changed when the first interim rule 

addressing management improvement 

and oversight, Child and Adult Care 

Food Program; Implementing Legislative 

Reforms to Strengthen Program 

Integrity, 67 FR 43447, June 27, 2002, 

was published. This interim rule 

amended 7 CFR 226.2 to define 

seriously deficient as ‘‘the status of an 

institution or a day care home that has 

been determined to be non-compliant in 

one or more aspects of its operation of 

the program.’’ Serious deficiency is a 

larger concept in that it reflects the 

situation before the opportunity for 

corrective action or the right to appeal 

is exercised by an institution. In the 

interim rule preamble, FNS attempted to 

explain this concept, emphasizing that 

the serious deficiency process should 

refer to every action that happens after 

a serious deficiency is declared, 

beginning with the determination of the 

finding, and ending with full and 

permanent resolution or 

disqualification. 

Although current CACFP regulations 

define ‘‘seriously deficient,’’ other terms 

that affect implementation of the current 

serious deficiency process are not 

clearly defined. For example, there is no 

corresponding definition of ‘‘serious 

deficiency’’ under 7 CFR 226.2. The 

regulations do not clearly define 

standards for determining the severity of 

a problem identified as a finding and 

when that finding rises to the level of a 

serious deficiency. The regulations are 

also ambiguous with regard to 

differentiating between occasional 

administrative errors and systemic 

management problems. Some terms 

have multiple connotations—for 

example, administrative review may 

mean a fair hearing or it may mean an 

evaluation of program operations— 

while other terms, such as good 

standing, are vague or subjective. As 

public comments and stakeholder 

feedback have revealed, these gaps have 

long been of concern to the CACFP 

community. 

Under this proposed rule, the findings 

that trigger the serious deficiency 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13153 

process would be defined as serious 

management problems, which are 

currently known as serious deficiencies. 

This term appears in section 17 of the 

NSLA, at 42 U.S.C. 1766(d), which 

requires State agencies to conduct more 

frequent reviews of any institution that 

has serious management problems or is 

at risk of having serious management 

problems. The proposed definition 

characterizes a serious management 

problem as the type of administrative 

weakness that affects an institution’s 

ability to meet CACFP performance 

standards—financial viability, 

administrative capability, and program 

accountability—or that affects the 

quality of meals served or the integrity 

of a claim for reimbursement in a day 

care home or center. For example, a 

sponsoring organization that operates a 

variety of community programs may be 

at risk of serious management problems 

if it has limited staffing to support 

program operations or is devoting too 

small of a share of administrative 

resources to CACFP. More frequent 

monitoring by the State agency and 

sponsoring organization would help 

improve CACFP operations by 

identifying and addressing these 

weaknesses. However, if these measures 

are not effective, the State agency would 

have to apply the serious deficiency 

process to require the sponsoring 

organization to take specific corrective 

actions to protect program integrity. 

FNS proposes that the serious 

deficiency process provide program 

operators with the opportunity to 

correct serious management problems 

through a corrective action plan. 

Institutions would develop corrective 

action plans to identify the steps they 

will take to correct serious management 

problems, or serious deficiencies as they 

are known under the current process. 

Prior to 2011, serious deficiencies 

were ‘‘rescinded’’ when an institution’s 

corrective action plan was approved. 

Unfortunately, rescinding the serious 

deficiency that early in the process often 

resulted in later reviews that 

demonstrated the serious deficiency had 

not been corrected, or that the corrective 

action left institutions vulnerable to 

other serious deficiencies. As a result, 

FNS changed the process to temporarily 

defer a finding of serious deficiency. In 

current regulations at 7 CFR 

226.6(c)(1)(iii)(B), (c)(2)(iii)(B), and 

(c)(3)(iii)(B), the State agency is required 

to temporarily defer the institution’s 

serious deficiency. However, under this 

process, institutions were never able to 

have their serious deficiency status 

removed, even after years of reviews 

with no additional findings. Through 

this rulemaking, changing the serious 

deficiency determination to occur at the 

point of termination aligns the 

regulations with statute at section 17 of 

the NSLA, at 42 U.S.C. 1766(a), which 

asserts that an institution that has been 

seriously deficient in operating any 

Child Nutrition Program cannot be 

eligible to participate in CACFP. 

Terms under the current serious 

deficiency process have led to 

confusion. The term ‘‘fully and 

permanently corrected’’ lacks clarity, 

particularly in cases where the same 

findings reoccur and the program 

operator’s agreement is proposed to be 

terminated. The term ‘‘permanent’’ is 

contradictory as it assumes that the 

same findings cannot arise again, 

regardless of the amount of time that has 

passed since the initial findings. The 

term ‘‘temporarily deferred’’ is 

confusing and the existing process does 

not establish limits on the duration of 

the deferment after corrective actions 

have taken place. Instead, this proposed 

rule would create a path to full 

correction within a defined period of 

time. When achieved, the serious 

management problem would be vacated, 

not deferred. If the same finding occurs 

after full correction is achieved, it will 

not lead directly to proposed 

termination. 

FNS recognizes that clearly defined 

terminology is essential to fully 

understand and correctly implement the 

serious deficiency process. FNS 

proposes to amend 7 CFR 226.2 to 

clarify existing terms, remove terms that 

are confusing, and add definitions to 

terms that had not previously been 

defined in the regulations. This 

proposed rule includes the following 

list of terms that relate to proposed 

modifications to the serious deficiency 

process described in this rulemaking: 

• Contingency plan means the State 

agency’s written process for the transfer 

of sponsored centers and day care 

homes that will help ensure that 

program meals for children and adult 

participants will continue to be 

available without interruption if a 

sponsoring organization’s agreement is 

terminated. 

• Corrective action means 

implementation of a solution, written in 

a corrective action plan, to address the 

root cause and prevent the recurrence of 

a serious management problem. 

• Disqualified means the status of an 

institution, facility, responsible 

principal, or responsible individual who 

is ineligible for participation in the 

program. 

• Fair hearing means due process 

provided upon request to: 

Æ An institution that has been given 

notice by the State agency of an action 

that will affect participation or 

reimbursement under the program; 

Æ A principal or individual 

responsible for an institution’s serious 

management problem and issued a 

notice of proposed termination and 

proposed disqualification from program 

participation; or 

Æ An individual responsible for a day 

care home or unaffiliated center’s 

serious management problem and 

issued a notice of proposed 

disqualification from program 

participation. 

• Finding means a violation of a 

regulatory requirement identified during 

a review. 

• Fiscal action means the recovery of 

an overpayment or claim for 

reimbursement that is not properly 

payable through direct assessment of 

future claims, offset of future claims, 

disallowance of overclaims, submission 

of a revised claim for reimbursement, or 

disallowance of funds for failure to take 

corrective action to meet program 

requirements. 

• Full correction means the status 

achieved after a corrective action plan is 

accepted and approved, all corrective 

actions are fully implemented, and no 

new or repeat serious management 

problem is identified in subsequent 

reviews, as described in proposed 

§ 226.25(c). 

• Good standing means the status of 

a program operator that meets its 

program responsibilities, is current with 

its financial obligations, and if 

applicable, has fully implemented all 

corrective actions within the required 

period of time. 

• Hearing official means an 

individual who is responsible for 

conducting an impartial and fair 

hearing—as requested by an institution, 

responsible principal, or responsible 

individual responding to a proposal for 

termination—and rendering a decision. 

• Lack of business integrity means the 

conviction or concealment of a 

conviction for fraud, antitrust 

violations, embezzlement, theft, forgery, 

bribery, falsification or destruction of 

records, making false statements, 

receiving stolen property, making false 

claims, or obstruction of justice. 

• Legal basis means the lawful 

authority established in statute or 

regulation. 

• National Disqualified List (NDL) 

means a system of records, maintained 

by the Department, of institutions, 

responsible principals, and responsible 

individuals disqualified from 

participation in the program. 

• Notice means a letter sent by 

certified mail, return receipt (or the 

equivalent private delivery service), by 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13154 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

facsimile, or by email, that describes an 

action proposed or taken by a State 

agency or FNS with regard to an 

institution’s program reimbursement or 

participation. Notice also means a letter 

sent by certified mail, return receipt (or 

the equivalent private delivery service), 

by facsimile, or by email, that describes 

an action proposed or taken by a 

sponsoring organization with regard to a 

day care home or unaffiliated center’s 

participation. 

• Program operator means any entity 

that participates in one or more Child 

Nutrition Programs. 

• Responsible individual means any 

individual employed by, or under 

contract with an institution or facility, 

or any other individual, including 

uncompensated individuals, who the 

State agency or FNS determines to be 

responsible for an institution or 

facility’s serious management problem. 

• Responsible principal means any 

principal, as described in this section, 

who the State agency or FNS 

determined to be responsible for an 

institution’s serious management 

problem. 

• Review cycle means the frequency 

and number of required reviews of 

institutions and facilities. 

• Serious management problem 

means the finding(s) that relates to an 

institution’s inability to meet the 

program’s performance standards or that 

affects the integrity of a claim for 

reimbursement or the quality of meals 

served in a day care home or center. 

• Seriously deficient means the status 

of an institution or facility after it is 

determined that full corrective action 

will not be achieved and termination for 

cause is the only appropriate course of 

action. 

• State agency list means an actual 

paper or electronic list, or the 

retrievable paper records, maintained by 

the State agency, that includes 

information on institutions and day care 

home providers or unaffiliated centers 

through the serious deficiency process 

in that State. The list must be made 

available to FNS upon request and must 

include information specified in 

proposed § 226.25(b). 

• Termination for cause means the 

termination of a program agreement due 

to considerations related to an 

institution or a facility’s performance of 

program responsibilities under the 

agreement between: 

Æ A State agency and the 

independent center, 

Æ A State agency and the sponsoring 

organization, 

Æ A sponsoring organization and the 

unaffiliated center, or 

Æ A sponsoring organization and the 

day care home. 

Accordingly, this proposed rule 

would define additional terms under 7 

CFR 226.2 by defining contingency 

plan, corrective action, fair hearing, 

finding, fiscal action, full correction, 

good standing, hearing official, lack of 

business integrity, legal basis, 

responsible individual, responsible 

principal, review cycle, and serious 

management problem. Definitions of 

disqualified, National Disqualified List, 

notice, seriously deficient, State agency 

list, and termination for cause that are 

currently listed under 7 CFR 226.2 

would be amended. Definitions of 

administrative review, administrative 

review official, and the combined term, 

‘‘responsible principal or responsible 

individual’’ would be removed from 7 

CFR 226.2. 

Current Requirements of the CACFP 

Serious Deficiency Process 

Historically, the CACFP serious 

deficiency process established a 

systematic way for an administering 

agency—a State agency or sponsoring 

organization—to correct problems and 

protect program integrity. Serious 

deficiency, termination, and 

disqualification procedures already 

exist for institutions, day care homes, 

responsible principals, and responsible 

individuals in CACFP under section 17 

of the NSLA, 42 U.S.C. 1766(d)(5), and 

codified in regulations at 7 CFR 

226.6(c), 226.6(k), 226.6(l), and 

226.16(l). 

These procedures give institutions 

and day care homes the opportunity for 

corrective action and due process. They 

are also designed to help administering 

agencies (State agencies and sponsoring 

organizations) document the case to 

terminate and remove from CACFP any 

program operator that is unwilling or 

incapable of resolving serious 

deficiencies that place program integrity 

at risk. Current CACFP regulations 

allow only two possible outcomes of the 

serious deficiency process, either the 

correction of the serious deficiency to 

the administering agency’s satisfaction 

within stated timeframes, or the 

administering agency’s proposed 

termination of the agreement and 

disqualification of the program operator 

and its responsible principals and 

responsible individuals. However, even 

when the serious deficiency is 

corrected, it is still only temporarily 

deferred. 

Current §§ 226.6(c) and 226.16(l) 

describe steps that start when the 

administering agency identifies a 

serious deficiency and end when that 

finding of serious deficiency has been 

resolved, either through corrective 

action or termination and 

disqualification. FNS has provided 

guidance for administering agencies on 

the serious deficiency process, 

including steps in the Serious 

Deficiency, Suspension, and Appeals for 

State Agencies and Sponsoring 

Organizations handbook. These steps 

include that the administering agency: 

1. Identify a finding that rises to the 

level of serious deficiency. There are 

several factors to consider in deciding 

that a program finding is a serious 

deficiency, including the severity of the 

problem, the degree of responsibility 

attributable to the program operator, the 

program operator’s past performance 

and training, the nature of the 

requirements that relate to the problem, 

and the degree to which the problem 

impacts program integrity. 

2. Issue a notice of a serious 

deficiency. A formal notice must 

provide information to the program 

operator, responsible principals, and 

responsible individuals that explains all 

of the cited findings, describes the 

actions required to fully and 

permanently correct the serious 

deficiencies, and provide a definite and 

appropriate time limit for the corrective 

action to be implemented. 

3. Receive and assess a written 

corrective action plan. The program 

operator must submit a corrective action 

plan that describes what actions and 

management controls have been 

implemented to address each serious 

deficiency. The administering agency 

must evaluate the plan to determine that 

actions taken to correct each serious 

deficiency are adequate and that 

management controls are in place to 

ensure that the serious deficiencies are 

fully and permanently corrected. 

4. Issue a notice of temporary deferral 

of the serious deficiency or a notice of 

proposed termination and 

disqualification. If the program operator 

submits a corrective action plan that 

satisfactorily corrects the serious 

deficiencies within the allotted period 

of time, the serious deficiency 

determination is temporarily deferred. 

The administering agency issues a 

notice to advise the responsible 

principals and or responsible 

individuals that the corrective action is 

successful and the serious deficiency 

determination is temporarily deferred. If 

it is later, at any time, determined that 

the serious deficiency has recurred, the 

administering agency must immediately 

issue a new notice of proposed 

termination and disqualification. If no 

corrective action plan is submitted or if 

the corrective action is not permanent or 

not adequate, the administering agency 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13155 

issues a notice of proposed termination 

for cause and disqualification with 

appeal rights and procedures. 

5. Provide an appeal of the proposed 

termination and disqualification if 

requested by the program operator. An 

institution and its responsible 

principals and responsible individuals 

may request an in person hearing or an 

administrative review of documents to 

determine whether the State agency’s 

actions comply with program 

requirements. A day care home also has 

the right to appeal a proposed 

termination through an administrative 

review of documents. The day care 

home may review the record on which 

the termination decision was based and 

refute the action in writing. The 

administrative review official is not 

required to hold a hearing. 

6. Issue a notice of final termination 

and disqualification or a notice of 

temporary deferral. On the date when 

the time for requesting an appeal 

expires or the administrative review 

official upholds the proposed 

termination and disqualification, the 

administering agency immediately 

terminates the program operator’s 

agreement, disqualifies the program 

operator and its responsible principals 

and responsible individuals, and adds 

their names to the National Disqualified 

List. If the administrative review official 

vacates the proposed termination, the 

administering agency issues a notice to 

withdraw the serious deficiency 

determination and temporarily defer the 

proposed termination. 

Once on the National Disqualified 

List, an institution, day care home, 

responsible principal, or responsible 

individual is ineligible to participate in 

CACFP in any State as an institution, a 

facility under a sponsoring organization, 

or as part of a different institution or 

facility. FNS believes it is critical to the 

effectiveness of the serious deficiency 

process that these procedures are 

consistently applied when an institution 

or provider is declared seriously 

deficient. For example, if the serious 

deficiency process is not completed, an 

individual who was found responsible 

for the serious deficiency in one 

institution might simply re-incorporate 

under a new name and be admitted to 

participate in CACFP in another State. 

Public comments on prior rulemaking 

have disclosed that implementation may 

vary widely. Respondents described 

weaknesses in existing regulations that 

created a process that they perceived to 

be unreasonable, ineffective, and 

punitive. This perception undermines 

the goal of the serious deficiency 

process to strengthen program 

compliance and integrity. FNS agrees 

that improvements to the serious 

deficiency process are needed to ensure 

its application is fair and fully 

implemented. To better serve State 

agencies and program operators, FNS is 

proposing modifications that will make 

the application of the serious deficiency 

process more consistent and more 

effective. 

Proposed Changes to the CACFP Serious 

Deficiency Process 

As noted earlier, FNS has carefully 

examined the serious deficiency process 

and the lessons learned through policy 

development and operational 

experience, to understand how to 

address and correct serious management 

problems in the CACFP. FNS’s 

understanding is that the steps 

described above have been useful for 

administering agencies dealing with 

serious failure to perform, and not just 

for the worst examples of potential 

fraud. This proposed rule would 

maintain the steps that have been 

proven effective—basic procedures 

guiding administering agencies in 

identifying serious management 

problems, requiring corrective action, 

providing appeals, continuing payments 

of valid claims until the appeals are 

resolved, and taking actions on 

termination and disqualification. 

However, based on that examination, 

several key changes are proposed in this 

rule. 

Currently, the administering agency 

identifies a serious deficiency violation, 

which is defined in regulation. For new 

institutions, current § 226.6(c)(1)(ii) 

provide that serious deficiencies 

include the submission of false 

information and concealment of a 

conviction during the past 7 years that 

indicates a lack of business integrity. 

Examples are provided in current 

regulation for offenses that indicate a 

lack of business integrity, with 

discretion allowed for the State to 

determine other offenses that may 

indicate a lack of business integrity or 

any other action affecting the 

institution’s ability to administer the 

program in accordance with program 

requirements. 

Under this proposed rule, a program 

finding identified during a review will 

no longer be considered a serious 

deficiency, but a serious management 

problem, if certain standards are met. 

This is a change in the terminology used 

to describe the process of identifying 

problems that needs correction. While 

FNS issued a CACFP handbook, Serious 

Deficiency, Suspension, and Appeals for 

State Agencies and Sponsoring 

Organizations, in February 2015, which 

recommends a framework to guide 

decision making, the current regulations 

are unclear about what standards apply 

to distinguish between errors and more 

serious findings. 

Under this proposed rule, FNS is 

proposing to codify the criteria found in 

the CACFP handbook, Serious 

Deficiency, Suspension, and Appeals for 

State Agencies and Sponsoring 

Organizations, that the State agency 

must consider when determining 

whether a program violation is a serious 

management problem. This rulemaking 

also proposes several questions to assist 

the administering agency. In addition to 

inviting comments on this proposed 

rule in general, FNS specifically 

welcomes public comments on the 

following five criteria: 

1. The severity of the problem. Is the 

noncompliance on a minor or 

substantial scale? Are the findings 

indicative of a systemic problem, or is 

the problem truly an isolated event? 

There is a point at which continued 

problems indicate serious 

mismanagement. Problems that initially 

appear manageable may become serious 

if not corrected within a reasonable 

period of time. Even minor problems 

may be serious if systemic. Some 

problems are serious even though they 

have occurred only once. For example, 

missing the recording of meal counts at 

the point of service for one day out of 

a month could be resolved with 

technical assistance. However, a second 

review with the same problem or an 

initial review with multiple days of 

incomplete point-of-service meal counts 

could rise to the level of a serious 

management problem. 

2. The degree of responsibility 

attributable to the program operator. To 

the extent that evidence is available, can 

the administering agency determine 

whether the findings were inadvertent 

errors of an otherwise responsible 

institution or facility? Is there evidence 

of negligence or a conscious 

indifference to regulatory requirements 

or is there evidence of deception? 

3. The program operator’s history of 

participation and training in CACFP. Is 

this the first time the institution, day 

care home or unaffiliated center is 

having problems or has noncompliance 

occurred frequently at the same 

institution or facility? 

4. The nature of the requirements that 

relate to the problem. Are the program 

operator’s actions a clear violation of 

CACFP requirements? Has the program 

operator implemented new policies 

correctly? 

5. The degree to which the problem 

impacts program integrity. Is the finding 

undermining the intent or purpose of 

the CACFP, such as misuse of program 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13156 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

funds, or is it simply an administrative 

error? 

Current §§ 226.6(c)(3)(iii)(A) and 

226.16(l)(3)(i) require the administering 

agency to issue a notice of the serious 

deficiency identified. The program 

operator must submit a corrective action 

plan to resolve the serious deficiency. 

Under this proposed rule, the 

administering agency would declare the 

program operator to be seriously 

deficient at the point of termination. A 

notice of proposed serious deficiency 

and proposed termination would be 

issued after the program operator has 

been provided an opportunity to correct 

serious management problems through a 

corrective action plan. If corrective 

action is not submitted, not approved, 

or not implemented, the administering 

agency would move to propose 

termination, with the opportunity to 

request a fair hearing. If the termination 

is upheld, the agreement is terminated 

for cause and the program operator is 

declared seriously deficient. 

Current §§ 226.6(c)(3)(iii)(B) and 

226.16(l)(3)(i)(B) require the corrective 

action plan to detail the program 

operator’s response to the notice of 

serious deficiency. The program 

operator must submit a written plan that 

describes the internal controls that are 

being implemented to ensure that the 

serious deficiency is fully and 

permanently corrected. Under this 

proposed rule, the corrective action plan 

must address the root causes, i.e., the 

underlying, true causes, of the serious 

management problem. By doing so, the 

corrective action plan should support 

elimination of the underlying challenges 

experienced by the program operator for 

long term program improvement. The 

program operator would be required to 

submit a written plan that describes the 

actions to be taken to correct the root 

causes of the identified problem, 

expected period of time for the 

corrective action to be put into place, 

and interim milestones for reaching 

implementation that would lead to full 

correction. 

Under current § 226.6(c)(3)(iii)(C), a 

notice of proposed termination and 

disqualification specifies the same set of 

outcomes for all types of institutions— 

the institution is terminated for cause, 

disqualified, and placed on the National 

Disqualified List. FNS is considering 

alternatives for institutions that are 

school food authorities, including an 

option that would require termination of 

the program agreement allowing 

participation in CACFP, but would not 

subject the school food authority to 

disqualification and placement on the 

National Disqualified List. In the 

discussion of reciprocal disqualification 

in Child Nutrition Programs, under 

section II–D–3 of this preamble, FNS 

requests specific input on this proposal 

to implement an alternative to 

disqualification for program operators 

that are school food authorities. Public 

comments on this alternative will be 

critical as FNS develops the final rule. 

Under current § 226.6(c)(1), if an 

applying institution does not meet all of 

the application requirements, the State 

agency must deny the application and 

initiate action through the serious 

deficiency process, which could lead to 

the disqualification of the new 

institution, the person who signs the 

application, and any other responsible 

principal or responsible individual. 

However, FNS recognizes that the intent 

of the serious deficiency process is to 

address program performance under a 

legally binding agreement. Under this 

rulemaking, at proposed § 226.6(c), a 

separate process—not the serious 

deficiency process—would provide 

applicants the opportunity to correct the 

application and request due process if 

the application is denied. 

While current § 226.2 includes a 

combined term of ‘‘responsible 

principal or responsible individual,’’ 

this proposed rule would set out 

separate definitions. Each State agency 

determines which people are 

responsible for a program operator’s 

serious management problem. In most 

cases, State agencies designate the 

executive director, director, and board 

chair as the positions that would 

represent the institution or sponsor and 

be held responsible for any serious 

management problem. For a for-profit 

organization, it would include the 

owner. For a public agency, a 

responsible principal might also include 

a supervisor or department head. FNS 

proposes to require any principals who 

fill positions that the State agency 

designates as responsible to certify their 

role as a responsible principal, as 

described in the definition. 

Under current 

§§ 226.6(c)(3)(iii)(B)(1)(i) and 

226.16(l)(3)(ii), if a corrective action 

plan is approved and implemented, the 

program operator’s serious deficiency is 

temporarily deferred and the serious 

deficiency is considered fully and 

permanently corrected. If the same 

finding reoccurs at any time in the 

future, the serious deficiency process 

resumes and may lead to termination. 

Under this proposed rule, if the 

corrective action plan is approved and 

implemented within a defined period of 

time, the administering agency will 

provide increased oversight and 

conduct more frequent reviews, as 

described in proposed §§ 226.6(k)(2) 

and 226.16(d)(4)(iv) and (v). Corrective 

action would no longer be described as 

permanent. Instead, FNS proposes that 

the serious deficiency process provide 

program operators with the opportunity 

to correct serious management problems 

through a corrective action plan, which 

would occur within a defined period of 

time and result in full correction. When 

achieved, the serious management 

problem would be vacated, not deferred. 

Temporary deferment would no 

longer be applicable, because this 

rulemaking proposes a path to full 

correction and changes the point at 

which a program operator is declared 

seriously deficient to occur at the point 

of termination. If the same serious 

management problem occurs after the 

time period under which full correction 

is achieved, it would not lead directly 

to proposed termination. ‘‘Full 

correction’’ would describe the status 

achieved after a corrective action plan is 

accepted and approved, all corrective 

actions are fully implemented, and no 

new or repeat serious management 

problems are identified in at least two 

full reviews occurring once every 2 

years. Additionally, institutions would 

only achieve ‘‘full correction’’ if the first 

and last full review is at least 24 months 

apart and all review, including follow 

up reviews, in between the first and last 

full review reveal no new or repeat 

serious management problems. 

Under proposed § 226.25(c)(3)(i), 

institutions may achieve full correction 

after at least two full reviews occurring 

in separate review cycles—with the first 

and last full review at least 24 months 

apart reveal no new or repeat serious 

management problems. A ‘‘review 

cycle’’ refers to the frequency and 

number of required reviews of 

institutions and facilities. The Child 

Nutrition Program Integrity Final Rule 

amended current § 226.6(m) to require 

State agencies to review program 

operators with serious management 

problems at least once every 2 years. 

FNS analyzed a large sample of serious 

deficiency notices and determined that 

most repeat serious deficiencies 

occurred within a 2-year period, with 

many repeat serious deficiencies 

reoccurring within just a matter of 

months. As a result, this rulemaking 

proposes a standard of ‘‘two full 

reviews, occurring once every 2 years 

and at least 24 months apart’’ for an 

institution to achieve full correction. 

FNS welcomes public comments on this 

standard. 

To understand how the defined 

period of time for full correction of 

serious management problems would be 

determined, consider an example: a 

State agency cites a sponsoring 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13157 

organization for a serious management 

problem in June 2020. The sponsoring 

organization is now subject to reviews at 

least once every 2 years. Subsequent full 

reviews took place in May 2021 and 

May 2023. Neither reviews revealed 

new or repeat serious management 

problems. The sponsoring organization 

achieved full correction in May 2023. 

The serious management problems are 

‘‘fully corrected’’ if subsequent reviews 

result in no new or repeat serious 

management problems over a minimum 

of two full reviews occurring at least 

once every 2 years and with the first and 

last full review taking place at least 24 

months apart. The State agency has 

discretion to conduct reviews more 

frequently and, in these cases, all 

reviews must result in no new or repeat 

serious management findings in order 

for the sponsoring organization to 

achieve full correction. 

A second example: A State agency 

reviews a sponsoring organization in 

June 2020 and identifies a serious 

management problem. The sponsoring 

organization submits a corrective action 

plan that is approved by the State 

agency and the sponsoring organization 

enters a 2-year review cycle. The State 

agency does a follow up review in 

August 2020 to ensure the corrective 

action plan has been implemented. The 

State agency determines that the 

corrective action plan has been fully 

implemented. The State agency 

conducts the first full review in July 

2021 and no new or repeat serious 

management problems are identified. 

The sponsoring organization is reviewed 

again in April 2022 and again, no new 

or repeat serious management problems 

are identified. Because 24 months have 

not passed (July 2021 and August 2022) 

between the first and last full review, 

the serious management problems are 

not considered fully corrected. The 

sponsoring organization receives a full 

review again in December 2023 and 

again, no new or repeat serious 

management problems are identified. At 

that point, full correction is achieved, 

i.e., all the reviews revealed no new or 

repeat serious management problems 

and at least 24 months passed between 

the first and last full reviews. 

Current §§ 226.6(c)(3)(iii)(B)(3) and 

226.16(l)(3)(ii) establish that repeat 

serious deficiencies may lead directly to 

proposed termination. If it were 

discovered that the program operator’s 

corrective action was not adhered to and 

the serious deficiency was repeated, the 

administering agency could resume the 

serious deficiency process by 

immediately issuing a notice of 

proposed termination and 

disqualification. Under this proposed 

rule, a serious management problem 

that occurs again, after full correction is 

achieved, would not be considered a 

repeat serious management problem and 

would not directly result in proposed 

termination. However, the recurrence of 

a serious management problem during 

the time before full correction is 

achieved would lead directly to 

proposed termination. If new serious 

management problems occur before an 

institution achieves full correction of its 

initial serious management problem, the 

institution would continue to be 

reviewed once every 2 years until at 

least two full reviews occurring at least 

24 months apart reveal no new or repeat 

serious management problems. 

For another example, consider that a 

State agency reviews an independent 

center in April 2021 and identifies a 

serious management problem. The 

independent center submits a corrective 

action plan that is approved by the State 

agency and the State agency does a 

follow up review in July 2021 to ensure 

the corrective action plan has been 

implemented. The State agency returns 

to conduct a full review in January 2023 

and no new or repeat serious 

management problems are identified. 

The State agency conducts a second full 

review of the independent center in 

February 2025, the same serious 

management problem reoccurs. Because 

full correction was not achieved, this 

serious management problem is 

considered repeat. The State agency 

would propose to terminate the 

independent center. At this point, the 

independent center would have a right 

to a fair hearing. 

Current regulations do not define 

good standing. Under the definition of 

‘‘good standing’’ in this proposed rule, 

the proposed serious deficiency process 

in CACFP would impact an institution’s 

good standing status. In the proposed 

serious deficiency process, 

identification of a serious management 

problem would move an institution out 

of good standing. An institution would 

need to fully implement all corrective 

actions and fully pay any debts owed to 

the program to return to good standing. 

Until these criteria are met, the 

institution would remain out of good 

standing. This proposed standard 

ensures that the institution is complying 

with requirements of the serious 

deficiency process and is working 

towards achieving full correction of its 

serious management problem. FNS 

welcomes public comments on this 

proposed standard of good standing in 

the serious deficiency process. 

For example, let’s say, a review in 

May 2022 of a sponsoring organization 

reveals a serious management problem 

that results in an overclaim. At this 

point, the sponsoring organization 

would not be in good standing. In June 

2022, the State agency conducts a follow 

up review and determines that the 

corrective actions are fully implemented 

and the unearned reimbursement is 

fully repaid. At this point, at the State 

agency’s discretion, the sponsoring 

organization returns to good standing. 

However, the serious management 

problem is not yet considered fully 

corrected. 

2. Oversight and Implementation of the 

Serious Deficiency Process in 

Institutions 

State agencies are responsible for 

oversight of institutions—i.e., 

sponsoring organizations, independent 

child care centers, and independent 

adult day care centers that enter into 

agreements with the State agency to 

participate in CACFP. FNS is proposing 

to modify the serious deficiency process 

to improve State agency oversight 

efforts. FNS proposes to codify 

standards to help State agencies 

distinguish occasional administrative 

errors from systemic management 

problems, determine that corrective 

action plans are adequate, put in place 

a fair hearing process that is accessible 

and fair, and prepare well-written 

notices of actions throughout the course 

of the serious deficiency process. 

Current program regulations describe 

serious deficiency notification 

procedures for participating institutions, 

responsible principals, and responsible 

individuals at 7 CFR 226.6(c)(3)(iii). 

This section includes requirements for 

the notice of serious deficiency at 7 CFR 

226.6(c)(3)(iii)(A). Corrective action is 

described in 7 CFR 226.6(c)(3)(iii)(B) 

and (c)(4). Administrative review 

procedures for the provision of a fair 

hearing are found at 7 CFR 226.6(k). 

Termination is at 7 CFR 

226.6(c)(3)(iii)(C) and (E) and (c)(4). 

Disqualification and placement on the 

National Disqualified List are at 7 CFR 

226.6(c)(iii)(E) and (c)(7). FNS proposes 

to move these requirements from 

subpart C, State Agency Provisions, to a 

new subchapter addressing 

administrative actions under subpart G 

at 7 CFR 226.25. 

This rulemaking proposes to codify 

standards, under proposed 

§ 226.25(a)(3), to help State agencies 

distinguish occasional administrative 

errors from systemic management 

problems. These standards would guide 

the State agency’s efforts in identifying 

systemic errors that reflect an 

institution’s inability to effectively 

manage the program as required under 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13158 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

the regulations. The State agency would 

have to consider: 

• The severity of the problem; 

• The degree of responsibility 

attributable to the institution; 

• The institution’s history of CACFP 

participation and training; 

• The nature of the requirements that 

relate to the problem; and 

• The degree to which the problem 

impacts program integrity. 

An institution would no longer be in 

good standing if the State agency 

determines that a finding rises to the 

level of a serious management problem. 

Information about the institution and its 

responsible principals and responsible 

individuals would be added to the State 

agency list, which State agencies are 

required to maintain and update 

through each step of the serious 

deficiency process. Requirements for the 

State agency list in current § 226.6(c)(8) 

would move to proposed § 226.25(b). 

Maintenance of this list allows the State 

agency to track the institution’s progress 

towards resolving each serious 

management problem. 

If the State agency determines that a 

program finding rises to the level of a 

serious management problem, the State 

agency would issue a written notice that 

is easy to understand, documenting 

each finding that must be addressed and 

corrected. The notice requirements in 

current § 226.6(c)(3)(iii)(A) would move 

to proposed § 226.25(a)(6)(i). The State 

agency would send the notice to the 

institution, the management officials 

who bear responsibility for the poor 

performance, and other responsible 

individuals, including nonsupervisory 

employees, contractors, and unpaid staff 

who have been directly involved in 

causing the serious management 

problem. A well-written notice will: 

provide a detailed explanation of each 

serious management problem; list 

appropriate regulatory citations to 

support the notice; identify the 

responsible principals and responsible 

individuals; provide a clear description 

of the actions required in order to 

correct the serious management 

problem; and provide a definite and 

appropriate time limit for the corrective 

action. 

The assessment of corrective action in 

current § 226.6(c)(3)(iii)(B) would move 

to proposed § 226.25(c). This proposed 

rule would require the institution to 

take corrective action to address the root 

cause of each finding. At proposed 

§ 226.25(c)(1), this rulemaking outlines 

the information that would guide the 

institution’s development of a corrective 

action plan that demonstrates that the 

noncompliance is resolved. The State 

agency’s approval of the corrective 

action plan would include a review of 

the institution’s responses to these 

questions: 

• What is the serious management 

problem and the action taken to address 

it? 

• Who addressed the serious 

management problem? 

• When was the action taken to 

address the serious management 

problem? 

• Where is documentation of the 

corrective action plan filed? 

• How were staff and providers 

informed of the new policies and 

procedures? 

The timelines for corrective action, at 

proposed § 226.25(c)(2), with an 

emphasis on correcting problems 

quickly, remain unchanged from the 

requirements at current § 226.6(c)(4). 

Corrective action must be taken within 

reasonable timeframes established in the 

current regulations that ensure that each 

serious management problem is quickly 

addressed and corrected. The timeframe 

must fit the type of serious management 

problem found. The allotted time begins 

on the date the institution receives the 

notice—up to 30 days for a false claim 

or unlawful practice, up to 90 days for 

correction of other problems, and more 

than 90 days for management system or 

process changes, if the State agency 

determines that a longer time frame is 

needed. Although the institution may 

take corrective action at any point in the 

serious deficiency process, the State 

agency would issue a notice of proposed 

termination if any of the deadlines 

described in proposed § 226.25(c)(2)(ii) 

through (iv) are not met. 

State agencies would have to 

prioritize monitoring resources to 

conduct more frequent reviews of 

institutions with serious management 

problems. FNS has recently published a 

final rule, Child Nutrition Program 

Integrity, 88 FR 57792, August 23, 2023, 

that requires State agencies to schedule 

reviews at least once every 2 years of 

institutions that have had serious 

management problems in previous 

reviews or are at risk of having serious 

management problems. This rulemaking 

would move this requirement from 

current § 226.6(m) to proposed 

§ 226.6(k). 

Current § 226.6(c)(3)(iii)(B)(1) requires 

the State agency to establish that 

corrective action is permanent. 

Proposed § 226.25(c)(3)(i) would take a 

different approach to the determination 

of full correction. This proposed rule 

would create a path to full correction for 

institutions with serious management 

problems if at least two full reviews, 

occurring once every 2 years and the 

first and last full review occurring at 

least 24 months apart demonstrate that 

the institution has the ability to operate 

CACFP with no new or repeat serious 

management problems. Once the State 

agency approves a corrective action 

plan, the institution must receive full 

reviews at least two times and at least 

once every 2 years before full correction 

is achieved. 

If corrective actions are fully 

implemented, the State agency would 

issue a notice to advise the institution, 

responsible principals, and responsible 

individuals of successful corrective 

action. The notice requirements in 

current § 226.6(c)(3)(iii)(B) would move 

to proposed § 226.25(a)(6)(ii). The State 

agency would continue to provide 

oversight to ensure that the corrective 

actions to correct the serious 

management problem remain in place. If 

corrective action is complete for the 

institution but not for all the responsible 

principals and responsible individuals 

or vice versa, proposed 

§ 226.25(a)(6)(ii)(A)(2) addresses partial 

achievement of corrective action. 

If corrective action is not submitted, 

approved or implemented, the State 

agency proposes to terminate the 

institution. Current § 226.6(k) describes 

administrative review procedures for 

the provision of a fair hearing. 

Termination is described in current 

§ 226.6(c)(3)(iii)(C) and (E) and (c)(4) 

and disqualification and placement on 

the National Disqualified List are 

described in current sections 7 CFR 

226.6(c)(3)(iii)(E) and (c)(6). This 

rulemaking describes procedures the 

State agency should follow for fair 

hearings at proposed § 226.25(g), 

termination for cause at proposed 

§ 226.25(d)(1), notice of serious 

deficiency status at proposed 

§ 226.25(a)(6)(iii)(B), and placement on 

the National Disqualified List at 

proposed § 226.25(e)(2)(i). 

Current § 226.6(k) addresses due 

process. In this rulemaking, proposed 

§ 226.25(g) describes the institution’s 

right to a fair hearing, parameters for 

conducting a fair hearing, and guidance 

on the role of the hearing official and 

the decision-making. The purpose of the 

fair hearing is limited to a determination 

by the hearing official that the State 

agency has complied with CACFP 

requirements in taking the actions that 

are under appeal. It is not to determine 

whether to uphold duly promulgated 

Federal and State program 

requirements. 

State agencies must provide a fair 

hearing to institutions when they take 

actions affecting an institution’s 

participation or its claim for 

reimbursement, such as application 

denial, claim denial, overpayment 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13159 

demands. During the serious deficiency 

process, the State agency’s issuance of a 

notice of proposed termination is the 

only action that is subject to 

administrative review. Although FNS 

proposes to replace the term 

‘‘administrative review’’ with the term 

‘‘fair hearing,’’ and move the 

requirements from current § 226.6(k)(5) 

to proposed § 226.25(g)(2), the provision 

of due process remains unchanged, 

which is: 

• The State agency must give notice 

of the proposed termination and 

procedures for requesting a fair hearing 

to the institution, its executive director, 

board chair, owner, any other 

responsible principals and responsible 

individuals. 

• The State agency’s notice must 

specify the basis for proposing 

termination and the procedures under 

which the institution, responsible 

principals, or responsible individuals 

may request a fair hearing. 

• The appellant must submit a 

written request for a fair hearing within 

15 calendar days of receipt of State 

agency’s notice of proposed termination. 

If the State agency’s fair hearing 

procedures direct the appellant to send 

the request to the hearing official, then 

the procedures must identify which 

office will be responsible for 

acknowledging the appellant’s request. 

• The State agency must acknowledge 

receipt of the fair hearing request within 

10 calendar days of receiving it. 

• If a fair hearing is requested, the 

State agency must continue to pay any 

valid claims for reimbursement of 

eligible meals served and allowable 

administrative expenses incurred until 

the hearing official issues a decision. 

• Any information upon which the 

State agency based the proposed 

termination must be available to the 

appellants for inspection from the date 

of receipt of the hearing request. 

• Appellants may contest the 

proposed termination in person or by 

submitting written documentation to the 

hearing official. 

• Appellants may represent 

themselves, retain legal counsel, or be 

represented by another person. 

• All documentation must be 

submitted prior to the beginning of the 

hearing. All parties, including the State 

agency, must submit written 

documentation to the hearing official 

within 30 calendar days of receipt of the 

notice of proposed termination. 

• Hearing officials must be 

independent and impartial. Even if they 

are employees of the State agency, 

hearing officials cannot be involved in 

the action that is the subject of the fair 

hearing, cannot occupy any position 

which would potentially subject to them 

to undue influence from other State 

employees who are responsible for the 

State agency’s action, or have any direct 

personal or financial interest in the 

outcome of the fair hearing. 

• Hearing officials must issue 

decisions within 60 calendar days of the 

State agency’s receipt of the appellants’ 

hearing request, based solely on the 

information provided by the parties. 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 fair hearing process. 

• The hearing official’s decision is the 

final administrative decision. 

Appellants may not administratively 

contest the hearing official’s decision. 

If the appellant prevails, the State 

agency would issue a notice that 

confirms that the proposed termination 

of the institution, responsible 

principals, and responsible individuals 

is vacated, as described in proposed 

§ 226.25(a)(6)(iii)(A). However, the 

institution would still have to 

implement procedures and policies to 

fully correct the serious management 

problem. 

If the hearing official upholds the 

State agency’s proposed termination 

action, the State agency would 

immediately notify the institution, 

executive director, owner, board chair, 

and any other responsible principals 

and responsible individuals that the 

institution’s agreement is terminated, as 

described in proposed 

§ 226.25(a)(6)(iii)(B). It is at this point in 

the process that this rulemaking 

proposes to declare the institution 

seriously deficient. The State agency 

would issue a serious deficiency notice 

that informs the institution, responsible 

principals, and responsible individuals 

of their disqualification from CACFP 

participation. Termination of the 

agreement and disqualification 

described in current § 226.6(c)(3)(iii)(E) 

would move to proposed § 226.25(d) 

and proposed § 226.25(e), respectively. 

The State agency would provide a copy 

of the serious deficiency notice to FNS, 

with the mailing address and date of 

birth for each responsible principal and 

responsible individual, and the full 

amount of any determined debt 

associated with the institution, 

responsible principals, and responsible 

individuals, for inclusion on the 

National Disqualified List. 

Requirements at current § 226.6(c)(6) 

describing placement on the National 

Disqualified List would move to 

proposed § 226.25(e)(2). 

Proposed § 226.25(h) addresses the 

State agency’s responsibilities for the 

payment of valid claims found in 

current § 226.6(c)(5)(i)(D); collection of 

unearned payments found in current 

§ 226.14(a); suspension of payments 

found in current § 226.6(c)(5)(ii)(E); and 

State liability for payments found in 

current § 226.6(h)(11). Requirements 

from current § 226.6(c)(iii)(6) for State 

agency action in response to the 

independent determination of a serious 

management problem by FNS would 

move to proposed § 226.25(i). 

Accordingly, this proposed rule 

would amend CACFP regulations by 

removing the requirements describing 

termination of a participating 

institution’s agreement, including 

serious deficiency notification 

procedures, successful corrective action, 

agreement termination, corrective action 

timeframes, administrative review, and 

State agency list, under 7 CFR 226.6(c) 

and (k). This rulemaking proposes to 

address all requirements for State 

agency oversight and implementation of 

the serious deficiency process in 

institutions under 7 CFR 226.25. 

Corresponding amendments are 

proposed at 7 CFR 226.2, 226.6(b)(1) 

and (2), 226.6(c), (k), and (m)(3), and 

226.16(l). 

3. Oversight and Implementation of the 

Serious Deficiency Process in Day Care 

Homes and Unaffiliated Sponsored 

Centers 

Sponsoring organizations enter into 

agreements with day care homes, 

unaffiliated child care centers, and 

unaffiliated adult day care centers to 

oversee their participation and meal 

service operations. The sponsoring 

organization is financially responsible 

for any meals served incorrectly or 

served to ineligible children and adults, 

making it even more important that 

serious management problems are 

properly identified and corrected. 

The serious deficiency process offers 

a clear way for sponsoring organizations 

to take actions guiding day care homes 

and unaffiliated centers to correct 

problems that affect the integrity of their 

meal service operations. It gives day 

care homes and centers the opportunity 

for improvement, technical assistance, 

and due process. For sponsoring 

organizations, it is a critical tool for 

resolving performance issues and 

correcting serious management 

problems at the operational level. 

Current program regulations describe 

serious deficiency notification 

procedures for participating day care 

homes at 7 CFR 226.16(l)(3). This 

section includes requirements for the 

notice of serious deficiency at 7 CFR 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13160 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

226.16(l)(3)(i). Corrective action is 

described in 7 CFR 226.16(l)(3)(ii). 

Administrative review procedures for 

the provision of a fair hearing are found 

at 7 CFR 226.6(l). Termination and 

disqualification are described at 7 CFR 

226.16(l)(3)(iii) and (v). FNS proposes to 

move these requirements of the serious 

deficiency process for day care homes to 

a new subchapter addressing 

administrative actions under subpart G 

at 7 CFR 226.25. This proposed rule 

would also require sponsoring 

organizations to follow these procedures 

to implement the serious deficiency 

process for unaffiliated centers. 

Under this proposed rule, many of the 

sponsoring organization responsibilities 

and actions would be identical to the 

provisions outlined for State agencies. 

However, FNS is proposing key changes 

to not only recognize CACFP 

requirements that are simplified for day 

care homes, but also to distinguish 

between the center that participates 

directly under the State agency and the 

center that elects to participate through 

a sponsoring organization. 

Part of a strong and sustained effort to 

ensure program integrity is the 

enhanced oversight that sponsoring 

organizations provide day care homes 

and unaffiliated centers. For example, 

while the State agency is generally 

required to conduct onsite reviews at 

least once every 2 or 3 years, depending 

on the size and circumstances of the 

institution being reviewed, a sponsoring 

organization will have conducted a 

minimum of six to nine reviews of each 

of its day care homes and unaffiliated 

centers during the same time period. 

The serious deficiency process that FNS 

proposes for day care homes and 

unaffiliated centers takes into account 

the additional monitoring, training, and 

technical assistance that sponsoring 

organizations must provide. 

This rulemaking proposes to codify 

standards, under proposed 

§ 226.25(a)(3), to help sponsoring 

organizations distinguish occasional 

administrative errors from systemic 

management problems. The sponsoring 

organization would have to consider: 

• The severity of the problem; 

• The degree of responsibility 

attributable to the day care home or 

unaffiliated center; 

• The day care home or unaffiliated 

center’s history of CACFP participation 

and training; 

• The nature of the requirements that 

relate to the problem; and 

• The degree to which the problem 

impacts program integrity. 

Whenever a sponsoring organization 

identifies a serious management 

problem, the day care home or 

unaffiliated center can no longer be 

considered to be in good standing. The 

sponsoring organization must provide 

information to the State agency to keep 

the State agency list updated through 

each step of the serious deficiency 

process. Current § 226.6(c)(7) requires 

the State agency list to include 

information about institutions and day 

care homes that are seriously deficient. 

This proposed rule would expand the 

list to include information on any 

unaffiliated center that has a serious 

management problem, as described in 

proposed § 226.25(b). 

Current § 226.16(l)(3)(i) addressing 

the notice of serious deficiency would 

move to proposed § 226.25(a)(7)(i). If the 

sponsoring organization determines that 

a program finding rises to the level of 

a serious management problem, the 

sponsoring organization would issue a 

notice documenting, in plain language, 

each serious management problem that 

must be corrected. The sponsoring 

organization would issue the notice to 

the day care home provider, center 

director, and any other responsible 

principals or responsible individuals 

who have been directly involved in 

causing the serious management 

problem. A well-written notice will: 

provide a detailed explanation of each 

serious management problem; list 

appropriate regulatory citations to 

support the notice; identify the 

responsible principals and responsible 

individuals; provide a clear description 

of the actions required in order to 

correct the serious management 

problem; and provide a definite time 

limit for the corrective action. 

Corrective action described in current 

§ 226.16(l)(3)(ii) would move to 

proposed § 226.25(c). Day care homes 

and unaffiliated centers would be 

required to take corrective action to 

address each serious management 

problem. The day care home or 

unaffiliated center would submit a 

written corrective action plan for the 

sponsoring organization to approve. The 

corrective action plan would have to 

address the root cause of each finding, 

with enough detail explaining the 

implementation—i.e., what, how, when, 

and by whom—for the sponsoring 

organization to make an assessment 

regarding its effectiveness in fully 

correcting the serious management 

problem. It would also describe where 

the documentation of changes will be 

filed. 

The emphasis of the timeline for 

corrective action is on correcting 

problems quickly, as described in 

current § 226.16(l)(3)(i)(C). Under 

proposed § 226.25(c)(2)(i), day care 

homes and unaffiliated centers would 

have up to 30 days to take corrective 

action that, in the sponsoring 

organization’s judgment, will correct the 

serious management problem. Although 

corrective action may occur at any point 

in the serious deficiency process, the 

sponsoring organization would issue a 

notice of serious deficiency if the 30-day 

deadline is not met. 

If the corrective action plan is 

accepted, the sponsoring organization 

would confirm that the corrective 

actions are fully implemented. Current 

§ 226.16(l)(3)(ii) temporarily defers a 

determination of serious deficiency if 

the sponsoring organization establishes 

that corrective action is successful. This 

proposed rule would create a path to 

full correction if follow-up reviews, as 

described in current § 226.16(d)(4)(v), 

demonstrate that the day care home or 

unaffiliated center has the ability to 

operate CACFP with no new or repeat 

serious management problems. The day 

care home or unaffiliated center would 

be reviewed at the same frequency as 

existing regulations require, as 

described in current § 226.16(d)(4)(iii). 

Full correction is achieved when, after 

three consecutive reviews are complete, 

the day care home or unaffiliated center 

demonstrates that it has no new or 

repeat serious management problems, as 

described in proposed § 226.25(c)(3)(ii) 

and (iii). After full correction is 

achieved, any recurrence of the same 

serious management problem would 

require the sponsoring organization to 

issue a new notice to restart the serious 

deficiency process. Serious management 

problems that occur after full correction 

is achieved would not lead to an 

immediate proposal of termination. 

However, as described in proposed 

§ 226.25(c)(3)(iv), the recurrence of a 

serious management problem before full 

correction is achieved would lead 

directly to proposed termination. 

Successful corrective action is 

described in current § 226.16(l)(3)(ii). If 

corrective actions are fully 

implemented, the sponsoring 

organization would issue a notice of 

successful corrective action to the day 

care home, unaffiliated center, 

responsible principals, and responsible 

individuals of, as described in proposed 

§ 226.25(a)(7)(ii)(A). The sponsoring 

organization would continue to provide 

oversight to ensure that the procedures 

and policies to fully correct the serious 

management problem are implemented. 

Current § 226.16(l)(3)(iii) and (v) 

address the sponsoring organization’s 

actions when full and permanent 

correction is not achieved. If the 

corrective action plan is not accepted or 

a repeat serious management problem 

occurs before full correction is achieved, 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13161 

this proposed rule describes the 

procedures the sponsoring organization 

would follow for fair hearings at 

proposed § 226.25(g)(1)(ii) and (g)(2), 

termination for cause and notification of 

serious deficiency status at proposed 

§ 226.25(a)(7)(iii), and placement on the 

National Disqualified List at proposed 

§ 226.25(e)(2). 

The sponsoring organization would 

issue a proposed termination notice, 

and a fair hearing would be offered. If 

a fair hearing is requested and the fair 

hearing upholds the proposal to 

terminate or the time frame for 

requesting a fair hearing has passed, the 

sponsoring organization would issue a 

notice of serious deficiency and 

termination. If the fair hearing vacates 

the proposed termination, the 

sponsoring organization would issue a 

notice to vacate the proposed 

termination as described in proposed 

§ 226.26(c)(7)(iii)(A). However, the day 

care home or unaffiliated center must 

still implement procedures and policies 

to fully correct the serious management 

problem. 

As described in current § 226.6(l)(1), 

the State agency will continue to have 

authority to decide whether a fair 

hearing will be heard by the state or by 

the sponsoring organization. As 

described in proposed § 226.25(g)(3), 

hearing officials, whether retained by 

the state or the sponsoring organization, 

must be independent, impartial, and 

have no involvement in the action that 

is the subject of the fair hearing. Their 

decisions must be based on a review of 

written submissions by all parties. They 

are not required to hold an in-person 

hearing for day care homes or 

unaffiliated centers. 

If the hearing official upholds the 

proposed termination, the sponsoring 

organization would immediately notify 

the day care home provider, center 

director, owner, board chair, and any 

other responsible principals and 

responsible individuals that the 

agreement is terminated, as described in 

proposed § 226.25(c)(7)(iii)(B). This 

would also be the point in the process 

when the day care home or unaffiliated 

center would be declared seriously 

deficient. The sponsoring organization 

would issue a serious deficiency notice 

that informs the day care home, 

unaffiliated center, responsible 

principals, and responsible individuals 

of their disqualification from CACFP 

participation. 

The sponsoring organization would 

provide a copy of the serious deficiency 

notice to the State agency, with the 

mailing address and date of birth for 

each responsible principal and 

responsible individual, and the full 

amount of any determined debt 

associated with the day care home or 

unaffiliated center. The State agency 

would continue to update the State 

agency list and provide this information 

to FNS for inclusion on the National 

Disqualified List. 

Accordingly, this proposed rule 

would amend CACFP regulations by 

removing the requirements describing 

the termination of agreements for cause, 

including serious deficiency notification 

procedures, under 7 CFR 226.16(l). This 

rulemaking would address all 

requirements for sponsoring 

organization oversight and 

implementation of the serious 

deficiency process in day care homes 

and unaffiliated centers under 7 CFR 

226.25. 

B. Summer Food Service Program 

(SFSP) 

1. Applying the Serious Deficiency 

Process to SFSP 

Section 13 of the NSLA, at 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 must also 

maintain a disqualification list for State 

agencies to use in approving or 

renewing sponsor applications. 

Prior to enactment of the Healthy 

Hunger-Free Kids Act of 2010, SFSP 

regulations included provisions 

addressing corrective action, 

termination, and appeals. Current SFSP 

regulations specify: 

• Criteria State agencies must 

consider when approving sites for 

participation; provide authority for the 

State agency to terminate sponsor 

participation, as described in 7 CFR 

225.6(h); 

• List the types of program findings 

that would be grounds for application 

denial or termination, as described in 7 

CFR 225.11(c); 

• Require State agencies to terminate 

participation of sites or sponsors for 

failure to correct program findings 

within timeframes specified in a 

corrective action plan as described in 7 

CFR 225.11(f); and 

• Set out procedures for sponsors to 

appeal adverse actions, including 

termination of a sponsor or site and 

denial of an application for 

participation, as described in 7 CFR 

225.13. 

However, the regulations do not 

provide explicit authority to FNS or 

State agencies to disqualify sponsors or 

any of the people who are responsible 

for the types of findings that weaken 

program management and integrity. 

Under the Healthy Hunger-Free Kids 

Act of 2010, Congress established 

requirements related to service 

institutions that were terminated, 

including maintaining a list of 

disqualified service institutions and 

individuals. To implement those 

requirements, in this proposed rule, 

specific steps are provided to establish 

a serious deficiency process in SFSP, 

building on the proposals outlined in 

the previous sections of this preamble. 

This rulemaking also proposes 

expansion of the National Disqualified 

List, establishment of State agency lists, 

and changes to termination and appeal 

procedures that would hold sponsors, 

responsible principals, and responsible 

individuals accountable for serious 

management problems in SFSP. These 

modifications are set out in the 

regulatory text section of this 

rulemaking in proposed § 225.18. 

In applying the serious deficiency 

process to SFSP, this rulemaking would 

expand the list of defined terms under 

7 CFR 225.2. This rulemaking proposes 

definitions of the following terms that 

relate to important aspects of program 

management and the serious deficiency 

process: 

• Contingency plan means the State 

agency’s written process for the transfer 

of sponsored site service area that will 

help ensure that Program meals for 

children will continue to be available 

without interruption if a sponsor’s 

agreement is terminated. 

• Corrective action means 

implementation of a solution, written in 

a corrective action plan, to address the 

root cause and prevent the recurrence of 

a serious management problem. 

• Disqualified means the status of a 

sponsor, responsible principal, or 

responsible individual who is ineligible 

for participation in the program. 

• Fair hearing means due process 

provided upon request to: 

Æ A sponsor that has been given 

notice by the State agency of an action 

that will affect participation or 

reimbursement under the program; 

Æ A principal or individual 

responsible for a sponsor’s serious 

management problems and issued a 

notice of proposed termination and 

proposed disqualification from Program 

participation; or 

Æ A sponsor that has been given 

notice of proposed termination. 

• Finding means a violation of a 

regulatory requirement identified during 

a review. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13162 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

• Fiscal action means the recovery of 

an overpayment or claim for 

reimbursement that is not properly 

payable through direct assessment of 

future claims, offset of future claims, 

disallowance of overclaims, submission 

of a revised claim for reimbursement, 

disallowance of funds for failure to take 

corrective action to meet program 

requirements. 

• Full correction means the status 

achieved after a corrective action plan is 

accepted and approved, all corrective 

actions are fully implemented, and no 

new or repeat serious management 

problems are identified in subsequent 

reviews, as described in proposed 

§ 225.18(c)(3). 

• Good standing means the status of 

a program operator that meets its 

program responsibilities, is current with 

its financial obligations, and, if 

applicable, has fully implemented all 

corrective actions within the required 

period of time. 

• Hearing official means an 

individual who is responsible for 

conducting an impartial and fair 

hearing—as requested by a sponsor, 

responsible principal, or responsible 

individual responding to a proposal for 

termination—and rendering a decision. 

• Lack of business integrity means the 

conviction or concealment of a 

conviction for fraud, antitrust 

violations, embezzlement, theft, forgery, 

bribery, falsification or destruction of 

records, making false statements, 

receiving stolen property, making false 

claims, obstruction of justice. 

• Legal basis means the lawful 

authority established in statute or 

regulation. 

• National Disqualified List (NDL) 

means a system of records, maintained 

by the Department, of sponsors, 

responsible principals, and responsible 

individuals disqualified from 

participation in the program. 

• Notice means a letter sent by 

certified mail, return receipt (or the 

equivalent private delivery service), by 

facsimile, or by email, that describes an 

action proposed or taken by a State 

agency or FNS with regard to a 

sponsor’s program reimbursement or 

participation. 

• Principal means any individual 

who holds a management position 

within, or is an officer of, a sponsor or 

a sponsored site, including all members 

of the sponsor’s board of directors or the 

sponsored site’s board of directors. 

• Program operator means any entity 

that participates in one or more child 

nutrition programs. 

• Responsible individual means any 

individual employed by, or under 

contract with a sponsor or an 

individual, including uncompensated 

individuals, who the State agency or 

FNS determines to be responsible for a 

sponsor’s serious management 

problems. 

• Responsible principal means any 

principal, as described in this section, 

who the State agency or FNS determines 

to be responsible for a sponsor’s serious 

management problems. 

• Review cycle means the frequency 

and number of required reviews of 

sponsors and sites. 

• Serious management problem 

means the finding(s) that relate to a 

sponsor’s inability to meet the 

program’s performance standards or that 

affect the integrity of a claim for 

reimbursement or the quality of meals 

served at a site. 

• Seriously deficient means the status 

of a sponsor after it is determined that 

full correction has not been achieved 

and termination for cause is the only 

appropriate course of action. 

• State agency list means an actual 

paper or electronic list, or the 

retrievable paper records, maintained by 

the State agency, that includes 

information on sponsors through the 

serious deficiency process in that State. 

The list must be made available to FNS 

upon request and must include 

information specified in proposed 

§ 225.18(b). 

• Termination for cause means the 

termination of a Program agreement due 

to considerations related to a sponsor’s 

performance of Program responsibilities 

under the agreement between the State 

agency and sponsor. 

Accordingly, this proposed rule 

would amend 7 CFR 226.2 by adding 

definitions for contingency plan, 

corrective action, disqualified, fair 

hearing, finding, fiscal action, full 

correction, good standing, hearing 

official, lack of business integrity, legal 

basis, National Disqualified List, notice, 

principal, program operator, responsible 

individual, responsible principal, 

review cycle, serious management 

problem, seriously deficient, State 

agency list, and termination for cause. 

2. Oversight and Implementation of the 

Serious Deficiency Process in SFSP 

Sponsors that enter into agreements 

with the State agency to operate SFSP 

must be able to assume responsibility 

for the entire administration of the 

program at all their meal service sites. 

They are required to demonstrate that 

they have the necessary financial and 

administrative capability to comply 

with SFSP requirements. If a sponsor is 

unable to properly manage the program, 

the serious deficiency process provides 

a clear way for the State agency to 

identify and correct serious 

management problems and improve 

integrity of meal service operations at 

the local level. 

Although SFSP and CACFP are 

autonomous programs with unique 

operational requirements, they are often 

administered by the same State agency. 

To facilitate consistent and equitable 

application of the serious deficiency 

process, within and across States, FNS 

proposes a set of procedures for SFSP 

that is similar to the modifications this 

rulemaking proposes to make in CACFP. 

As in CACFP, the intent of the serious 

deficiency process for SFSP is to offer 

a systematic way for an administering 

agency to correct problems and protect 

program integrity. The process would 

include procedures to identify serious 

management problems—what 7 CFR 

part 225 refers to as significant 

operational problems—and provide 

opportunities for corrective action and 

due process. The steps of the serious 

deficiency process would also be 

designed to help the State agency 

document the case to terminate and 

remove any sponsor that is unwilling to 

or incapable of resolving serious 

management problems that place 

program integrity at risk. 

This proposed rule would reorganize 

existing regulations into a new 

subchapter at 7 CFR 225.18, amend 

termination procedures, and establish a 

disqualification process similar to the 

process employed in CACFP, with 

modifications reflecting the shorter 

duration of meal service operations in 

SFSP. For example, the proposed 

maximum timeframe for which the 

corrective action plan may be 

implemented in SFSP would be up to 10 

calendar days, whereas in CACFP the 

maximum timeframe could be up to 90 

calendar days for institutions. 

To examine how State agencies can 

minimize risk to SFSP integrity, this 

rulemaking proposes to codify standards 

under proposed § 225.18(a) to help State 

agencies distinguish occasional 

administrative errors from systemic 

management problems. These standards 

would guide the State agency’s efforts in 

identifying systemic errors that reflect 

sponsor’s inability to effectively manage 

the program as required under the 

regulations. The State agency would 

have to consider the following criteria, 

which FNS welcomes public comments 

on: 

1. The severity of the problem. Is the 

noncompliance on a minor or 

substantial scale? Are the findings 

indicative of a systemic problem or is 

the problem truly an isolated event? 

There is a point at which continued 

problems indicate serious 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13163 

mismanagement. Problems that initially 

appear manageable may become serious 

if not corrected within a reasonable 

period of time. Even minor problems 

may be serious if systemic. Some 

problems are serious even though they 

have occurred only once. For example, 

missing the recording of meal counts at 

the point of service for one day out of 

a month could be resolved with 

technical assistance. However, a second 

review with the same problem or an 

initial review with multiple days of 

incomplete point-of-service meal counts 

could rise to the level of a serious 

management problem. 

2. The degree of responsibility 

attributable to the sponsor. To the 

extent that evidence is available, can the 

State agency determine whether the 

findings were inadvertent errors? Is 

there evidence of negligence or a 

conscious indifference to regulatory 

requirements, or even worse, is there 

evidence of deception? 

3. The sponsor’s history of 

participation and training in SFSP. Is 

this the first time the sponsor is having 

problems or has noncompliance 

occurred frequently? 

4. The nature of the requirements that 

relate to the problem. Are the sponsor’s 

actions a clear violation of SFSP 

requirements? Has the sponsor 

implemented new policies correctly? 

5. The degree to which the problem 

impacts program integrity. Is the finding 

undermining program intent or purpose, 

such as misuse of program funds, or is 

it simply an administrative error? 

When the State agency identifies a 

serious management problem, the 

sponsor can no longer be in good 

standing. At proposed § 225.18(b), this 

proposed rule would require the State 

agency to maintain a State agency list to 

track each sponsor’s progress towards 

resolving each serious management 

problem. The State agency would add 

information about the sponsor and its 

responsible principals and responsible 

individuals to the list and keep the list 

updated through each step of the serious 

deficiency process. 

If the State agency determines that a 

finding rises to the level of a serious 

management problem, the State agency 

would issue a notice documenting in 

plain language each problem that must 

be addressed and corrected, as 

described under proposed 

§ 225.18(a)(6)(i). The State agency 

would send the notice to the sponsor, 

the management officials who bear 

responsibility for the poor performance, 

and other responsible principals and 

individuals, including nonsupervisory 

employees, contractors, and unpaid staff 

who have been directly involved in 

causing the serious management 

problem. A well-written notice will: 

provide a detailed explanation of each 

serious management problem; list 

appropriate regulatory citations to 

support the notice; identify the 

responsible principals and responsible 

individuals; provide a clear description 

of the actions required in order to fully 

correct the serious management 

problem; and provide a definite and 

appropriate time limit for the corrective 

action. 

At proposed § 225.18(c)(1), this 

proposed rule outlines the information 

that would guide the sponsor’s 

development of a corrective action plan 

that would address the root cause of 

each finding, while also demonstrating 

that the noncompliance is resolved. The 

State agency’s approval of the corrective 

action plan would include a review of 

the sponsor’s responses to these 

questions: 

• What is the serious management 

problem and the action taken to address 

it? 

• Who addressed the serious 

management problem? 

• When was the action taken to 

address the serious management 

problem? 

• Where is documentation of the 

corrective action plan filed? 

• How were the sponsor’s staff 

informed of the new policies and 

procedures? 

The section on assessing corrective 

action at proposed § 225.18(c)(2), 

requires a short timeline to ensure that 

problems are corrected quickly, 

particularly given SFSP’s brief period of 

operation. If corrective action cannot be 

achieved, the regulations describe 

procedures the State agency should 

follow for fair hearings, termination for 

cause, notices of serious deficiency 

status, and placement on the National 

Disqualified List. Although corrective 

action may occur at any point in the 

serious deficiency process, the State 

agency would issue a notice of proposed 

termination if the deadline described in 

proposed paragraph (c)(2) is not met. 

If corrective action is fully 

implemented, the State agency would 

issue a notice to advise the sponsor, 

responsible principals, and responsible 

individuals of successful corrective 

action, as described in proposed 

§ 225.18(a)(6)(ii)(A). The State agency 

would continue to provide oversight to 

ensure that the procedures and policies 

the sponsor implemented to fully 

correct the serious management problem 

are still in place. If corrective action is 

complete for some but not all of the 

serious management problems, 

proposed § 225.18(a)(6)(ii)(A)(2) 

addresses partial achievement of 

corrective action. If corrective actions 

are not implemented, this rulemaking 

describes procedures the State agency 

should follow for fair hearings in 

proposed § 225.18(f), notice of serious 

deficiency status in proposed 

§ 225.18(a)(6)(iii)(B), termination for 

cause in proposed § 225.18(d), and 

placement on the National Disqualified 

List in proposed § 225.18(e)(2). 

This proposed rule would create a 

path to full correction if at least two full 

reviews, occurring once every year— 

with the first and last full review 

occurring at least 12 months apart— 

demonstrate that the sponsor has the 

ability to operate SFSP with no new or 

repeat serious management problems. 

Additionally, all reviews in between the 

first and last full review, including 

follow up reviews, would need to 

demonstrate that the sponsor has no 

new or repeat serious management 

problems. As described under proposed 

§ 225.18(c)(3), once the State agency 

approves a corrective action plan, the 

sponsor must be reviewed at least two 

times, at least once every year, before 

full correction is achieved. Current 

§ 225.7(e)(4)(ii) requires the State agency 

to annually review every sponsor that 

has experienced significant operational 

problems in the prior year. This 

proposed rule would make a 

corresponding change to replace the 

term ‘‘significant operational problem’’ 

with the term ‘‘serious management 

problem.’’ Serious management 

problems would be considered fully 

corrected if two consecutive reviews— 

one full review each year for 2 years and 

at least 12 months apart—indicate no 

new serious management problems or 

no repeat of a serious management 

problem. FNS welcomes public 

comments on this standard. 

For example, let’s say a State agency 

reviews a sponsor in June 2022 and 

identifies a serious management 

problem. The sponsor submits a 

corrective action plan that is approved 

by the State agency and sponsor enters 

a once every year review cycle. The 

State agency does a follow up review in 

August of 2022 to ensure that actions 

are fully implemented. The State agency 

determines that the corrective action 

plan has been fully implemented and all 

debts owed to the program are fully 

repaid. At this point the sponsor returns 

to good standing. The State agency 

conducts a full review in June of 2023 

and again in June of 2024. All reviews 

reveal no new or repeat serious 

management problems and the first and 

last full review are at least 12 months 

apart. At this point, the sponsor’s 

serious management problem is 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13164 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

considered fully corrected and the 

sponsor has achieved full correction. 

Under proposed § 225.18(c)(3)(iv), a 

serious management problem that 

occurs again, after full correction is 

achieved, would not be considered a 

repeat serious management problem and 

would not directly result in proposed 

termination. However, the recurrence of 

a serious management problem before 

full correction is achieved would be 

considered repeat and would lead 

directly to proposed termination. If new 

serious management problems occur 

before a sponsor achieves full correction 

of its serious management problems, the 

sponsor would continue to be reviewed 

at least once every year until at least two 

full reviews—with the first and last 

review occurring at least 12 months 

apart—reveal no new or repeat serious 

management problems. 

State agencies must provide appeal 

rights when they take actions affecting 

a sponsor or site’s participation, claim 

for reimbursement, request for advance 

payments, or registration of a food 

service management company, as 

described in current § 225.13(a). Appeal 

procedures, which are described in 

current § 225.13(b), would be replaced 

by the fair hearing procedures of the 

serious deficiency process, at proposed 

§ 225.18(f). This section describes the 

sponsor’s right to a fair hearing, 

parameters for conducting a fair hearing, 

and guidance on the role of the hearing 

official and the decision-making. 

The purpose of the fair hearing is 

limited to a determination by the 

hearing official that the State agency has 

complied with SFSP requirements in 

taking the actions that are under appeal. 

As with CACFP, it is not to determine 

whether to uphold duly promulgated 

Federal and State program 

requirements. FNS welcomes comments 

on the following points at issue. As 

described in proposed § 225.18(f), this 

rulemaking proposes the following set 

of actions: 

• The State agency must give notice 

of the proposed termination and 

procedures for requesting a fair hearing 

to the sponsor, its executive director, 

board chair, and any other responsible 

principals and responsible individuals. 

• The State agency’s notice must 

specify the basis for proposing 

termination and the procedures under 

which the sponsor, responsible 

principals, or responsible individuals 

may request a fair hearing. 

• The appellant must submit a 

written request for a fair hearing within 

10 calendar days after receipt of the 

State agency’s notice of proposed 

termination. If the State agency’s fair 

hearing procedures direct the appellant 

to send the request to the hearing 

official, then the procedures must 

identify which office will be responsible 

for acknowledging the appellant’s 

request. 

• The State agency must acknowledge 

receipt of the fair hearing request within 

5 calendar days of receiving it. 

• If a fair hearing is requested, the 

State agency must continue to pay any 

valid claims for reimbursement of 

eligible meals served until the hearing 

official issues a decision. 

• Any information upon which the 

State agency based the proposed 

termination must be available to the 

appellants for inspection from the date 

of receipt of the hearing request. 

• Appellants may contest the 

proposed termination in person or by 

submitting written documentation to the 

hearing official. 

• Appellants may represent 

themselves, retain legal counsel, or be 

represented by another person. 

• All documentation must be 

submitted prior to the beginning of the 

hearing. All parties, including the State 

agency, must submit written 

documentation to the hearing official 

within 20 calendar days after sponsor’s 

receipt of the notice of proposed 

termination. 

• Hearing officials must be 

independent and impartial. Even if they 

are employees of the State agency, 

hearing officials cannot be involved in 

the action that is the subject of the fair 

hearing, cannot occupy any position 

which would potentially subject to them 

to undue influence from other State 

employees who are responsible for the 

State agency’s action, or have any direct 

personal or financial interest in the 

outcome of the fair hearing. 

• Hearing officials must issue 

decisions within 30 calendar days of the 

State agency’s receipt of the appellants’ 

hearing request, based solely on the 

information provided by the parties. 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 fair hearing process. 

• The hearing official’s administrative 

decision is final. Appellants may not 

administratively contest the hearing 

official’s decision. 

If the appellant prevails, the State 

agency would issue a notice that 

confirms the proposed termination of 

the sponsor, responsible principals, and 

responsible individuals is vacated, as 

described in proposed 

§ 225.18(a)(6)(iii)(A). However, the 

sponsor would still have to implement 

procedures and policies to fully correct 

the serious management problem. 

If the hearing official upholds the 

State agency’s proposed termination 

action, the State agency would 

immediately notify the sponsor, 

executive director, board chair, and any 

other responsible principals and 

responsible individuals that the 

sponsor’s agreement is terminated, as 

described in proposed 

§ 225.18(a)(6)(iii)(B). As with CACFP, it 

is at this point in the process that this 

rulemaking proposes to declare the 

sponsor seriously deficient. The State 

agency would issue a serious deficiency 

notice that informs the sponsor, 

responsible principals, and responsible 

individuals of their disqualification 

from SFSP participation. This proposed 

rule describes termination of the 

agreement at proposed § 225.18(d) and 

disqualification at proposed § 225.18(e). 

The State agency would provide a 

copy of the serious deficiency notice to 

FNS, with the mailing address and date 

of birth for each responsible principal 

and responsible individual, and the full 

amount of any determined debt 

associated with the sponsor, responsible 

principals, and responsible individuals, 

for inclusion on the National 

Disqualified List. Requirements at 

proposed § 226.25(e)(2) describe 

placement on the National Disqualified 

List. Extension of the National 

Disqualified List to SFSP would make a 

list of disqualified sponsors and 

individuals available to State agencies 

to use in approving or renewing sponsor 

applications. 

Proposed § 225.18(g) addresses the 

State agency’s responsibilities for the 

payment of valid claims and the 

collection of unearned payments. 

Requirements for State agency action in 

response to the independent 

determination of a serious management 

problem by FNS is described in 

proposed § 225.18(h). 

Accordingly, this proposed rule 

would establish a serious deficiency 

process to address serious management 

problems in SFSP. This rulemaking 

would address State agency oversight 

and implementation of the serious 

deficiency process under 7 CFR 225.18. 

Corresponding amendments are 

proposed at 7 CFR 225.2, 225.6(b)(9), 

225.11(c), and 225.13. 

C. Suspension 

Section 17 of the NSLA, at 42 U.S.C. 

1766(d)(5), recognizes that there are 

circumstances that may require the 

immediate suspension of program 

operations, where continued 

participation in CACFP is inappropriate 

because health, safety, or program 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13165 

integrity are at risk. Current 

§§ 226.6(c)(5)(i) and 226.16(l)(4) 

describe a set of actions that an 

administering agency must implement if 

a program operator’s participation poses 

an imminent threat to the health or 

safety of children, adult participants, or 

the public. Under current 

§ 226.6(c)(5)(ii), the regulations outline 

administrative procedures when a State 

agency determines a false or fraudulent 

claim is submitted. There is no 

corresponding statute or regulations for 

suspension of participation in SFSP. 

Suspension requirements would 

move to proposed § 226.25(f). FNS does 

not propose any procedural changes for 

administering agencies when there is an 

imminent threat to health and safety 

through the suspension process. 

However, FNS is proposing to 

strengthen requirements for State 

agency action when a program operator 

knowingly submits a false or fraudulent 

claim. Proposed § 226.25(f)(2) would 

require State agencies to exercise their 

authority to suspend CACFP 

participation when it is determined that 

a claim for reimbursement is fraudulent 

or cannot be verified with required 

documentation. 

This rulemaking also includes 

technical amendments to correspond 

with the proposed changes in 

terminology and reorganization of the 

serious deficiency process regulations. 

Under proposed § 226.25(f), a 

suspension would remain in effect until 

the serious management problem is 

corrected, as in the case of a suspension 

based on a false or fraudulent claim, or 

a fair hearing of the proposed 

termination is completed. Although the 

agreement is not formally terminated, a 

program operator cannot participate in 

CACFP during the period of suspension. 

Suspension for Health or Safety Threat 

CACFP participation must be 

suspended if an imminent threat is 

identified that places the health or 

safety of children, adult participants, or 

the public at risk. The suspension is 

immediate and cannot be appealed. The 

administering agency must notify the 

program operator, responsible 

principals, and responsible individuals 

that participation and payments are 

suspended and termination and 

disqualification are proposed. The 

notice must identify the serious 

management problem and include 

procedures for requesting a fair hearing 

of the proposed termination and 

disqualification, as described in current 

§§ 226.6(c)(5)(i)(B) and 226.16(l)(4)(ii). 

Proposed § 226.25(f)(1)(i)(A) would 

address the notice of suspension of an 

institution and proposed 

§ 226.25(f)(1)(ii)(A) would address the 

notice of suspension of a day care home 

or an unaffiliated center. 

The administering agency is 

prohibited from offering an appeal prior 

to the commencement of the suspension 

and payments will remain suspended 

until the fair hearing is concluded. If the 

hearing official overturns the 

suspension, the program operator may 

claim reimbursement for eligible meals 

served during the suspension. Current 

§ 226.6(c)(5)(i)(C), which addresses 

termination of the agreement by the 

program operator and placement on the 

National Disqualified List, would move 

to proposed § 226.25(f)(1)(i)(B) and 

(f)(1)(ii)(B). If a program operator 

voluntarily terminates its agreement 

after receiving the notice of proposed 

termination, the program operator will 

still be terminated for cause and 

disqualified. 

Proposed Suspension for Fraud or 

Fraudulent Claim 

Submission of a false claim for 

reimbursement in facilities is a serious 

management problem that must be 

addressed through the serious 

deficiency process. However, an 

institution is subject to suspension for 

the submission of a false claim for 

reimbursement. Current § 226.6(c)(5)(ii), 

authorizes State agencies to suspend 

participation, at their discretion, if the 

State agency determines that a claim for 

reimbursement is fraudulent or cannot 

be verified with required 

documentation. Under proposed 

§ 226.25(f)(2) of this rulemaking, FNS 

would require State agencies to suspend 

participation of institutions in all cases 

of false or fraudulent claims. 

Suspension stops the flow of payments 

to those institutions and provides 

protection against misuse of program 

funds. 

Suspension for false or fraudulent 

claims is not immediate. At the time 

suspension is proposed, the State 

agency must initiate action to terminate 

the agreement to disqualify the 

institution, responsible principals, and 

responsible individuals. Suspension for 

false or fraudulent claims becomes 

effective if the institution does not 

appeal the proposed termination and 

disqualification or, if a suspension 

review is requested, the hearing official 

upholds the State agency’s proposed 

action. If a suspension for submission of 

a false or fraudulent claim is 

overturned, the serious deficiency 

process to address the institution’s 

serious management problems would 

still continue. 

All of the requirements for 

suspending an institution for submitting 

a fraud or fraudulent claim that are 

found in current § 226.6(c)(5)(ii) would 

move to proposed § 226.25(f)(2). 

Suspension of payments would move 

from current §§ 226.6(c)(5)(i)(D), 

226.6(c)(5)(ii)(E), and 226.16(l)(4)(iv) to 

proposed § 226.25(h)(2). When the State 

agency proposes to suspend an 

institution’s participation, including 

program payments for the submission of 

a false or fraudulent claim, the State 

agency must issue a combined notice of 

serious management problems and 

proposed suspension, which would 

include a description of the serious 

management problem and the State 

agency’s fair hearing procedures for 

suspension and termination. The 

institution has the right to request a 

suspension review as well as a fair 

hearing of the proposed termination and 

disqualification action. 

The suspension is implemented if the 

institution does not appeal the action or, 

if an appeal is filed, the hearing official 

upholds the action proposed by the 

State agency. If the suspension review 

official overturns the proposed 

suspension, the institution may claim 

reimbursement for eligible meals served 

during the proposed suspension. A State 

agency must not reimburse an 

institution for that portion of a claim 

that the State agency knows to be 

invalid. Voluntary termination of the 

institution’s agreement with the State 

agency after having received the notice 

would still result in termination for 

cause and placement on the National 

Disqualified List. 

Suspension of participation and 

suspension of payments add strong 

integrity protections against the 

submission of false and fraudulent 

claims in CACFP. FNS is concerned that 

there are similar circumstances in SFSP 

where continuing program operations is 

inappropriate, yet there are no 

corresponding requirements authorizing 

the State agency to suspend 

participation and payments. FNS 

recognizes that additional public input 

is needed to consider the use of 

suspension to protect against the 

submission of false or fraudulent claims 

in SFSP. Public comments on the 

following proposed options will be 

critical as FNS develops the final rule: 

1. Option 1 of this proposed rule 

would require the State agency to apply 

the serious deficiency process when it 

determines that a sponsor in SFSP has 

submitted a false or fraudulent claim. 

The serious deficiency process would 

provide the sponsor the opportunity for 

corrective action and a fair hearing, with 

no suspension of participation. The 

sponsor would be eligible to continue to 

participate in SFSP and receive 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13166 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

payments for all valid claims that are 

submitted to the State agency for 

reimbursement. 

2. Option 2 would require the State 

agency to propose suspension based on 

a sponsor’s submission of a false or 

fraudulent claim, at the same time that 

the serious deficiency process is 

implemented. The suspension would 

remain in effect until the false or 

fraudulent claim is corrected or a fair 

hearing of the suspension completed. 

Although there would be no formal 

termination of the agreement, the 

sponsor would not be eligible to 

participate in SFSP during the period of 

suspension. All payments of claims for 

reimbursement would be suspended. If 

a fair hearing overturns the suspension, 

the sponsor would be eligible for 

retroactive reimbursement. 

Accordingly, this rulemaking 

proposes to make corresponding 

changes to 7 CFR 226.2 and 226.25 to 

align the proposed amendments to the 

serious deficiency process. This 

proposed rule would move State agency 

actions to suspend participation if 

health or licensing officials cite an 

institution for serious health or safety 

violations from 7 CFR 226.6(c)(5)(i) 

through 226.25(f)(1). Requirements for 

the State agency to exercise its authority 

to suspend participation if it determines 

that an institution knowingly submitted 

a claim for reimbursement that is 

fraudulent or that cannot be verified 

with required documentation would 

move from 7 CFR 226.6(c)(5)(ii) to 

226.25(f)(2). Fair hearing procedures at 

7 CFR 226.6(k) and (l) would move to 

§ 226.25(g). Sponsoring organization 

actions to suspend participation of day 

care homes that are currently found at 

7 CFR 226.16(l)(4) would move to 

§ 226.25(f). Requirements for the 

suspension of payments would move 

from 7 CFR 226.6(c)(5)(i)(D), 

226.6(c)(5)(ii)(E), and 226.16(l)(4)(iv) to 

226.25(h)(2). 

D. Disqualification and the National 

Disqualified List 

1. Termination for Cause and 

Disqualification 

The serious deficiency process gives 

program operators the opportunity for 

corrective action and due process. The 

administering agency can accept 

corrective action at any point up until 

the program agreement is terminated. If 

the administering agency determines 

that the program operator, whose ability 

to manage the program has already been 

called into question, fails to take 

successful corrective action, the 

program agreement must be terminated 

for cause. Under this proposed rule, the 

administering agency would declare the 

program operator to be seriously 

deficient at the point of termination, 

which would be followed by 

disqualification. 

Termination for Cause 

The Child Nutrition Program Integrity 

Final Rule amended CACFP and SFSP 

regulations to allow a program operator 

to terminate an agreement for 

convenience for considerations 

unrelated to its program performance, at 

current §§ 225.6(i) and 226.6(b)(4)(ii). In 

the serious deficiency process, due to a 

program operator’s inability to properly 

perform its responsibilities under its 

program agreement, termination must 

always be for cause, not convenience. 

Current § 226.16(l) also addresses a 

sponsoring organization’s actions to 

terminate a day care home’s agreement 

for cause. There are no regulations 

describing the termination for cause of 

a CACFP institution or unaffiliated 

center or an SFSP sponsor’s agreement 

related to the performance of program 

requirements. 

To strengthen management practices 

and eliminate gaps that put program 

integrity at risk, FNS proposes to amend 

current §§ 225.2 and 226.2 to include 

definitions of ‘‘Termination for cause’’ 

to describe the administering agency’s 

action to end an agreement with a 

sponsor, an institution, an unaffiliated 

center, or a day care home for reasons 

related to proper performance of 

program responsibilities. This proposed 

rule would also require action by the 

State agency to: 

• Terminate an agreement whenever a 

sponsor’s participation in SFSP or an 

institution’s participation in CACFP 

ends at proposed §§ 225.6(i) and 

226.6(b)(4)(iii), respectively; 

• Terminate an agreement for cause, 

as described under the serious 

deficiency process proposed 

§§ 225.18(d)(1) and 226.25(d)(1); and 

• Terminate an agreement for cause if 

a program operator, responsible 

principal, or responsible individual is 

on the National Disqualified List, at 

proposed §§ 225.18(e)(1) and 

226.25(e)(1). 

Disqualification 

The National Disqualified List was 

established to prevent a disqualified 

institution or day care home from being 

approved to participate in CACFP or 

any other Child Nutrition Program. As 

described in the next section of this 

preamble, FNS proposes to amend 7 

CFR 210.9(d), 215.7(g), 220.7(i), 

225.6(b)(13), and 226.6(b)(1)(xiii), to 

establish a reciprocal disqualification 

process that would prohibit State 

agencies from approving an application 

for any program operator that is 

terminated for cause and placed on a 

National Disqualified List. 

In CACFP, if a new institution’s 

application does not meet program 

requirements under 7 CFR 226.6(b), 

226.15(b), or 226.16(b), the State agency 

must deny the application and 

disqualify the applicant institution, the 

person who signed the application, and 

any other responsible principals or 

responsible individuals, as described in 

proposed § 226.6(c). The State agency 

must ensure that participating 

institutions annually certify that neither 

the institution nor its principals are on 

the National Disqualified List. The State 

agency must also ensure that 

participating sponsoring organizations 

annually certify that no sponsored 

facility or facility principal is on the 

National Disqualified List. 

When a new application is denied, 

current § 226.6(c)(1) requires the State 

agency to follow the procedures for 

implementing the serious deficiency 

process. However, FNS recognizes that 

the intent of the serious deficiency 

process is to address program 

performance under a legally binding 

agreement. It may be more appropriate 

to address the denial of a program 

application through a remedial 

application process, instead of the 

serious deficiency process. This 

rulemaking would amend 7 CFR 

226.6(c)(1) to propose a separate set of 

procedures that would provide 

applicants the opportunity to correct the 

application and request due process if 

the application is denied. Similarly, the 

serious deficiency process would not 

apply to a denial of a sponsor’s 

application for SFSP, as described in 7 

CFR 225.11(c). 

2. Reciprocal Disqualification in Child 

Nutrition Programs 

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

1760(r), specifies 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. FNS proposes 

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 and the applicant is 

on the National Disqualified List for 

CACFP or SFSP. This process is called 

‘‘reciprocal disqualification.’’ 

The establishment of a reciprocal 

disqualification process supports 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13167 

integrity when it is determined that a 

program operator currently participating 

in a Child Nutrition Program is 

terminated for cause from another Child 

Nutrition Program and placed on the 

National Disqualified List. Proposed 

§ 226.6(b)(1)(xiii) would prohibit State 

agencies from approving an application 

for participation in any Child Nutrition 

Program for any program operator that 

is terminated for cause and placed on 

the National Disqualified List. Current 

§ 226.6(c)(1)(iii)(C)(3) and proposed 

§§ 226.6(c)(6)(iii) and 226.25(g)(1)(i)(A) 

provide the right to a fair hearing to 

program operators whose applications 

are denied. The right to a fair hearing of 

an application denial for program 

operators based on the National 

Disqualified List is solely granted to 

contest the accuracy of the information 

on the National Disqualified List or the 

match to the National Disqualified List. 

The basis for denial, termination for 

cause, and placement on the National 

Disqualified List, is not subject to an 

additional hearing. The right to a fair 

hearing already would have been 

provided prior to termination and 

disqualification. 

Proposed § 226.25(e)(1) would apply 

reciprocal disqualification for 

termination and placement on a 

National Disqualified List for program 

operators with an existing program 

agreement. This rulemaking would also 

apply termination procedures, under 7 

CFR 210.25, 215.16, 220.19, 225.11, 

226.6, and 226.16, when it is 

determined that a program operator 

currently participating in a Child 

Nutrition Program is terminated for 

cause from another Child Nutrition 

Program and placed on a National 

Disqualified List. The State agency 

would have to make an effort to ensure 

that eligible children and adult 

participants continue to have access to 

important nutrition benefits. For 

example, if a CACFP sponsoring 

organization is terminated and 

disqualified, the State agency should 

have a contingency plan for the transfer 

of homes or unaffiliated centers. A 

contingency plan, as defined in 

proposed §§ 225.2 and 226.2, and 

further described in proposed 

§§ 225.18(d)(2) and 226.25(d)(2), would 

help ensure that meal services continue 

to be available, without interruption. 

This proposed rule would require the 

State agency to follow the same 

procedures to address serious 

management problems through 

corrective action and due process for all 

types of program operators. However, at 

the point when a proposed termination 

action is upheld and the program 

operator is declared seriously deficient, 

as described in proposed 

§ 226.25(a)(6)(iii)(B) and (d)(1), FNS has 

determined that there are circumstances 

that may warrant an alternative to 

disqualification for institutions or 

sponsors that are also school food 

authorities. FNS recognizes that school 

food authorities are responsible to 

safeguard school meal benefits to 

children. Additional public input is 

needed to consider a different procedure 

when a school food authority that is also 

an institution or sponsor operating 

CACFP or SFSP, respectively, is 

declared seriously deficient. Public 

comments on the following options will 

be critical as FNS develops the final 

rule: 

1. Option 1 would require the State 

agency to terminate, disqualify, and 

place on the National Disqualified List 

any school food authority that is 

declared seriously deficient, just like 

any other type of institution or sponsor 

that is operating CACFP and SFSP. If a 

school food authority is determined to 

be seriously deficient, the school food 

authority’s agreement to operate CACFP 

or SFSP would be terminated, and it 

would be disqualified and placed on the 

National Disqualified List, as described 

under proposed §§ 225.18(e) and 

226.25(e). Placement on the National 

Disqualified List would prohibit the 

school food authority from operating the 

National School Lunch Program, School 

Breakfast Program, or any other Child 

Nutrition Program. The responsible 

principals and responsible individuals 

would also be disqualified from 

program participation and placed on the 

National Disqualified List. 

2. Option 2 would require the State 

agency to terminate the school food 

authority’s agreement to operate CACFP 

or SFSP. In this case, the responsible 

principals and responsible individuals 

would be disqualified from program 

participation, placed on the National 

Disqualified List, and ineligible to 

participate in any Child Nutrition 

Program. However, the State agency 

would have discretion to disqualify and 

place the school food authority, itself, 

on the National Disqualified List. If the 

State agency determines that the school 

food authority should not be subject to 

disqualification and placement on the 

National Disqualified List, there would 

be no impact on the school food 

authority’s ability to operate other Child 

Nutrition Programs, including the 

National School Lunch and School 

Breakfast Programs. 

This rulemaking would not affect the 

eligibility of a school food authority that 

only operates the National School 

Lunch, School Breakfast, or Special 

Milk Programs to continue to participate 

in those programs. FNS does not 

anticipate that it will impact most 

school food authorities that operate 

CACFP or SFSP. With their experience 

managing the school nutrition programs, 

school food authorities are wellpositioned to successfully operate 

CACFP and SFSP. 

There may also be circumstances 

when a school food authority may be a 

meal vendor for a program operator that 

has been placed on the National 

Disqualified List. If the school food 

authority is not otherwise connected to 

the management of CACFP or SFSP, the 

school food authority would continue to 

be eligible to participate in the Child 

Nutrition Programs, because it would 

not be responsible for program 

operations. School food authorities, 

sponsors, and institutions are only 

responsible for the schools, sites, and 

facilities identified in their State agency 

agreements. 

Accordingly, this proposed rule 

would amend 7 CFR 225.2 and 226.2 to 

include definitions of termination for 

cause and contingency plan. Additional 

amendments to 7 CFR 210.9(d), 215.7(g), 

220.7(i), 225.6(b)(13), 225.18(d) and (e), 

226.6(b)(1)(xiii) and (b)(2)(iii)(D), and 

226.25(d) and (e) would prohibit State 

agencies from approving an application 

for participation in any Child Nutrition 

Program for a program operator that is 

terminated for cause and that is listed 

on a National Disqualified List. This 

rulemaking would also amend 7 CFR 

225.11(c) and 226.6(c) to ensure that the 

appropriate procedures are followed for 

a denial of a sponsor’s or institution’s 

application. 

3. Legal Requirements for Records 

Maintained on Disqualified Individuals 

The National Disqualified List is a 

Federal computer matching program 

that uses a Computer Matching and 

Privacy Protection Act system of records 

of information on institutions and 

individuals who are disqualified from 

participation in CACFP. This is a 

mandatory collection under section 

243(c) of Public Law 106–224, the 

Agricultural Risk Protection Act of 

2000, which amended section 17 of the 

Richard B. Russell National School 

Lunch Act, at 42 U.S.C. 1766(d)(5)(E)(i) 

and (ii), and under 7 CFR 226.6(c)(7)(i). 

This proposed rule would expand the 

National Disqualified List to include the 

records of sponsors, sites, responsible 

principals, and responsible individuals 

who have been disqualified from SFSP, 

in compliance with section 13 of the 

NSLA, at 42 U.S.C. 1761(q)(3), and the 

Computer Matching Act, at 5 U.S.C. 

552a. The Computer Matching Act 

applies when a Federal agency conducts 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13168 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

a computer match of two or more 

personally identifiable information 

records for establishing or verifying 

eligibility under a Federal benefit 

program. The Computer Matching Act 

also applies when a non-Federal agency 

compares information with a Federal 

system of records to determine 

eligibility for a Federal benefit program. 

A computer match takes information 

provided by a Federal source and 

compares it to a State record, using a 

computer to perform the comparison. 

The National Disqualified List 

supports program integrity by 

preventing institutions whose program 

agreements were terminated for cause 

and disqualified in one State from being 

approved for participation in another 

State. It prevents disqualified 

responsible principals from continuing 

to be involved in program 

administration by forming a new 

corporate entity and entering the 

program under a different organizational 

name. It also prevents day care home 

providers and responsible individuals 

who have been terminated and 

disqualified by one sponsoring 

organization from re-entering the 

program under the auspices of a 

different sponsoring organization. Once 

disqualified, program participation is 

prohibited for 7 years from the effective 

date of the disqualification and until 

any debt is paid. 

The records of institutions, 

responsible principals, and responsible 

individuals who have been disqualified 

from participation in CACFP are part of 

the National Disqualified List. As FNS 

described in the notice, Privacy Act of 

1974; System of Records Revision, 86 FR 

48975, September 1, 2021, many of the 

steps of the serious deficiency process 

align with requirements of the 

Computer Matching Act. For example, 

the State agency initiating a National 

Disqualified List search must 

independently verify records to 

determine accuracy before taking 

adverse action against a program 

applicant or participant. FNS uploads 

every certified notice of serious 

deficiency into the system, which the 

State agency may use to verify that the 

match is correct. After records are 

verified, the State agency must notify 

the disqualified program applicant or 

participant of the match findings. 

However, current § 226.6(c)(6) 

describing the National Disqualified List 

does not address procedures or 

protections for data disclosure and 

privacy specified for records maintained 

on any person in a computer matching 

program under the Computer Matching 

Act. 

This proposed rule would close the 

gap by codifying the responsibilities of 

administering agencies in implementing 

systems of records, as described in the 

Computer Matching Act. Under 

proposed §§ 225.18(e)(3) and 

226.25(e)(3), each State agency would 

enter into a written matching agreement 

with FNS to address procedures and 

protections for disclosure and privacy of 

personally identifiable information 

records on the National Disqualified 

List. Additional amendments would 

advise State agencies on the use of 

matching agreements, independent 

verification of matching information, 

use of disqualification data, and 

safeguards to protect individuals who 

may be incorrectly placed on the 

National Disqualified List through 

human error or technical lapses in the 

system. Before a CACFP or an SFSP 

application is denied, the State agency 

would also have to notify any 

individual whom the application 

identifies as being placed on the 

National Disqualified List. The State 

agency must provide an opportunity for 

the individual to ensure that the record 

is accurate. 

Current CACFP regulations at 7 CFR 

226.6(b)(1)(xii) and (b)(2)(iii)(C) require 

State agencies and sponsoring 

organizations to verify that applicants 

are not on the National Disqualified List 

prior to approval or annual certification 

of participation. Similarly, before hiring, 

CACFP sponsoring organizations must 

check the National Disqualified List to 

verify that any new employee whose 

position will be supported by program 

funds or who will be working in CACFP 

is not on the National Disqualified List. 

Proposed § 226.25(e)(3)(i)(C) would 

require the State agency initiating a 

computer match to verify the 

disqualification before taking adverse 

action against a program applicant, 

participant, or employee. The State 

agency could contact the originating 

administering agency or check the 

certified notices that are uploaded to the 

system to verify the disqualification. 

The serious deficiency process 

requires three types of certified notices 

that are uploaded to the system, which 

administering agencies may use to 

independently verify the accuracy of a 

computer match. This rulemaking 

would also amend the definition of 

‘‘notice’’ under 7 CFR 226.2 and address 

the content and delivery requirements 

for all of the notifications that are 

transmitted as part of the serious 

deficiency process at proposed 

§ 226.25(a)(5). 

This proposed rule would also 

expand the National Disqualified List to 

include the records of sponsors, sites, 

responsible principals, and responsible 

individuals who have been disqualified 

from SFSP, as required under section 13 

of the NSLA, at 42 U.S.C. 1761(q)(3). 

FNS proposes to amend SFSP 

regulations to address termination for 

cause at proposed § 225.18(d)(1); 

disqualification and placement on the 

National Disqualified List at proposed 

§ 225.18(e)(2); and the State agency’s 

responsibilities under the Computer 

Matching Act at proposed § 225.18(e)(3). 

Accordingly, this proposed rule 

would amend 7 CFR 225.18(e)(3) and 

226.25(e)(3) to address compliance with 

the Computer Matching Act’s 

protections for data disclosure and 

privacy specified for records maintained 

on any person on the National 

Disqualified List. This rulemaking 

would also amend the definition of 

‘‘notice’’ under 7 CFR 225.2 and 226.2 

and further amend 225.18(a)(5) and 

(e)(3)(v), and 226.25(a)(5) and (e)(3)(v) to 

address the content and delivery 

requirements for serious deficiency 

process notifications and independent 

verification of a computer match. 

E. Multi-State Sponsoring Organizations 

(MSSO) 

A sponsoring organization is a type of 

public or private nonprofit institution 

that is entirely responsible for the 

administration of CACFP in any day 

care home, unaffiliated public or private 

nonprofit center, or affiliated for-profit 

center. Day care homes are required to 

participate in CACFP through a 

sponsoring organization. Although 

centers may enter into an agreement 

directly with the State agency, many 

centers find it is easier to participate in 

CACFP under an existing sponsoring 

organization. As a growing number of 

sponsoring organizations expand to 

serve multiple types of facilities in 

multiple States, State agencies are faced 

with unique challenges, particularly 

when serious management problems 

arise. Without regulated practices, 

assignment of State agency 

responsibilities and protocol of 

communication, State agencies dealing 

with multi-state sponsoring 

organizations (MSSOs) could duplicate 

each other’s efforts and could be 

unaware of potential serious 

management problems occurring in 

another State. In SFSP, FNS 

understands there are an increasing 

number of sponsors operating summer 

meal programs at sites in more than one 

State. 

FNS is taking this opportunity to 

propose regulations to strengthen State 

agency administration when a 

sponsoring organization operates the 

program in more than one State. This 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13169 

proposed rule addresses provisions to 

facilitate the State agency’s review of 

administrative budgets and allocation of 

shared costs, performance of monitoring 

and audit-related activities, and 

oversight when procurement standards 

vary from State to State. FNS recognizes 

that improved information sharing, 

collaboration, and coordination among 

administering agencies are also essential 

to ensure that participation of MSSOs is 

administered properly, with less 

duplication and burden. 

At 7 CFR 226.2, FNS proposes to 

define an MSSO as a sponsoring 

organization that operates CACFP in 

more than one State. This proposed rule 

would define an MSSO as a sponsor that 

operates SFSP in more than one State, 

under 7 CFR 225.2. An MSSO enters 

into a written agreement with the 

administering agency in each State 

where it is approved to provide CACFP 

or SFSP meal services. An 

independently owned or franchised 

organization operating multiple centers, 

day care homes, or sites in a single State 

would not be an MSSO. However, a 

franchise operating multiple centers, 

day care homes, or sites in more than 

one State would be an MSSO. A forprofit organization is an MSSO when 

the parent corporation operates multiple 

affiliated centers or affiliated sites in 

more than one State. 

The State agency must determine if 

program operations will be provided in 

more than one State, as part of the 

application process. Proposed 

§§ 225.6(c)(5), 226.6(b)(1)(xix), and 

226.6(b)(2)(iii)(L) would require the 

State agency to ask all applicants if they 

are approved or intend to submit an 

application to participate in any other 

State. The application of a potential 

MSSO would have to provide: 

additional information on the number of 

affiliated and unaffiliated facilities or 

sites it operates; its use of program 

funds for administrative expenses; and 

its nonprofit or for-profit status. The 

application would also have to include 

a comprehensive budget that provides 

the sum of all costs to be incurred, 

identifies costs that attribute directly to 

operations within each State, and sets 

out a cost allocation plan for costs 

benefiting more than one State. 

For program purposes, a cognizant 

agency is any State agency or FNS 

Regional office that is responsible for 

oversight of CACFP or SFSP in the State 

where the MSSO’s headquarters is 

located. The location of the MSSO’s 

headquarters is the determining factor 

in assigning the role of the cognizant 

agency. This rulemaking proposes to 

add definitions of Cognizant State 

agency and Cognizant Regional office, 

under 7 CFR 225.2 and 226.2, to 

recognize the roles that these 

administering agencies have when an 

MSSO participates in CACFP or SFSP. 

These terms are currently not defined in 

regulation. By assigning responsibilities 

to the Cognizant State agency and 

Cognizant Regional office, this will 

eliminate a duplication of effort and 

increase program integrity by increasing 

awareness of the MSSO’s performance 

in other States. FNS seeks input on how 

MSSO’s headquarters are identified. 

Over the years, FNS has issued 

CACFP guidance to clarify 

responsibilities—particularly with 

regard to participation of franchises and 

for-profit organizations, review of 

administrative budgets, allocation of 

shared costs, availability of records, 

performance of monitoring and auditrelated activities, and procurement 

actions—for agencies that assume 

cognizance. This set of guidance 

includes FNS Instruction 788–5, 

Approval of Administrative Budgets for 

Multi-State Sponsoring Organizations of 

Family Day Care Homes—Child Care 

Food Program, October 25, 1982; FNS 

Instruction 788–16, Administrative 

Procedures for Multi-State Sponsoring 

Organization—Child Care Food 

Program, October 19, 1983; FNS 

Instruction 788–6, Revision 2, 

Availability of Institutions’ Records to 

Administering Agencies, November 1, 

1991; FNS Instruction 796–2, Revision 

4, Financial Management—Child and 

Adult Care Food Program, December 11, 

2013; and the memorandum, 

Applicability of FNS Instruction 788–16 

to Multi-State Proprietary CACFP 

Sponsors, June 25, 2003. 

FNS proposes to amend CACFP 

regulations at 7 CFR 226.6(q) to address 

the responsibilities of the administering 

agency in all States where MSSOs 

operate and describe the unique role of 

the cognizant agency in the State where 

the MSSO is headquartered. This 

proposed rule would add similar 

amendments to SFSP regulations under 

7 CFR 225.6(n). 

This rulemaking would require all 

CACFP State agencies and SFSP State 

agencies to: 

• Determine if an applicant is an 

MSSO. As part of the application 

process, the State agency must ask all 

applicants if their organization operates 

in more than one State. 

• Obtain administrative and financial 

information from each MSSO. The 

following information must be obtained 

initially on the MSSO’s application and 

annually certified or updated: 

b The number of affiliated facilities 

or sites it operates, by State; 

b The number of unaffiliated 

facilities or sites it operates, by State; 

b The names, addresses, and phone 

numbers of the organization’s 

headquarters and the official who has 

administrative responsibility; 

b The names, addresses, and phone 

numbers of the financial records center 

and the official who has financial 

responsibility; and 

b The organization’s decision 

whether or not to use program funds for 

administrative expenses. 

• Approve the administrative budgets 

of any MSSOs operating within their 

respective States. The State agency is 

responsible for approving budget line 

items that are directly attributable to 

operations within the State. The State 

agency must notify the cognizant State 

agency of any CACFP administrative 

costs that exceed the 15 percent limit, 

as described in current § 226.6(f)(1)(iv). 

In SFSP, the State agency must notify 

the cognizant State agency if it has 

determined that the ratio of 

administrative to operating costs is high 

or that the net cash resources of an 

MSSO’s nonprofit food service exceeds 

the limits that are described in 7 CFR 

225.7(m). 

• Enter into a permanent written 

agreement with each MSSO operating 

within the State. Each MSSO must enter 

into an agreement with the State agency 

to assume final administrative and 

financial responsibility for program 

management in each State in which it 

operates. 

• Track State-specific costs. The State 

agency is responsible for approving 

State-specific costs, which include the 

State agency’s portion of budget line 

item costs that are shared among other 

administering agencies, as well as costs 

that attribute directly to program 

operations within the State. 

• Conduct oversight of MSSO 

operations within the State. State 

agencies must comply with SFSP and 

CACFP monitoring and program 

assistance requirements under proposed 

§§ 225.6(n)(2) and 226.6(q), respectively, 

to conduct reviews, training, and other 

oversight activities of MSSOs operating 

within their respective States. The 

review cycle would be based on the 

number of sites or facilities operating 

within the State. To reduce 

administrative burden, the State agency 

may use information from the cognizant 

State agency’s monitoring activities to 

assess compliance in areas where the 

scope of review overlaps, during the 

same review cycle. In those 

circumstances, the State agency may 

choose to only review those aspects of 

CACFP or SFSP that are outside the 

scope of the cognizant agency’s review, 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13170 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

such as implementation of additional 

State agency requirements or financial 

records to support State-specific 

administrative costs. Summaries of 

reviews conducted within each State 

must be provided to the cognizant State 

agency. The State agency may also 

choose to conduct a full review at the 

MSSO headquarters and financial 

records center, by requesting the 

necessary records from the cognizant 

State agency. 

• Conduct audit resolution activities. 

State agencies are responsible for 

reviewing audit reports, addressing 

audit findings, and implementing 

corrective actions to resolve audits of 

any MSSOs operating within their 

respective States. MSSOs must make 

audit reports available to the State 

agencies in all of the States in which 

they have program operations. 

• Make available copies of notices of 

termination and disqualification. The 

State agency conducting the oversight 

activities must notify all other 

administering agencies that have 

agreements with the MSSO of 

termination and disqualification 

actions. If a State agency holds an 

agreement with an MSSO that is 

disqualified by another administering 

agency and placed on the National 

Disqualified List, the State agency must 

terminate the MSSO’s agreement, 

effective no later than 30 calendar days 

of the date of the MSSO’s 

disqualification. This requirement is 45 

days in CACFP regulations at current 

§ 226.6(c)(2)(i). In SFSP, this proposed 

rule would require the State agency to 

terminate the MSSO’s agreement, 

effective no later than 15 calendar days 

of the date of the MSSO’s 

disqualification. 

FNS also proposes requirements for 

the cognizant State agency 

administering CACFP or SFSP. This 

rulemaking would require the cognizant 

State agency to: 

• Determine if there will be shared 

administrative costs among the States in 

which the MSSO operates and how the 

costs will be allocated. The cognizant 

agency has the authority to approve cost 

levels for cost items that must be 

allocated. The cognizant State agency 

must approve the allocation method that 

the MSSO uses for shared costs. The 

method must allocate the cost based on 

the benefits received, not the source of 

funds available to pay for the cost. If the 

MSSO operates CACFP centers, the 

cognizant agency must also ensure that 

administrative costs are capped at 15 

percent on an organization-wide basis. 

In SFSP, the cognizant agency must 

ensure that the net cash resources of an 

MSSO’s nonprofit food service do not 

exceed the limits that are described in 

7 CFR 225.7(m). 

• Coordinate monitoring. The 

cognizant State agency’s monitoring 

activities must include a full review at 

the MSSO headquarters and financial 

records center. The cognizant State 

agency must coordinate the timing of 

reviews and make copies of monitoring 

reports and findings available to all 

other administering agencies that have 

agreements with the MSSO, as 

described in proposed §§ 225.6(n)(2)(iii) 

and § 226.6(q)(2)(iii). 

• Ensure that organization-wide audit 

requirements are met. Each MSSO must 

comply with audit requirements, as 

described under 2 CFR part 200, subpart 

D, and USDA implementing regulations 

2 CFR parts 400 and 415. Since their 

operations are often large and complex, 

MSSOs should have annual audits. If an 

MSSO has for-profit status, the 

cognizant agency must establish audit 

thresholds and requirements. 

• Oversee audit funding and costs. 

Audit funding is a shared responsibility. 

The share of organization-wide audit 

costs may be based on a percentage of 

each State’s expenditure of CACFP and 

SFSP funds and the MSSO’s 

expenditure of Federal and non-Federal 

funds during the audited fiscal year. 

The cognizant State agency should 

review audit costs as part of the overall 

budget review and make audit reports 

available to the other administering 

agencies that have agreements with the 

MSSO. 

• Ensure compliance with 

procurement requirements. Procurement 

actions involving MSSOs must follow 

the requirements under 2 CFR part 200, 

subpart D, and USDA implementing 

regulations 2 CFR parts 400 and 415. If 

the procurement action benefits all 

States in which the MSSO operates, the 

procurement standards of the State that 

are the most restrictive apply. If the 

procurement action only benefits a 

single State’s program, the procurement 

standards of that State agency apply. 

Accordingly, this rule proposes to 

amend 7 CFR 226.2, 226.6(b)(1) and (2), 

and 226.6(q) to address State 

administrative responsibilities when 

MSSOs participate in CACFP. 

Amendments to 7 CFR 225.2, 

225.6(c)(5), and 225.6(n) would make 

similar changes to address State 

administrative responsibilities when 

MSSOs participate in SFSP. 

F. Summary of Regulatory Provision 

Proposals 

This rulemaking reflects FNS’ 

commitment to work with State 

administrators, program operators, and 

other stakeholders to develop strategies 

to ensure that Child Nutrition Program 

requirements are effective, practical, 

and fair. FNS has proposed important 

modifications to the serious deficiency 

process that, when codified in the 

regulations, are designed to strengthen 

administrative oversight, improve 

operational performance, and protect 

Child Nutrition Programs from 

mismanagement, abuse, and fraud. The 

serious deficiency process described in 

this proposed rule includes procedures 

for corrective action, termination, 

disqualification, and due process that 

emphasize fairness and consistency for 

all types of program operators in CACFP 

and SFSP. This proposed rule addresses 

statutory requirements and policy 

improvements that would: 

• Extend the serious deficiency 

process to unaffiliated centers in 

CACFP. 

• Establish a serious deficiency 

process in SFSP. 

• Make improvements to the serious 

deficiency process by: 

Æ Defining terms that would 

encourage a clear understanding and 

improve implementation of the serious 

deficiency process; 

Æ Including measures for identifying 

a serious management problem and 

determining the effectiveness of 

corrective action; 

Æ Offering a path to full correction of 

a serious management problem and the 

removal of the determination of serious 

deficiency; 

Æ Establishing timelines with an 

emphasis on correcting serious 

management problems quickly; and 

Æ Consolidating all regulatory 

requirements for oversight and 

implementation of the serious 

deficiency process, including due 

process, termination, and 

disqualification, in a single subchapter, 

at 7 CFR 225.18 and 226.25. 

• Direct each SFSP State agency to 

establish a list of sponsors, responsible 

principals, and responsible individuals 

with serious management problems. 

• Require action by the State agency 

to terminate a CACFP or SFSP 

agreement for cause through the serious 

deficiency process. 

• Expand the National Disqualified 

List to include disqualified SFSP 

sponsors, responsible principals, and 

responsible individuals on the National 

Disqualified List. 

• Direct the State agency to exercise 

its authority to suspend CACFP 

participation when a false or fraudulent 

claim is alleged. 

• Require compliance with the 

Computer Matching Act’s protections 

for data disclosure and privacy specified 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13171 

for records maintained on any person on 

the National Disqualified List. 

• Propose requirements to strengthen 

State agency administration when a 

program operator participates in CACFP 

or SFSP in more than one State. 

Public input and assessment, with an 

opportunity to examine CACFP and 

SFSP operations and consider 

improvements related to this proposed 

rule, are essential elements of the 

rulemaking process. FNS invites the 

public to submit comments to help FNS 

gain a better understanding of both the 

possible benefits and any negative 

impacts associated with the proposed 

regulatory changes. FNS requests 

specific input on a proposal to allow an 

alternative to disqualification for 

program operators that are school food 

authorities. Specific public input is also 

requested on the requirement that State 

agencies exercise their authority to 

suspend CACFP participation when a 

false or fraudulent claim is alleged and 

to extend this authority to State agencies 

administering SFSP. Public comments 

on these amendments will be critical as 

FNS develops the final rule. 

III. Procedural Matters 

A. Executive Orders 12866, 13563 and 

14094 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits, 

including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and equity. 

Executive Order (E.O.) 13563 

emphasizes the importance of 

quantifying both costs and benefits, 

reducing costs, harmonizing rules, and 

promoting flexibility. This rulemaking 

was determined to be not significant 

under section 3(f) of E.O. 12866, as 

amended by E.O. 14094, and therefore 

no Regulatory Impact Analysis is 

required. 

B. 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 proposed 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 

and local organizations operating the 

Child and Adult Care Food Program and 

Summer Food Service Program, any 

economic effect will not be significant. 

C. 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 rule, section 

205 of UMRA generally requires FNS to 

identify and consider a reasonable 

number of regulatory alternatives and 

adopt the least costly, more costeffective or least burdensome alternative 

that achieves the objectives of the rule. 

This proposed 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. 

D. 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, Special Milk, and School 

Breakfast Programs are listed under Nos. 

10.555, 10.556, and 10.553, respectively. 

All are subject to Executive Order 

12372, which requires 

intergovernmental consultation with 

State and local officials. Since these 

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. 

E. 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 proposed 

rule does not have federalism 

implications. This rulemaking does not 

impose substantial or direct compliance 

costs on State and local governments. 

Therefore, under section 6(b) of the 

Executive Order, a federalism summary 

is not required. 

F. Executive Order 12988, Civil Justice 

Reform 

This proposed 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. 

G. Civil Rights Impact Analysis 

FNS has reviewed the proposed rule, 

in accordance with Departmental 

Regulation 4300–004, ‘‘Civil Rights 

Impact Analysis,’’ to identify and 

address any major civil rights impacts 

the proposed rule might have on 

participants based on age, race, color, 

national origin, sex, and disability. Due 

to the unavailability of data, FNS is 

unable to directly determine whether 

this proposed rule will have an adverse 

or disproportionate impact on protected 

classes among entities that administer 

and participate in Child Nutrition 

Programs. 

The proposed serious deficiency rule 

includes strategies to ensure that the 

serious deficiency process is 

implemented fairly and evenly across 

states and among institutions. By 

codifying the criteria for identifying 

when a finding is a serious management 

problem, the process is more 

standardized. The new serious 

deficiency process also provides an 

opportunity for institutions to correct 

serious management problems, a 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13172 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

significant departure from the current 

process in which a serious deficiency is 

only temporarily deferred and never 

fully corrected. Importantly, the 

proposed rule aligns the ‘‘seriously 

deficient’’ designation with proposed 

termination rather than determining an 

institution is seriously deficient at the 

beginning of the process and then 

deferring that status unless or until 

there is a repeat finding. This step, in 

particular, responds to commenters 

concerns about a seriously deficient 

status and its effect on an institution’s 

reputation which could, in turn, 

encourage more participation in CN 

programs. 

FNS will also develop materials for 

program operators in formats for 

individuals with limited English 

proficiency and for individuals with 

disabilities, that describe the serious 

deficiency process and program 

operators’ rights and responsibilities. 

States are also required to have 

contingency plans to ensure meals 

remain available in the event a sponsor 

is terminated. 

FNS Civil Rights Division finds that 

the current mitigation and outreach 

strategies outlined in the regulations 

and this Civil Rights Impact Analysis 

(CRIA) provide ample consideration to 

applicants’ and participants’ abilities to 

participate in the CACFP and SFSP. The 

promulgation of this proposed rule will 

affect CACFP institutions and facilities 

and SFSP sponsors. FNS expects that 

the proposed changes, e.g., defining key 

terms, outlining clear steps in the 

review process, and providing a path to 

full correction, will be an overall 

positive change for CACFP and SFSP 

program operators. Finally, FNS is 

looking forward to the opportunity to 

review public comments on the 

proposed rule. 

H. Executive Order 13175 

Executive Order 13175 requires 

Federal agencies to consult and 

coordinate with Tribes on a 

government-to-government basis on 

policies that have Tribal implications, 

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 a 

consultation on May 23, 2023, FNS 

anticipates that this rulemaking will 

have no significant cost and no major 

increase in regulatory burden on Tribal 

organizations. 

I. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

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

1320) requires that OMB approve all 

collections of information by a Federal 

agency from the public before they can 

be implemented. Respondents are not 

required to respond to any collection of 

information unless it displays a current 

valid OMB control number. 

In accordance with the Paperwork 

Reduction Act of 1995, this proposed 

rule is revising existing information 

collection requirements, which are 

subject to review and approval by OMB. 

This rulemaking proposes new 

reporting, recordkeeping, and public 

disclosure requirements for State 

agencies and sponsoring organizations 

that administer the Child and Adult 

Care Food Program (CACFP), the 

Summer Food Service Program (SFSP), 

and the National Disqualified List 

(NDL). The rule also proposes new 

regulatory citations for some of the 

existing requirements in these 

collections. 

FNS is submitting for public comment 

the information collection burdens that 

will result from adoption of the new 

reporting, recordkeeping, and public 

disclosure requirements and the 

changes in regulatory citations for some 

of the existing requirements which are 

proposed in the rulemaking. The 

establishment of the proposed collection 

of information requirements are 

contingent upon OMB approval. Since 

this rulemaking impacts three separate 

information collections: OMB Control 

Number 0584–0280 7 CFR part 225, 

Summer Food Service Program; OMB 

Control Number 0584–0055 Child and 

Adult Care Food Program (CACFP), and 

OMB Control Number 0584–0584 Child 

and Adult Care Food Program (CACFP) 

National Disqualified List. This 

rulemaking contains three separate PRA 

sections to capture the burden impact 

that this proposed rule is estimated to 

have on these existing collections. 

Comments on the information 

collection in this proposed rule must be 

received by May 21, 2024. 

Comments may be sent to: Program 

Integrity and Innovation Division, 1320 

Braddock Place, Alexandria, VA 22314. 

Comments will also be accepted through 

the Federal eRulemaking Portal. Go to 

https://www.regulations.gov and follow 

the online instructions for submitting 

comments electronically. 

Comments are invited on: (1) Whether 

the proposed collection of information 

is necessary for the proper performance 

of the functions of the agency, including 

whether the information will have 

practical utility; (2) 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; (3) 

ways to enhance the quality, utility and 

clarity of the information to be 

collected; and (4) ways to minimize the 

burden of the collection of information 

on those who are to respond, including 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology. 

All responses to this document will 

be summarized and included in the 

request for OMB approval. All 

comments will also become a matter of 

public record. 

Title: 7 CFR part 225, Summer Food 

Service Program. 

Form Number: FNS–843 and FNS– 

844. 

OMB Control Number: 0584–0280. 

Expiration Date: 09/30/2025. 

Type of Request: Revision. 

Abstract: This revision adds new 

requirements and revises existing 

requirements in the currently approved 

information collection for OMB Control 

Number 0584–0280. Below is a 

summary of the changes in the proposed 

rule and the impact that it will have on 

the reporting, recordkeeping, and public 

disclosure requirements for the state/ 

local/tribal government agencies, nonprofit institutions, and camps. 

State agencies have a responsibility 

for the monitoring and oversight of 

institutions in the Child and Adult Care 

Food Program (CACFP). To maintain 

program integrity and ensure 

compliance with program requirements, 

FNS established the serious deficiency 

process to address mismanagement, 

abuse, and fraud by institutions and 

facilities participating in the program. 

The serious deficiency process 

establishes a structured series of steps to 

identify serious deficiencies, take 

corrective action, and suspend, 

terminate, and disqualify institutions 

and responsible principals and 

responsible individuals that undermine 

the integrity of the program. State 

agencies also have a similar 

responsibility to monitor and provide 

oversight of the Summer Food Service 

Program (SFSP). 

Currently, the SFSP does not have a 

defined process to address serious 

management problems threatening the 

integrity of the program. SFSP 

regulations specify that state agencies 

must consider specific criteria before 

approving sites for participation. 

Regulations also provide authority for 

State agencies to terminate sponsor 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13173 

participation and establish procedures 

for sponsors to appeal adverse actions, 

but they do not provide authority for 

FNS or state agencies to disqualify an 

individual from participating in SFSP, 

or in any other Child Nutrition Program 

or being placed on the National 

Disqualified List. This proposed rule 

would extend the serious deficiency 

process to SFSP to address potential 

serious management problems 

threatening the integrity of the program. 

This proposed rule would amend 7 

CFR 225.6 and 225.18 to extend the 

serious deficiency process to SFSP. 

State agencies would be required to 

implement a serious deficiency process; 

provide appeal procedures to sponsors, 

annually and upon request; specify the 

types of adverse actions that cannot be 

appealed in SFSP; establish a list of 

sponsors, responsible principals, and 

responsible individuals declared 

seriously deficient; terminate 

agreements whenever a program 

operator’s participation ends; and take 

action to terminate an agreement for 

cause, through the serious deficiency or 

placement on the National Disqualified 

List. This will strengthen management 

practices and eliminate gaps that put 

program integrity at risk. 

Reporting 

State/Local/Tribal Government 

Agencies 

The changes proposed in this rule 

will add additional reporting 

requirements to the requirements 

currently approved under OMB Control 

Number 0584–0280 for State/Local/ 

Tribal Government Agencies. It will also 

change the regulatory cite for one of the 

existing reporting requirements in the 

collection. All of these changes will be 

considered program changes since they 

are due to the proposed rule. 

The proposed rule will add additional 

reporting requirements in 7 CFR 225.6 

that apply the Serious Deficiency 

Process to MSSOs operating the 

Program. 

USDA expects that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.6(c)(5) that a 

state agency must determine if a 

sponsoring organization operates in 

more than one state. USDA expects each 

state agency will collect and report 

information from 3 MSSOs and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 39.75 burden 

hours and 159 total responses to the 

collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n) that State 

agencies must determine if a sponsoring 

organization is an MSSO, and assume 

the role of a Cognizant State agency 

(CSA) if the MSSOs center of operations 

is located within the State. USDA 

estimates that the 53 State agencies will 

be required to make 3 MSSO 

determinations each year and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 39.75 annual 

burden hours and 159 responses to the 

collection. 

USDA expects that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(1)(i) that 

State agencies must enter into a 

permanent written agreement with the 

MSSO, as described in paragraph (b)(4). 

USDA expects that the 53 State agencies 

will be required to make 3 permanent 

agreements each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 39.75 annual burden 

hours and 159 responses to the 

collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(1)(ii) that 

State agencies must approve the MSSOs 

administrative budget. USDA estimates 

that the 53 State agencies will be 

required to approve 3 administrative 

budgets each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 39.75 hours and 159 

responses to the collection. 

USDA expects that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(1)(iii) 

that State agencies must conduct 

monitoring of MSSO Program 

operations within the State, as described 

in paragraph (k)(4). USDA expects that 

the 53 State agencies will be required to 

monitor 3 MSSOs each year and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 39.75 hours 

and 159 responses to the collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(1)(iii)(C) 

that State agencies provide summaries 

of the MSSO reviews that are conducted 

to the CSA. USDA estimates that the 53 

State agencies will be required to submit 

3 MSSO review summaries to the CSA 

annually and that it takes approximately 

15 minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

39.75 annual burden hours and 159 

responses to the collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(1)(iv) that 

State agencies must conduct audit 

resolution activities. USDA estimates 

that the 53 State agencies will be 

required to conduct 3 audit resolution 

activities each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 39.75 annual burden 

hours and 159 responses to the 

collection. 

USDA expects that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(1)(v) that 

State agencies must notify all other State 

agencies that have an agreement with an 

MSSO that their agreement has been 

terminated and have taken 

disqualification actions against that 

MSSO. USDA expects that the 53 State 

agencies will be required to make 3 

notifications a year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 39.75 annual burden 

hours and 159 responses to the 

collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(2) that 

State agencies must determine if an 

MSSOs center of operations are located 

within the State and assume the role of 

the CSA. USDA estimates that the 53 

State agencies will be required to make 

3 MSSO determinations each year and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

39.75 annual burden hours and 159 

responses to the collection. 

USDA expects that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(2)(iii) 

that the CSA must conduct a full review 

at the MSSO headquarters and financial 

records center, coordinate the timing of 

the reviews, and make copies of 

monitoring reports and findings 

available to all other State agencies that 

have agreements with the MSSO. USDA 

expects that the 53 State agencies will 

be required to conduct a full review of 

3 MSSO headquarters and financial 

records centers annually and that it 

takes approximately 20 hours to 

complete this requirement; which is 

estimated to add 3,180 annual burden 

hours and 159 responses to the 

collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.6(n)(2)(iv) 

that, if an MSSO has for-profit status, 

the cognizant agency must establish 

audit thresholds and requirements. 

USDA estimates that the 53 State 

agencies will be required to establish 

audit thresholds and requirements for 

for-profit MSSOs annually and that it 

takes approximately 1 hour to complete 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13174 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

this requirement; which is estimated to 

add 53 annual burden hours and 

responses to the collection. 

The proposed rule will add additional 

requirements in 7 CFR 225.13 to 

establish fair hearing procedures for the 

extended serious deficiency process in 

SFSP. 

USDA expects that 53 state agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.13(a) that 

state agencies must establish a 

procedure to be followed by an 

applicant appealing for a fair hearing. 

USDA expects each state agency will 

need to establish a procedure for a fair 

hearing annually and that it will take 

approximately 1 hour to complete this 

requirement; which is estimated to add 

53 burden hours and responses to this 

collection. 

The proposed rule will add additional 

reporting requirements in 7 CFR 225.18 

that extends the Serious Deficiency 

Process to SFSP. 

USDA estimates that 53 state agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.18(a)(2)(i) and 

(a)(3) that state agencies identify serious 

management problems and define a set 

of standards to help measure the 

severity of a problem to determine what 

rises to the level of a serious 

management problem and how it affects 

the sponsor or facility’s ability to meet 

Program requirements. USDA estimates 

each state agency will be required to 

develop a set of standards to identify 

serious management problems, taking 

approximately 1 hour to complete this 

requirement; which is estimated to add 

53 burden hours and responses to this 

collection. 

USDA estimates that 53 state agencies 

will be required to fulfill the reporting 

requirement at 7 CFR 225.18(a)(2)(ii) 

and (a)(6)(i) that state agencies notify a 

sponsor’s executive director, chairman 

of the board of directors, responsible 

principals, and responsible individuals 

that serious management problems have 

been identified, must be addressed, and 

must be corrected. USDA estimates each 

state agency will be required to notify 3 

sponsors of the serious management 

problems and that it takes 

approximately 15 minutes (.25 hours) to 

complete this requirement; which is 

estimated to add 39.75 hours and 159 

responses to the collection. 

USDA expects that 53 state agencies 

will be required to fulfill the new 

requirement at 7 CFR 225.18(a)(2)(iii) 

and (c)(2)(ii) that state agencies must 

receive and approve a submitted 

corrective action plan within 15 days 

from the date the sponsor received the 

notice and monitor the full 

implementation of the corrective action 

plan. USDA expects each state agency 

will be required to receive and approve 

3 corrective action plans and that it 

takes approximately 15 minutes (.25 

hours) to complete this requirement; 

which is estimated to add 39.75 burden 

hours and 159 total responses to the 

collection. 

USDA expects that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(a)(2)(iv) 

and (a)(6)(ii) that state agencies notify a 

sponsor’s executive director, chairman 

of the board of directors, responsible 

principals, and responsible individuals 

that the serious management problem(s) 

have been corrected and vacated or, if 

corrective action has not been taken or 

fully implemented, that the state agency 

proposes to terminate the sponsor’s 

agreement and proposes to disqualify 

the sponsor, responsible principals, and 

responsible individuals. USDA expects 

each state agency will be required to 

notify 3 sponsors of their successful 

corrective action or proposes 

termination and disqualification and 

that it takes approximately 15 minutes 

(.25 hours) to complete this 

requirement; which is estimated to add 

39.75 burden hours and 159 responses 

to the collection. 

USDA estimates that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(a)(2)(v) 

and (f)(1)(iii)(E) that State agencies must 

submit written documentation to the 

hearing official prior to the beginning of 

the hearing, within 30 days after 

receiving notice of the action. USDA 

estimates that each state agency will 

have to provide documentation to 3 fair 

hearings annually and that it takes 

approximately 2 hours to complete this 

requirement; which is estimated to add 

318 annual burden hours and 159 total 

responses to the collection. 

USDA expects that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(a)(2)(v) 

and (f)(2) that hearing official must hold 

hearing, in addition to a review of 

written information upon written 

request for a fair hearing by the sponsor, 

responsible principals, or responsible 

individuals, to determine whether the 

State agency or sponsor followed 

Program requirements in taking action 

under appeal. USDA expects that each 

state agency will be required to provide 

3 fair hearings annually and that it will 

take approximately 4 hours to complete 

this requirement; which is estimated to 

add 636 burden hours and 159 total 

responses to the collection. 

USDA estimates that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(a)(2)(vi) 

and (a)(6)(iii) that state agencies notify 

a sponsor’s executive director and 

chairman of the board of directors that 

serious management problems have 

been vacated and advise the institution 

that procedures and policies must be 

implemented to fully correct the serious 

management problem if the sponsor’s 

appeal is upheld. If the sponsor’s appeal 

is denied, the sponsor must be notified 

that the program agreement is 

terminated and declared seriously 

deficient. USDA estimates each state 

agency will be required to notify 3 

sponsors of the fair hearing 

determination and that it takes 

approximately 15 minutes (.25 hours) to 

complete this requirement; which is 

estimated to add 39.75 hours and 159 

responses to the collection. 

USDA estimates that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(c)(3) that 

state agencies must conduct and 

prioritize follow-up reviews and more 

frequent full reviews of sponsors with 

serious management problems, 

including one full review, at least once 

every year. USDA estimates each state 

agency will be required to review 3 

sponsors and that it takes approximately 

20 hours to complete this requirement; 

which is estimated to add 3,180 hours 

and 159 responses to the collection. 

USDA expects that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(d)(2) that 

state agencies are required to develop a 

contingency plan to ensure that eligible 

participants continue to have access to 

meal service. USDA expects each state 

agency will be required to develop 3 

contingency plans and that it takes 

approximately 2 hours to complete this 

requirement; which is estimated to add 

318 burden hours and 159 responses to 

the collection. 

USDA estimates that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(e)(2)(iii) 

that, if all serious management problems 

have been corrected and all debts have 

been repaid, state agencies may elect to 

remove a sponsor, responsible 

principals, and responsible individuals 

from the National Disqualified List, and 

must submit all requests for early 

removals to the appropriate Food and 

Nutrition Service Regional Office 

(FNSRO). USDA estimates each state 

agency will remove 3 sponsors from the 

National Disqualified List and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 39.75 burden 

hours and 159 responses to the 

collection. 

USDA estimates that 53 State agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(e)(3)(ii) 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13175 

that State agencies enter into written 

agreements with FNS in order to 

participate in a matching program 

involving a FNS Federal system of 

records. USDA estimates that 53 State 

agencies will enter into a CMA written 

agreement annually and that it will take 

1 hour to complete this requirement; 

which is estimated to add of 53 annual 

burden hours and responses to the 

collection. 

USDA expects that 53 State agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(e)(3)(iii)(B) 

that State agencies may request FNS to 

waive the two-step independent 

verification and notice requirement of 

the CMA. USDA expects that the 53 

State agencies will request a waiver 

annually and that it will take an hour to 

complete this requirement; which is 

estimated to add 53 annual burden 

hours and responses to the collection. 

USDA expects that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(g)(2) that 

state agencies must send a necessary 

demand letter for the collection of 

unearned payments, including any 

assessment of interest and refer the 

claim to the appropriate State authority 

for pursuit of the debt payment. USDA 

estimates each state agency will send 3 

demand letters and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 39.75 hours and 159 

responses to the collection. 

USDA estimates that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(h)(2)(i) that 

state agencies must terminate for cause 

the program agreement no later than 45 

days after the date of the sponsor’s 

disqualification by FNS. This 

requirement is listed in the currently 

approved collection at 7 CFR 

225.18(b)(2), but the proposed rule is 

changing the regulatory citation to 7 

CFR 225.18(h)(2)(i). USDA estimates 

that each state agency will still be 

required to terminate 5 sponsors’ 

agreements and that it will still take 

approximately 1 hour to complete this 

requirement. With the change in 

citation, USDA still expects this 

requirement to have 265 burden hours 

and 265 responses so no additional 

hours or responses will be added to the 

collection. 

USDA expects that 933.33 local 

government sponsors will be required to 

fulfill the requirement at 7 CFR 

225.18(c)(1) that sponsors must describe 

and document the action taken to 

correct each serious management 

problem in a corrective action plan and 

submit it to the state agency. USDA 

expects 933.3 local government 

sponsors will be required to submit a 

corrective action plan and that it takes 

approximately 15 minutes (.25 hours) to 

complete this requirement; which is 

estimated to add 233.33 hours and 933 

responses to the collection. 

Non-Profit Institutions and Camps 

(Businesses) 

USDA expects that 133 sponsoring 

organizations will be required to fulfill 

the requirement at 7 CFR 225.6(c)(5) 

that sponsoring organizations that are 

approved to operate the Program in 

more than one State must provide 

information concerning the sites and the 

officials who have administrative and 

financial responsibility. USDA expects 

that 133 sponsoring organizations will 

operate in more than one state and will 

collect and report information to FNS 

annually and that it takes approximately 

one hour and 15 minutes (1.25 hours) to 

complete this requirement; which is 

estimated to add 166.25 burden hours 

and 133 responses to the collection. 

USDA estimates that 477 non-profit 

institutions and camps will be required 

to fulfill the requirement at 7 CFR 

225.18(c)(1) to describe and document 

the actions taken to correct each serious 

management problem in a corrective 

action plan and submit it to the state 

agency. USDA estimates each non-profit 

institutions will be required to submit a 

corrective action plan and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 119.25 burden hours 

and 477 responses to the collection. 

Recordkeeping 

State/Local/Tribal Government 

Agencies 

USDA estimates that 53 state agencies 

will be required to fulfill the 

requirement at 7 CFR 225.18(b) that a 

state agency maintain a state agency list 

that includes information on each 

sponsor that are determined to have a 

serious management problem and be 

updated as they move through the 

serious deficiency process. As a part of 

the recordkeeping requirement, state 

agencies will be required to maintain 

records on the FNS–843 Report of 

Disqualification from Participation: 

Institution and Responsible Principals/ 

Individuals and the FNS–844 Report of 

Disqualification from Participation— 

Individually Disqualified Responsible 

Principal/Individual or Day Care Home 

Provider forms, which must be updated 

if a sponsor has been declared seriously 

deficient as a part of the seriously 

deficient process. USDA estimates each 

state agency will be required to 

maintain 145 records of sponsors with 

serious management problems and that 

it takes approximately 5 minutes (0.08 

hours) to complete this requirement; 

which is estimated to add 641.70 

burden hours and 7,685 responses to the 

collection. 

Public Disclosure 

State Agencies 

The proposed rule will add an 

additional public disclosure 

requirement at 7 CFR 225.6(n)(2)(iii) as 

a part of the new review process for 

Multi-State Sponsoring Organizations 

(MSSOs). 

USDA estimates that 53 State agencies 

will fulfill the requirement at 7 CFR 

225.6(n)(2)(iii) that the Cognizant State 

Agency (CSA) must conduct a full 

review at the MSSO headquarters and 

financial records center, must 

coordinate the timing of the reviews, 

and make copies of monitoring reports 

and findings available to all other State 

agencies that have agreements with the 

MSSO. USDA estimates that the 53 State 

agencies will each disclose the findings 

of 3 MSSO reviews to other State 

agencies annually and that it takes 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

39.75 annual burden hours and 159 

responses to the collection. 

As a result of the proposals outlined 

in this rulemaking, FNS estimates that 

the proposals resulting from this rule 

will have 1,463 respondents, 13,097 

total annual responses, and 9,959 total 

burden hours. The average burden per 

response and the annual burden hours 

are explained below and summarized in 

the charts which follow. Based on these 

estimates, FNS estimates that this 

proposed rule will increase the burden 

for OMB Control Number 0584–0280 by 

12,673 responses and by 9,694 burden 

hours, to an estimated 404,468 

responses and 472,392 burden hours for 

the entire collection. 

Reporting 

Respondents (Affected Public): 

Businesses; and State, Local, and Tribal 

Government. The respondent groups 

include non-profit institutions and 

camps, and State agencies. 

Estimated Number of Respondents: 

1,463. 

Estimated Number of Responses per 

Respondent: 3.59. 

Estimated Total Annual Responses: 

5,253. 

Estimated Time per Response: 1.77. 

Estimate Total Annual Burden on 

Respondents: 9,277. 

Recordkeeping 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13176 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

respondent groups include State 

agencies. 

Estimated Number of Respondents: 

53. 

Estimated Number of Responses per 

Respondent: 145. 

Estimated Total Annual Responses: 

7,685. 

Estimated Time per Response: 0.08. 

Estimate Total Annual Burden on 

Respondents: 642. 

Public Disclosure 

Respondents (Affected Public): State, 

Local, and Tribal Government. 

Estimated Number of Respondents: 

53. 

Estimated Number of Responses per 

Respondent: 3. 

Estimated Total Annual Responses: 

159. 

Estimated Time per Response: 0.25. 

Estimated Total Annual Burden on 

Respondents: 40. 

ESTIMATED ANNUAL BURDEN FOR SFSP 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State/Local/ 

Tribal 

Governments.

The SA must determine if a sponsoring 

organization operates in more than 

one State.

225.6(c)(5) .............. 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must determine if 

a sponsoring organization is an MSSO, 

as described in paragraphs (b)(1)(xv) and 

(b)(2)(iii)(L). SAs 

must assume the 

role of the CSA, if 

the MSSOs center of 

operations is located 

within the State. 

Each SA that approves an MSSO 

must follow the requirements described in paragraph 

(i).

225.6(n) .................. 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must enter into a 

permanent written 

agreement with the 

MSSO, as described 

in paragraph (b)(4).

225.6(n)(1)(i) .......... 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must approve the 

MSSOs administrative budget.

225.6(n)(1)(ii) .......... 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must conduct 

monitoring of MSSO 

Program operations 

within the State, as 

described in paragraph (k)(4). The SA 

should coordinate 

monitoring with the 

CSA to streamline 

reviews and minimize duplication of 

the review content. 

The SA may base 

the review cycle on 

the number of facilities operating within 

the State.

225.6(n)(1)(iii) ......... 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must provide summaries of the MSSO 

reviews that are conducted to the CSA. If 

the SA chooses to 

conduct a full review, 

the SA should request the necessary 

records from the 

CSA.

225.6(n)(1)(iii)(C) .... 53 3 159 0.25 39.75 0 39.75 39.75 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13177 

ESTIMATED ANNUAL BURDEN FOR SFSP—Continued 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State/Local/ 

Tribal 

Governments.

SAs must conduct 

audit resolution activities. The SA must 

review audit reports, 

address audit findings, and implement 

corrective actions, as 

required under 2 

CFR part 200, subpart D, and USDA 

implementing regulations 2 CFR parts 

400 and 415.

225.6(n)(1)(iv) ......... 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs notify all other 

State agencies that 

have agreements 

with the MSSO of 

termination and disqualification actions, 

as described in paragraph (c)(2)(i).

225.6(n)(1)(v) ......... 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

If it determines that an 

MSSOs center of operations is located 

within the State, the 

SA must assume the 

role of the CSA.

225.6(n)(2) .............. 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

The CSA must conduct 

a full review at the 

MSSO headquarters 

and financial records 

center. The CSA 

must coordinate the 

timing of the reviews 

and make copies of 

monitoring reports 

and findings available to all other 

State agencies that 

have agreements 

with the MSSO.

225.6(n)(2)(iii) ......... 53 3 159 20 3,180 0 3,180 3,180 

State/Local/ 

Tribal 

Governments.

If an MSSO has forprofit status, the cognizant agency must 

establish audit 

thresholds and requirements.

225.6(n)(2)(iv) ......... 53 1 53 1 53 0 53 53 

State/Local/ 

Tribal 

Governments.

SAs must establish a 

procedure to be followed by an applicant appealing for a 

fair hearing.

225.13(a) ................ 53 1 53 1 53 0 53 53 

State/Local/ 

Tribal 

Governments.

SAs must identify serious management 

problems and define 

a set of standards to 

help measure the 

severity of a problem 

to determine what 

rises to the level of a 

serious management 

problem and how it 

affects the sponsor 

or facility’s ability to 

meet Program requirements.

225.18(a)(2)(i) and 

225.18(a)(3).

53 1 53 1 53 0 53 53 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13178 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED ANNUAL BURDEN FOR SFSP—Continued 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State/Local/ 

Tribal 

Governments.

SAs must notify a 

sponsor’s executive 

director and chairman of the board of 

directors, and RPIs, 

that serious management problems have 

been identified, must 

be addressed, and 

corrected. The notice 

must identify all aspects of the serious 

management problem; reference specific regulatory citations, instructions, or 

policies; name all of 

the RPIs; describe 

the action needed to 

correct the serious 

management problem; and set a deadline for completing 

the corrective action. 

At the same time, 

the SA must add the 

sponsor and RPIs to 

the SA list and provide a copy of the 

notice to the appropriate FNSRO.

225.18(a)(2)(ii) and 

225.18(a)(6)(i).

53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must receive and 

approve the corrective action plan within 15 days from the 

date the sponsor received the notice 

and monitor the full 

implementation of 

the corrective action 

plan.

225.18(a)(2)(iii) and 

225.18(c)(2)(ii).

53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

If corrective action has 

been taken to fully 

correct each serious 

management problem, SAs must notify 

a sponsor’s executive director and 

chairman of the 

board of directors, 

and RPIs, that the 

serious management 

problem has been 

vacated. If corrective 

action has not been 

taken or fully implemented, the SA must 

notify the sponsor of 

its proposed termination and disqualification. The notice 

must inform the 

sponsor, responsible 

principals, and responsible individuals 

of the right and procedures for seeking 

a fair hearing.

225.18(a)(2)(iv) and 

225.18(a)(6)(ii).

53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must submit written documentation to 

the hearing official 

prior to the beginning of the hearing, 

within 30 days after 

receiving the notice 

of action.

225.18(a)(2)(v) and 

225.18(f)(1)(iii)(E).

53 3 159 2 318 0 318 318 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13179 

ESTIMATED ANNUAL BURDEN FOR SFSP—Continued 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State/Local/ 

Tribal 

Governments.

Hearing official must 

hold hearing, in addition to a review of 

written information 

upon written request 

for a fair hearing by 

the sponsor, responsible principals, or 

responsible individuals, to determine 

that the SA or sponsor followed Program requirements 

in taking action 

under appeal. State 

agencies must be allowed to attend, respond to testimony, 

and answer questions posed by the 

hearing official.

225.18(a)(2)(v) and 

225.18(f)(2).

53 3 159 4 636 0 636 636 

State/Local/ 

Tribal 

Governments.

SAs must notify a 

sponsor’s executive 

director and chairman of the board 

that serious management problems have 

been vacated and 

advise the institution 

that procedures and 

policies must be fully 

implemented to correct the serious 

management problem if the sponsor’s 

appeal is upheld. If 

the sponsor’s appeal 

is denied, the sponsor must be notified 

that the program 

agreement is terminated and declared 

seriously deficient.

225.18(a)(2)(vi) and 

225.18(a)(6)(iii).

53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must conduct and 

prioritize follow-up 

reviews and more 

frequent full reviews 

of sponsors with serious management 

problems, including 

one full review occurring at least once 

every year.

225.18(c)(3) ............ 53 3 159 20 3180 0 3180 3180 

State/Local/ 

Tribal 

Governments.

SAs must develop a 

contingency plan in 

place to ensure that 

eligible participants 

continue to have access to meal service.

225.18(d)(2) ............ 53 3 159 2 318 0 318 318 

State/Local/ 

Tribal 

Governments.

If all serious management problems have 

been corrected and 

all debts have been 

repaid, SAs may 

elect to remove a 

sponsor and RPIs 

from the National 

Disqualified List, and 

must submit all requests for early removals to the appropriate FNSRO.

225.18(e)(2)(iii) ....... 53 3 159 0.25 39.75 0 39.75 39.75 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13180 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED ANNUAL BURDEN FOR SFSP—Continued 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State/Local/ 

Tribal 

Governments.

SAs must enter into 

written agreements 

with FNS, consistent 

with 5 U.S.C. 

552a(o) of the CMA, 

in order to participate in a matching 

program involving a 

FNS Federal system 

of records.

225.18(e)(3)(ii) ........ 53 1 53 1 53 0 53 53 

State/Local/ 

Tribal 

Governments.

SAs may request FNS 

to waive the twostep independent 

verification and notice requirement of 

the CMA.

225.18(e)(3)(iii)(B) .. 53 1 53 1 53 0 53 53 

State/Local/ 

Tribal 

Governments.

SAs must send a necessary demand letter 

for the collection of 

unearned payments, 

including any assessment of interest, 

as described in 

§ 225.12(b), and 

refer the claim to the 

appropriate State authority for pursuit of 

the debt payment. 

SAs must assess interest on sponsors’ 

debts established on 

or after July 29, 

2002, based on the 

Current Value of 

Funds Rate, which is 

published annually 

by Treasury in the 

Federal Reserve and 

is available from the 

FNSRO, and notify 

the sponsor that interest will be 

charged on debts 

not paid in full within 

30 days of the initial 

demand for remittance up to the date 

of payment.

225.18(g)(2) ............ 53 3 159 0.25 39.75 0 39.75 39.75 

State/Local/ 

Tribal 

Governments.

SAs must terminate for 

cause the Program 

agreement upon no 

later than 45 days 

after the date of the 

sponsor’s disqualification by FNS.

225.18(h)(2)(i) ........ 53 5 265 1 265 265 0 0 

State/Local/ 

Tribal 

Governments.

Sponsors must describe and document 

the action taken to 

correct each serious 

management problem in a corrective 

action plan and submit it to the SA.

225.18(c)(1) ............ 933.3 1 933.3 0.25 233.33 0 233.33 233.33 

Total State/Local/Tribal Government Reporting .............. 986 4.71 4,643 1.94 8,991.58 265 8,726.58 8,726.58 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13181 

ESTIMATED ANNUAL BURDEN FOR SFSP—Continued 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

Businesses 

(Nonprofit Institutions 

and 

Camps).

Sponsoring organizations that are approved to operate 

the Program in more 

than one State must 

provide: The number 

of affiliated sites it 

operates, by State; 

The number of unaffiliated sites it operates; the names, addresses, and phone 

numbers of the organization’s headquarters and the officials who have administrative responsibility; and the 

names, addresses, 

and phone numbers 

of the financial 

records center and 

the officials who 

have financial responsibility.

225.6(c)(5) .............. 133 1 133 1.25 166.25 0 166.25 166.25 

Businesses 

(Nonprofit Institutions 

and 

Camps).

Sponsors must describe and document 

the actions taken to 

correct each serious 

management problem in a corrective 

action plan and submit it to the SA.

225.18(c)(1) ............ 477 1 477 0.25 119.25 0 119.25 119.25 

Total Businesses (Non-profit Institutions and Camps) .... 477 1.28 610 0.47 285.5 0 285.5 285.5 

Total Reporting ................................................................ 1,463 3.59 5,253 1.77 9,277.08 265 9,012.08 9,012.08 

State/Local/ 

Tribal 

Governments.

SAs must maintain a 

SA list and must include the following 

information: (1) 

Names and mailing 

addresses of each 

sponsor that is determined to have a 

serious management 

problem; (2) Names, 

mailing addresses, 

and dates of birth of 

each responsible 

principals and responsible individuals 

(RPIs); and (3) The 

status of the sponsor 

as it progresses 

through the stages 

of corrective action, 

termination, suspension, and disqualification, as applicable. (Forms FNS– 

843 and FNS–844.).

225.18(b) ................ 53 145 7,685 0.08 641.70 0 641.70 641.70 

Total State/Local/Tribal Government Recordkeeping ...... 53 145 7,685 0.08 641.70 0 641.70 641.70 

Total Recordkeeping ........................................................ 53 145 7,685 0.08 641.70 0 641.70 641.70 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13182 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED ANNUAL BURDEN FOR SFSP—Continued 

[Reporting] 

Respondent 

type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Currently 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State/Local/ 

Tribal 

Governments.

The CSA must conduct 

a full review at the 

MSSO headquarters 

and financial records 

center. The CSA 

must coordinate the 

timing of reviews 

and make copies of 

monitoring reports 

and findings available to all other 

State agencies that 

have agreements 

with the MSSO.

225.6(n)(2)(iii) ......... 53 3 159 0.25 39.75 0 39.75 39.75 

Total State/Local/Tribal Government Public Disclosure .. 53 3 159 0.25 39.75 0 39.75 39.75 

Total Public Disclosure .................................................... 53 3 159 0.25 39.75 0 39.75 39.75 

Total Burden .................................................................... 1,463.30 8.95 13,097.3 0.76 9,958.52 265 9,963.52 9,963.52 

SUMMARY OF BURDEN

[OMB #0584–0280] 

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

Average No. Responses per 

Respondent ........................... 6.33 

Total Annual Responses .......... 404,468.31 

Average Hours per Response .. 1.17 

Total Burden Hours .................. 472,392.25 

Current OMB Approved Burden 

Hours ..................................... 462,699 

Adjustments .............................. 0 

Program Changes .................... 9,693.52 

Total Difference in Burden ....... 9,693.52 

Title: Child and Adult Care Food 

Program (CACFP). 

Form Number: FNS–843 and FNS– 

844. 

OMB Control Number: 0584–0055. 

Expiration Date: 08/31/2025. 

Type of Request: Revision. 

Abstract: This is a revision of 

requirements in the information 

collection under OMB Control Number 

0584–0055 that are being impacted by 

this rulemaking. USDA proposes to 

improve the serious deficiency process 

in the CACFP. This proposed rule 

impacts information reporting at the 

state/local/tribal government level, 

reporting at the business level 

(sponsoring organizations and facilities), 

and monitoring requirements for State 

agencies. Under this rule, USDA is 

proposing to codify into regulations 

provisions from the Final Rule: Child 

Nutrition Program Integrity to clarify 

provisions of the serious deficiency 

process, and to extend the process to 

unaffiliated centers participating in the 

CACFP. Furthermore, FNS published a 

notice, Request for Information: The 

Serious Deficiency Process in the Child 

and Adult Care Food Program, 84 FR 

22431, May 17, 2019, to gather 

information to help FNS understand 

firsthand the experiences of State 

agencies and program operators. 

This rulemaking intends to revise the 

serious deficiency process to codify 

provisions from the Final Rule: Child 

Nutrition Program Integrity and to 

respond to comments from State 

agencies and participating institutions. 

The revisions will replace the term 

‘‘serious deficiencies’’ that apply to 

program violations with the term 

‘‘serious management problems’’, as 

found in the National School Lunch Act 

(NSLA). They will also change the point 

at which a serious deficiency 

determination is made. Previously, the 

discovery of program violations would 

immediately lead to a serious deficiency 

declaration. The new process will move 

the serious determination near the end 

of the process, where the State agency 

will propose termination for failing to 

correct an institution’s serious 

management problems. Finally, the 

rulemaking will create a path to full 

correction defined by a timeframe and 

number of reviews. By incorporating all 

these program changes, FNS intends to 

reduce ambiguity navigating the serious 

deficiency process, remove stigma 

associated with the ‘‘serious deficiency’’ 

term, and improve program integrity by 

implementing a simpler process. The 

burden related to these proposals is 

reflected in the burden estimates for 

OMB Control Number 0584–0055. All of 

these changes are program changes. 

Reporting 

State Agencies 

The changes proposed in this rule 

will impact the existing reporting 

requirements currently approved under 

OMB Control Number 0584–0055 for 

State agencies. 

USDA estimates that 56 State agencies 

will develop a process to share 

information on any institution, facility, 

responsible principals, or responsible 

individuals not approved to administer 

or participate in the Program to fulfill 

the requirement at 7 CFR 

226.6(b)(2)(iii)(D)(2). USDA estimates 

that 56 State agencies would be required 

to develop an information-sharing 

process and that it takes approximately 

1 hour to complete this requirement; 

which is estimated to add 56 annual 

burden hours and responses to the 

collection. 

USDA expects that 56 State agencies 

will be required to fulfill the 

requirement at 7 CFR 226.6(b)(2)(iii)(L) 

that State agencies report up-to-date 

information on multi-state sponsoring 

organizations (MSSOs) operations. 

USDA expects that 56 state agencies 

would be required to update 23 MSSO 

records per year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 322 annual burden 

hours and 1,288 responses to the 

collection. 

The proposed rule will change the 

citations in 7 CFR part 226 that will 

change the Serious Deficiency Process 

from 7 CFR 226.6 to 226.25. As a part 

of these changes, the rule will create 

separate citations for applying 

institutions and for participating 

institutions. The currently approved 

collection combines the burden of 

applying institutions and participating 

institutions into a single citation per 

burden item. The following reporting 

requirements will remove reporting 

burden associated with participating 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13183 

institutions from the preexisting 

citations, which will be added back into 

the collection with new citations at 7 

CFR 226.25. Overall, no new burden 

will be added to the collection as a 

result of these citation changes. 

The proposed rule will change the 

requirement at 7 CFR 226.6(c)(1)(iii)(A) 

to 7 CFR 226.6(c)(4). USDA estimates 

that 56 State agencies will be required 

to fulfill the existing requirement that 

SAs notify an institution’s executive 

director and chairman of the board of 

directors that the institution’s 

application has been determined 

seriously deficient. When the notice is 

issued, the State agency must add the 

institution to the State agency list, with 

the reason for the serious deficiency 

determination, and provide a copy of 

the notice to the appropriate FNSRO. 

USDA estimates that 56 State agencies 

will be required to submit 5 notices 

each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. The 

existing requirement at 7 CFR 

226.6(c)(1)(iii)(A) is currently approved 

with 560 responses and 140 burden 

hours. USDA estimates that 70 burden 

hours and 280 responses of these 

estimates are associated with the 

participating institutions, with the rest 

of the estimates associated with the 

applying institutions. USDA estimates 

that 70 annual burden hours and 280 

responses will be subtracted from this 

existing requirement. 

The proposed rule will change the 

requirement at 7 CFR 226.6(c)(1)(iii)(B) 

to 7 CFR 226.6(c)(5)(i)(A). USDA 

expects that 56 State agencies will be 

required to fulfill the existing 

requirement that State Agencies submit 

a copy of a notice that an institution’s 

corrective action has been successful to 

the appropriate FNSRO for new, 

renewing, and participating institutions. 

USDA expects that 56 State agencies 

will be required to submit 3.5 notices 

each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. The 

existing requirement at 7 CFR 

226.6(c)(1)(iii)(B) is currently approved 

with 392 responses and 98 burden 

hours. USDA estimates that 49 burden 

hours and 196 responses of these 

estimates are associated with 

participating institutions, with the rest 

associated with the applying 

institutions. USDA estimates that 49 

burden hours and 196 responses will be 

subtracted from this existing 

requirement. 

The proposed rule will change the 

requirement at 7 CFR 226.6(c)(1)(iii)(C) 

to 7 CFR 226.6(c)(6). USDA estimates 

that 56 State agencies will be required 

to fulfill the existing requirement that 

State agencies submit a copy of the 

application denial and proposed 

disqualification notice to FNSRO. USDA 

estimates that 56 State agencies will be 

required to submit 1.5 notices each year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The existing requirement 

at 7 CFR 226.6(c)(1)(iii)(C) is currently 

approved with 168 responses and 42 

burden hours. USDA estimates that 84 

responses and 21 burden hours of these 

estimates are associated with the 

participating institutions, with the rest 

associated with the applying 

institutions. USDA estimates that 21 

burden hours and 84 responses will be 

subtracted from this existing 

requirement. 

The proposed rule will change the 

requirement at 7 CFR 226.6(c)(1)(iii)(E) 

to 7 CFR 226.6(c)(8). USDA expects that 

56 State agencies will be required to 

fulfill the existing requirement that SAs 

submit copies of disqualification notices 

to the FNSRO for new, renewing, and 

participating institutions. USDA expects 

that 56 State agencies will be required 

to submit 1.5 notices each year and that 

it takes approximately 15 minutes (0.25 

hours) to complete this requirement. 

The existing requirement at 7 CFR 

226.6(c)(1)(iii)(E) is currently approved 

with 168 responses and 42 burden 

hours. USDA estimates that 84 

responses and 21 burden hours of these 

estimates are associated with 

participating institutions, with the 

remaining estimates associated with the 

applying institutions. USDA estimates 

that 21 burden hours and 84 responses 

will be subtracted from this existing 

requirement. 

The proposed rule will change the 

requirement at 7 CFR 226.6(p) for State 

agencies to develop and provide the use 

of a standard form of a written 

permanent agreement (which must 

specify the rights and responsibilities of 

both parties) between sponsoring 

organizations and day care homes, 

unaffiliated centers, outside-schoolhours-care centers, at-risk afterschool 

care centers, emergency shelters, or 

adult day care centers for which the 

State agency has responsibility for 

Program operations to 7 CFR 

226.6(n)(1). USDA expects that 15 State 

agencies will be required to develop and 

provide a standard form a year and that 

it takes approximately 6 hours per 

response to complete this requirement. 

The existing requirement at 7 CFR 

226.6(p) has a total of 90 annual burden 

hours and 15 responses. The proposed 

rule is changing the regulatory citation 

for this requirement but otherwise has 

no further impact on the requirement or 

its burden so no additional burden 

hours or responses will be added to this 

requirement. 

The proposed rule will add additional 

reporting requirements that apply the 

Serious Deficiency Process to MSSOs 

operating the Program. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q) that State 

agencies must determine if a sponsoring 

organization is an MSSO and assume 

the role of a Cognizant State agency 

(CSA) if the MSSOs center of operations 

is located within the State. USDA 

estimates that the 56 State agencies will 

be required to make 23 MSSO 

determinations each year and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 322 annual 

burden hours and 1,288 responses to the 

collection. 

USDA expects that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(1)(i) that 

State agencies must enter into a 

permanent written agreement with the 

MSSO. USDA expects that the 56 State 

agencies will be required to make 23 

permanent agreements each year and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

322 annual burden hours and 1,288 

responses to the collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(1)(ii) that 

State agencies must approve the MSSOs 

administrative budget. USDA estimates 

that the 56 State agencies will be 

required to approve 23 administrative 

budgets each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 322 annual burden 

hours and 1,288 responses to the 

collection. 

USDA expects that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(1)(iii) 

that State agencies must conduct 

monitoring of MSSO Program 

operations within the State. USDA 

expects that the 56 State agencies will 

be required to monitor 23 MSSOs each 

year and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

322 annual burden hours and 1,288 

responses to the collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(1)(iii)(C) 

that State agencies provide summaries 

of the MSSO reviews that are conducted 

to the CSA and if the State agency 

conducts a full review, the State agency 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13184 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

should request the necessary records 

from the CSA. USDA estimates that the 

56 State agencies will be required to 

submit 23 MSSO review summaries to 

the CSA annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 322 annual burden 

hours and 1,288 responses to the 

collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(1)(iv) that 

State agencies must conduct audit 

resolution activities. USDA estimates 

that the 56 State agencies will be 

required to conduct 5 audit resolution 

activities each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 70 annual burden 

hours and 280 responses to the 

collection. 

USDA expects that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(1)(v) that 

State agencies must notify all other State 

agencies that have an agreement with an 

MSSO that their agreement has been 

terminated and disqualification actions 

taken against that MSSO. USDA expects 

that the 56 State agencies will be 

required to make 23 notifications a year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

322 annual burden hours and 1,288 

responses to the collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(2) that 

State agencies must determine if an 

MSSOs center of operations are located 

within the State and assume the role of 

the CSA. USDA estimates that the 56 

State agencies will be required to make 

23 MSSO determinations each year and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

322 annual burden hours and 1,288 

responses to the collection. 

USDA expects that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(2)(iii) 

that the CSA must conduct a full review 

of the MSSOs headquarters and 

financial records center, must 

coordinate the timing of the reviews, 

and make copies of the monitoring 

reports and findings available to all 

other State agencies that have 

agreements with the MSSO. USDA 

expects that the 56 State agencies will 

be required to conduct full reviews of 23 

MSSO headquarters and financial 

records centers annually and that it 

takes approximately 20 hours to 

complete this requirement; which is 

estimated to add 25,760 annual burden 

hours and 1,288 responses to the 

collection. 

UDSA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.6(q)(2)(iv) 

that, if an MSSO has for-profit status, 

the cognizant agency must establish 

audit thresholds and requirements. 

USDA estimates that the 56 State 

agencies will be required to establish 

audit thresholds and requirements for 6 

for-profit MSSOs annually and that it 

takes approximately 1 hour to complete 

this requirement; which is estimated to 

add 336 annual burden hours and 

responses to the collection. 

The proposed rule will change the 

requirement at 7 CFR 226.6(r) to 7 CFR 

226.6(p), which requires State agencies 

to provide information on the 

importance and benefits of the Special 

Supplemental Nutrition Program for 

Women, Infants, and Children (WIC) 

and WIC income eligibility guidelines to 

participating institutions. USDA 

estimates that 56 State agencies will be 

required to fulfill the requirements each 

year and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The existing requirement 

at 7 CFR 226.6(r) has a total of 14 annual 

burden hours and 56 responses. The 

proposed rule is changing the regulatory 

citation for this requirement, but 

otherwise has no further impact on the 

requirement or its burden so no 

additional burden hours or responses 

will be added to the collection. 

As a part of the Serious Deficiency 

Process, the proposed rule will be 

adding a requirement at 7 CFR 

226.25(a)(2)(i) and (a)(3) that State 

agencies must identify serious 

management problems and define a set 

of standards to help measure the 

severity of a problem to determine what 

rises to the level of a serious 

management problem. USDA expects 

that 56 State agencies will be required 

to define a set of standards to identify 

serious management problems a year 

and that it takes approximately 1 hour 

to complete this requirement; which is 

estimated to add 56 burden hours and 

responses to the collection. 

As a part of the changes to 7 CFR 

226.6, the proposed rule subtracts 

burden from currently approved 

requirements to create separate citations 

for applying institutions and 

participating institutions. The burden 

associated with applying institutions 

remain in 7 CFR 226.6 while the burden 

associated with participating 

institutions is subtracted from the old 

citations and added to new citations in 

7 CFR 226.25. Overall, no new burden 

will be added to the collection as a 

result of the following changes. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(6)(i) that State agencies 

notify a participating institution’s 

executive director and chairman of the 

board of directors, responsible 

principals, and responsible individuals 

that serious problems have been 

identified, must be addressed, and 

corrected. USDA estimates that 56 State 

agencies will notify 5 institutions a year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The proposed requirement 

at the regulatory citations noted above 

adds back a total of 70 burden hours and 

280 responses for the participating 

institutions which was subtracted from 

the old citation of 7 CFR 

226.6(c)(1)(iii)(A) (originally approved 

with 560 responses and 140 burden 

hours for both the applying and 

participating institutions; it is now 

estimated that the applying institutions 

now have 70 burden hours and 280 

responses). Therefore, USDA estimates 

that 70 hours and 280 responses will be 

added back to the collection. 

USDA expects that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(6)(ii)(A) that State 

agencies notify a participating 

institution’s executive director and 

chairman of the board of directors, 

responsible principals, and responsible 

individuals that the serious 

management problem has been vacated, 

update the State agency list, and 

provide a copy of the notice to the 

appropriate FNSRO. USDA expects that 

56 State agencies will notify 3.5 

institutions a year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. The 

proposed requirement at the regulatory 

citations noted above adds back a total 

of 49 burden hours and 196 responses 

for the participating institutions, which 

was subtracted from the old citation of 

7 CFR 226.6(c)(1)(iii)(B) (originally 

approved with 98 burden hours and 392 

responses for both the applying and 

participating institutions; it is now 

estimated that the applying institutions 

will have 49 burden hours and 196 

responses). Therefore, USDA estimates 

that 49 hours and 196 responses will be 

added back to the collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(6)(ii)(B) that State 

agencies notify a participating 

institution’s executive director and 

chairman of the board of directors, 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13185 

responsible principals, and responsible 

individuals that the State agency 

proposes to terminate the institution’s 

agreement and disqualify the 

institution, the responsible principals 

and responsible individuals. USDA 

estimates that 56 State agencies will 

notify 1.5 institutions a year and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement. 

The proposed requirement at the 

regulatory citations noted above adds 

back a total of 21 burden hours and 84 

responses for the participating 

institutions, which was subtracted from 

the old citation of 7 CFR 

226.6(c)(1)(iii)(C) (originally approved 

with 42 burden hours and 168 responses 

for both the applying and participating 

institutions; it is now estimated that the 

applying institutions will have 21 

burden hours and 84 responses). 

Therefore, USDA estimates that 21 

hours and 84 responses will be added 

back to the collection. 

USDA expects that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(6)(iii)(A) and (B) that State 

agencies notify a participating 

institution’s executive director and 

chairman of the board of directors, 

responsible principals, and responsible 

individuals of the appeal determination, 

and whether the institution’s agreement 

is terminated, issue a notice of serious 

deficiency if the institution’s agreement 

is terminated, update the State agency 

list, and provide a copy to the 

appropriate FNSRO. USDA expects that 

56 State agencies will notify 1.5 

institutions a year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. The 

proposed requirement at the regulatory 

citations noted above adds back a total 

of 21 burden hours and 84 responses for 

the participating institutions, which was 

subtracted from the old citation of 7 

CFR 226.6(c)(1)(iii)(E) (originally 

approved with 42 burden hours and 168 

responses for both the applying and 

participating institutions; it is now 

estimated that the applying institutions 

will have 21 burden hours and 84 

responses). Therefore, USDA estimates 

that 21 hours and 84 responses will be 

added back to the collection. 

The proposed rule will add additional 

requirements to 7 CFR 226.25 regarding 

the placement of institutions, day care 

homes, and unaffiliated centers that 

have been determined to have serious 

management problems. 

USDA estimates that 56 State agencies 

will be required to fulfill the 

requirement at 7 CFR 226.25(b) that 

State agencies maintain a State agency 

list, made available to FNS upon 

request. USDA estimates that the 56 

State agencies will each make 10,570 

updates annually ((6,843 Independent 

Child Care Centers + 89,853 Family Day 

Care Homes + 21,692 Unaffiliated 

Centers)/56 State Agencies) × 5 Steps in 

the Serious Deficiency Process = 10,570) 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

147,973.75 annual burden hours and 

591,895 responses to this collection. 

The proposed rule will add additional 

requirements to 7 CFR 226.25 regarding 

corrective action plans and monitoring 

requirements of State agencies. 

USDA estimates that 56 State agencies 

will be required to fulfill the 

requirement at 7 CFR 226.25(c)(2)(iv)(C) 

that State agencies receive and approve 

submitted corrective action plans within 

90 days from the date the institution 

received the notice and that the State 

agency monitor the full implementation 

of the corrective action plan. USDA 

estimates that the 56 State agencies will 

review 3 corrective action plans a year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

42 annual burden hours and 168 

responses to the collection. 

USDA expects that 56 State agencies 

will be required to fulfill the 

requirement at 7 CFR 226.25(c)(3)(i) and 

226.6(k)(2) that State agencies conduct 

and prioritize follow-up reviews and 

more frequent full reviews of 

institutions with serious management 

problems. USDA expects that the 56 

State agencies will have to conduct 

reviews of 39 participating institutions 

a year and that it takes approximately 20 

hours to complete this requirement; 

which is estimated to add 43,680 annual 

burden hours and 2,184 responses to the 

collection. 

The proposed rule will change the 

currently approved requirement at 7 

CFR 226.6(c)(6)(ii)(G) to 7 CFR 

226.25(d)(1). Under this requirement, 

State agencies are required to terminate 

for cause the Program agreement with a 

participating institution upon 

declaration of the facility or institution 

of being seriously deficient. USDA 

estimates that 56 State agencies will 

terminate 3 participating institutions 

each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. The 

existing requirement at 7 CFR 

226.6(c)(6)(ii)(G) has a total of 42 annual 

burden hours and 168 responses. The 

proposed rule is changing the regulatory 

citation for this requirement, but 

otherwise has no further impact on the 

requirement or its burden so no 

additional hours or responses will be 

added to the collection as a result of this 

proposed rule. 

The proposed rule will add additional 

requirements for State agencies to 

follow after terminating an agreement 

with a participating institution. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.25(d)(2) that 

State agencies develop a contingency 

plan for the transfer of facilities if a 

sponsoring organization is terminated or 

disqualified to ensure that eligible 

participants continue to have access to 

meals. USDA estimates that the 56 State 

agencies will develop 3 contingency 

plans each year and that it takes 

approximately 2 hours to complete this 

requirement; which is estimated to add 

336 annual burden hours and 168 

responses to the collection. 

USDA expects that 56 State agencies 

will be required to fulfill the new 

requirement at 7 CFR 226.25(e)(2)(iii) 

that, if all serious management problems 

have been corrected and all debts have 

been repaid, State agencies may elect to 

remove an institution, responsible 

principals, and responsible individuals 

from the National Disqualified List, and 

must submit all requests for early 

removals to the appropriate FNSRO. 

USDA expects that the 56 State agencies 

will remove up to 3 institutions from 

the National Disqualified List each year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

42 annual burden hours and 168 

responses to the collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the new 

requirements at 7 CFR 226.25(e)(3)(ii) 

that State agencies must enter into 

written agreements with FNS, in order 

to participate in a matching program 

involving a FNS Federal system of 

records. USDA estimates that the 56 

State agencies will enter into a CMA 

written agreement annually and that it 

takes approximately 1 hour to complete 

this requirement; which is estimated to 

add 56 annual burden hours and 

responses to the collection. 

USDA expects that 56 State agencies 

will be required to fulfill the new 

requirements at 7 CFR 

226.25(e)(3)(iii)(B) that State agencies 

may request FNS to waive the two-step 

independent verification and notice 

requirement of the CMA. USDA expects 

that the 56 State agencies will submit a 

waiver request annually and that it takes 

approximately 1 hour to complete this 

requirement; which is estimated to add 

56 annual burden hours and responses 

to the collection. 

The proposed rule will change the 

remaining citations belonging to the 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13186 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

Serious Deficiency Process in 7 CFR 

226.6 to 7 CFR 226.25. As these are 

changes only to citations, no new 

burden will be added to the collection. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(f)(1)(i)(A) 

and (f)(2)(i)(A) that State agencies 

initiate action for termination and 

disqualification upon determination of 

an imminent threat to the health and 

safety of participants or that the 

institution knowingly submitted a false 

or fraudulent claim, submit a combined 

notice of suspension, proposed 

termination, and proposed 

disqualification to the institution, and 

notify the appropriate FNSRO. USDA 

estimates that the 56 State agencies will 

take action for termination and 

disqualification against these 

participating institutions once a year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The number of annual 

burden hours and responses for this 

requirement remains unchanged from 

its older citation at 7 CFR 

226.6(c)(5)(i)(A) and (B), (c)(5)(ii)(A) and 

(B), (c)(5)(ii)(D) and (c)(6)(ii)(B), so this 

requirement still has a total of 14 annual 

burden hours and 56 responses. 

USDA expects that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g) that 

State agencies annually submit 

administrative review (appeals) 

procedures to all institutions. USDA 

expects that the 56 State agencies will 

submit annual administrative 

procedures to 21,840 institutions a year 

and that it takes approximately 1 minute 

(0.02 hours) to complete this reporting 

requirement for each record. The 

number of annual burden hours and 

responses from this requirement 

remains unchanged from its older 

citation at 7 CFR 226.6(k)(4)(i), so this 

requirement still has a total of 364.73 

annual burden hours and 21,840 

responses. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g)(1) that 

State agencies must submit 

administrative review (appeal) 

procedures when applicable action is 

taken. USDA estimates that the 56 State 

agencies will submit procedures 5 times 

a year and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The number of annual 

burden hours and responses for this 

requirement remains unchanged from 

its older citation at 7 CFR 226.6(k)(4)(ii), 

so it still has a total of 70 annual burden 

hours and 280 responses. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g)(1)(iii) 

that State agencies notify the 

institution’s executive director and 

chairman of the board of directors, 

responsible principals, and responsible 

individuals that action is being taken 

against them, the basis for the action, 

and the procedures to be followed to 

request an administrative review 

(appeal) of the action. USDA estimates 

that the 56 State agencies will notify 3 

participating institutions a year and that 

it takes approximately 15 minutes (0.25 

hours) to complete this requirement. 

The number of annual burden hours and 

responses for this requirement remains 

unchanged from its older citation at 7 

CFR 226.6(k)(5)(i), so this requirement 

still has a total of 42 annual burden 

hours and 168 responses. 

USDA expects that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g)(1)(iv)(E) 

that State agencies submit written 

documentation to a hearing official prior 

to the beginning of an administrative 

hearing, within 30 days after receiving 

the notice of action. USDA expects that 

the 56 State agencies will submit 

written documentation to a hearing 

official 3 times a year and that it takes 

approximately 2 hours to complete this 

requirement. The number of annual 

burden hours and responses for this 

requirement remains unchanged from 

its older citation at 7 CFR 226.6(k)(5)(v), 

so this requirement still has a total of 

336 annual burden hours and 168 

responses. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g)(2) that 

State agencies provide participating 

institutions advanced notification at 

least 5 days in advance of the time and 

place of the hearing. USDA estimates 

that the 56 State agencies will notify 3 

participating institutions a year and that 

it takes approximately 5 minutes (0.08 

hours) to complete this requirement. 

The number of annual burden hours and 

responses for this requirement remains 

unchanged from its older citation at 7 

CFR 226.6(k)(5)(ii), so this requirement 

still has a total of 14.03 annual burden 

hours and 168 responses. 

USDA expects that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g)(2) that 

State agencies participate in a hearing to 

determine that the State agency 

followed Program requirements in 

taking action under appeal. USDA 

estimates that the 56 State agencies will 

participate in 3 hearings a year and that 

it takes approximately 4 hours to 

complete this requirement. The number 

of annual burden hours and responses 

for this requirement remains unchanged 

from its older citation at 7 CFR 

226.6(k)(5)(vi), so this requirement still 

has a total of 672 annual burden hours 

and 168 responses. 

USDA estimates that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(g)(5)(i) and 

(ii) that participating institutions, 

responsible principals, and responsible 

individuals are informed of the decision 

made by the hearing official within 60 

days of the date the State agency 

received the appeal request. USDA 

estimates that the 56 State agencies will 

notify 3 participating institutions a year 

and that it takes approximately 30 

minutes (0.5 hours) to complete this 

requirement. The number of annual 

burden hours and responses for this 

requirement remains unchanged from 

its older citation at 7 CFR 226.6(k)(5)(ix) 

and (k)(9), so it still has a total of 84 

annual burden hours and 168 responses. 

USDA expects that 56 State agencies 

will be required to fulfill the changed 

requirement at 7 CFR 226.25(h)(3)(i) that 

State agencies send a necessary demand 

letter for the collection of unearned 

payments, including any assessment of 

interest, and refer the claim to the 

appropriate State authority for the 

pursuit of the debt payment. USDA 

estimates that the 56 State agencies will 

send 39 necessary demand letters a year 

and that it takes approximately 1minute 

(0.02 hours) to complete this 

requirement. The number of annual 

burden hours and responses for this 

requirement remains unchanged from 

its older citation at 7 CFR 226.14(a), so 

it still has a total of 36.47 annual burden 

hours and 2,184 responses. 

Local Government Agencies 

The changes proposed in this rule 

will impact the existing requirements 

currently approved under OMB Control 

Number 0584–0055 for local 

government agencies. 

USDA estimates that 3 local 

government agencies will be required to 

fulfill the requirement at 7 CFR 

226.6(b)(1)(xix) that sponsoring 

organizations approved to participate in 

the Program that operate in more than 

one state must provide the State with 

additional information about their 

operations. USDA estimates that 3 local 

government agencies will need to report 

on their operations once a year and that 

it takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 45 annual 

burden minutes (0.75 hours) and 3 

responses to the collection. 

USDA expects that 3,257 local 

government agencies will be required to 

fulfill the requirement at 226.25(a)(2)(i) 

and 226.25(a)(3) that sponsoring 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13187 

organizations must identify serious 

management problems and define a set 

of standards to help measure the 

severity of a problem to determine what 

rises to the level of a serious 

management problem and how it affects 

the institution or facility’s ability to 

meet Program requirements. USDA 

expects that 3,257 local government 

agencies will develop a set of standards 

annually and that it takes approximately 

1 hour to complete this requirement; 

which is estimated to add 3,257 annual 

burden hours and responses to the 

collection. 

The proposed rule will change the 

following citation belonging to the 

Serious Deficiency Process in 7 CFR 

226.16(l)(3)(i) to 226.25(a)(2)(ii), (a)(5) 

and (a)(7)(i). As these are changes only 

to citations, no new burden will be 

added to the collection. 

USDA estimates that 83 local 

government agencies will be required to 

fulfill the requirement at 7 CFR 

226.25(a)(2)(ii), (a)(5) and (a)(7)(i) that 

sponsoring organizations notify day care 

homes or unaffiliated centers that 

serious management problems have 

been identified, must be addressed, and 

corrected. USDA estimates that 83 local 

government agencies will send a notice 

each year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. The 

proposed requirement remains 

unchanged from its currently approved 

citation at 7 CFR 226.16(l)(3)(i), with a 

total of 20.75 annual burden hours and 

83 responses. 

The proposed rule requirements for 

the Serious Deficiency Process in 7 CFR 

226.25 that affect local government 

agencies extend the Serious Deficiency 

Process to day care homes and 

unaffiliated centers and reflect the 

added requirements for local 

government agencies. 

USDA expects that 3,257 local 

education agencies will be required to 

fulfill the requirement at 7 CFR 

226.25(a)(2)(ii), (a)(5), and (a)(7)(ii)(A) 

that sponsoring organizations notify an 

institution’s executive director, 

chairman of the board of directors, 

responsible principals, and responsible 

individuals that the serious 

management problems have been 

vacated. USDA expects that the 3,257 

local government agencies will send a 

notification annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement. Therefore, 

USDA estimates that a total of 814.25 

annual burden hours and 3,257 

responses will be added to the 

collection. 

USDA estimates that 3,257 local 

education agencies will be required to 

fulfill the requirement at 7 CFR (a)(2)(ii), 

(a)(5), and (a)(7)(ii)(B) that sponsoring 

organizations notify an institution’s 

executive director, chairman of the 

board of directors, responsible 

principals, and responsible individuals 

that corrective action has not fully 

corrected each serious management 

problem and that the sponsoring 

organization proposes to terminate the 

institution’s agreement and disqualify 

the institution, responsible principals, 

and responsible individuals. USDA 

estimates that the 3,257 local 

government agencies will send a 

notification annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 814.25 annual burden 

hours and 3,257 responses to the 

collection. 

USDA expects that 3,257 local 

education agencies will be required to 

fulfill the requirement at 7 CFR 

226.25(a)(2)(ii), (a)(5), and (a)(7)(iii)(A) 

and (B) that sponsoring organizations 

notify an institution’s executive 

director, chairman of the board of 

directors, responsible principals, and 

responsible individuals of the appeal 

determination, and, if the appeal is 

denied, notify them that the institution’s 

agreement is terminated and declare the 

institution or facility seriously deficient. 

USDA expects that the 3,257 local 

government agencies will send a 

notification annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 814.25 annual burden 

hours and 3,257 responses to the 

collection. 

USDA estimates that 3,257 local 

education agencies will be required to 

fulfill the requirement at 7 CFR 

226.25(c)(1) that the institution, 

unaffiliated center, or day care home 

must submit, in writing, what corrective 

actions have been taken to correct each 

serious management problem. USDA 

estimates that the 3,257 local 

government agencies will submit a 

written record of corrective actions 

taken and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

814.25 annual burden hours and 3,257 

responses to the collection. 

USDA expects that 3,257 local 

education agencies will be required to 

fulfill the at 7 CFR 226.25(c)(3)(ii) that 

sponsoring organizations conduct 

follow-up reviews and more frequent 

full reviews to confirm that serious 

management problems are corrected. 

USDA expects that the 3,257 local 

government agencies will conduct a 

follow-up review and that it takes 

approximately 20 hours to complete this 

requirement; which is estimated to add 

65,140 annual burden hours and 3,257 

responses to the collection. 

USDA estimates that 3,257 local 

education agencies will be required to 

fulfill the requirement at 7 CFR 

226.25(d)(1) that sponsoring 

organizations terminate for cause the 

Program agreement upon declaration of 

the institution or facility to be seriously 

deficient. USDA estimates that the 3,257 

local government agencies will 

terminate an agreement annually and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

814.25 annual burden hours and 3,257 

responses to the collection. 

The proposed rule will change the 

following citation belonging to the 

Serious Deficiency Process in 7 CFR 

226.16(d)(4)(viii) to 7 CFR 

226.25(f)(1)(ii)(A) and 7 

226.25(f)(2)(ii)(A). As these are changes 

only to citations, no new burden will be 

added to the collection. 

USDA estimates that 814 local 

government agencies will be required to 

fulfill the changed requirement at 7 CFR 

226.25(f)(1)(ii)(A) and (f)(2)(ii)(A) that 

sponsoring organizations initiate action 

for termination and disqualification 

upon determination of an imminent 

threat to the health and safety of 

participants or that the institution 

knowingly submitted a false or 

fraudulent claim and submit a 

combined notice of suspension, 

proposed termination, and proposed 

disqualification to the day care home 

provider or unaffiliated center. USDA 

estimates that the 814 local government 

agencies will take action for termination 

and disqualification against these 

participating institutions once a year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The number of annual 

burden hours and responses from this 

requirement remains unchanged from 

its older citation at 7 CFR 

226.16(d)(4)(viii), with a total of 203.5 

annual burden hours and 814 responses. 

As a part of the revised serious 

deficiency process, the proposed rule 

will require State agencies to develop a 

contingency plan in place for the 

transfer of facilities if a sponsoring 

organization is terminated or 

disqualified. The added requirement, at 

§ 226.25(d)(2), is necessary to ensure 

that eligible participants in the program 

do not lose meal access as a result of a 

State agency action against an 

institution with serious management 

problems. The burden for the 56 State 

agencies is estimated at 42 (for 0.25 

hours and for 168 total annual 

responses), an increase of 42 annual 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13188 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

burden hours from the current 

collection. The new requirement to 

develop a contingency plan is included 

as a line item in the ICR associated with 

the rulemaking. 

The proposed rule will also relocate 

the requirements for suspension in the 

event of an imminent threat to health 

and safety or the presence of false or 

fraudulent claims from § 226.25(c)(5) 

and (6) to a new home in 

§ 226.25(f)(1)(i)(A) and 

226.25(f)(2)(i)(A). The burden for the 56 

State agencies is estimated to remain 

unchanged from the previous collection 

at 14 (for 0.25 hours and for 56 total 

annual responses). The burden for 

institutions, however, is expected to 

change due to adjustments accounting 

for FY2020 CACFP participation data. 

The burden for an estimated 728 local 

government agencies is expected to 

increase to 182 (for 0.25 hours and for 

728 total annual responses), an increase 

of 161.25 hours from the current 

collection. Meanwhile, the burden for 

an estimated 4,154 business-level 

institutions is expected to decrease to 

1,039 (for 0.25 hours and for 4,154 total 

annual responses), a decrease of 124 

annual burden hours from the current 

collection. The moved suspension 

requirements have been included as line 

items in the ICR associated with this 

rulemaking. 

As a part of the proposed rule, 

requirements regarding the appeals 

process will be relocated to § 226.25(g). 

State agencies will still need to 

acknowledge the receipt of a request for 

a fair hearing, submit written 

documentation to the hearing official, 

provide a fair hearing, and inform the 

sponsor, responsible principals, and 

responsible individuals of the hearing 

official’s final decision. The burden for 

the 56 State agencies will still be 

1,106.028 (for 6.5835 hours and for 168 

total annual responses). As such, the 

burden is expected to remain 

unchanged from the previous collection. 

The fair hearing requirements are listed 

as line items in the ICR associated with 

this rulemaking. 

Along with the reporting 

requirements of the serious deficiency 

rule, State agencies will be required to 

maintain a State agency list that collects 

information on each institution and 

facility determined to have serious 

management problems; the names, 

mailing addresses, and dates of birth for 

each responsible principal and 

responsible individual, as well as the 

institution or facility’s status as it 

progresses through the serious 

deficiency process. The recordkeeping 

requirements already existed in the 

previous collection, but the proposed 

rule will be moving the State agency list 

requirements to § 226.25(b) to group the 

requirement with the other provisions of 

the serious deficiency process for 

participating institutions. The burden 

for the 56 State agencies is estimated at 

1,400 (for 5 hours and for 280 total 

annual responses), resulting in no 

change from the current collection. 

The proposed rule will be offering an 

opportunity for institutions, responsible 

principals, and responsible individuals 

to be removed from the National 

Disqualified List earlier than the sevenyear timetable, at State agency 

discretion. The disqualified institutions, 

responsible principals, and responsible 

individuals must correct all serious 

management problems and repay any 

outstanding debts due to unearned 

payments. Offering this new 

opportunity will incentivize institutions 

and the responsible individuals and 

principals to correct their serious 

management problems after they have 

been disqualified by allowing them to 

exit the National Disqualified List and 

reapply for participation in the Program. 

Under the proposed rule, FNS will be 

amending the regulations at 

§ 226.25(e)(2)(iv), to give State agencies 

the ability to remove an institution and 

the responsible principals and 

individuals from the National 

Disqualified List and require the State 

agency to submit all early removals to 

the appropriate FNSRO. 

The burden associated with requests 

for early removals for the 56 State 

agencies is estimated at 42 (0.25 hours 

and for 168 total annual respondents). 

Overall, the burden is expected to 

increase the burden to 42 annual burden 

hours, an increase of 42 hours from the 

current collection. The requirement to 

submit all requests for early removal 

from the National Disqualified List is 

included as a line item in the ICR 

associated with this collection. 

Similarly, the burden associated with 

sending a necessary demand letter for 

the collection of unearned payments 

remains the same as the prior collection. 

The only difference is that the citation 

has moved from § 226.14(a) to 

§ 226.25(h)(3)(i). The burden for the 56 

State agencies is estimated 42 (for 0.25 

hours and for 168 total annual 

responses). Overall, FNS expects that 

the burden associated with sending the 

necessary demand letter remains 

unchanged from the current collection. 

The burden associated with this 

requirement will be included as a line 

item in the ICR associated with this 

rulemaking. 

At the conclusion of the serious 

deficiency process, the proposed rule 

requires that the State agency terminate 

an institution’s agreement no later than 

45 days after the date of the institution’s 

disqualification by FNS. The 

termination requirement has moved 

from § 226.6 to § 226.25(i)(2)(A). By 

consolidating this requirement with 

other serious deficiency requirements 

for participating institutions should 

improve the readability of the CACFP 

regulations for State agencies. FNS 

estimates that the burden for the 56 

State agencies will remain at 42 (for 0.25 

hours and for 168 total annual 

responses), unchanged from the current 

collection. 

Other requirements that have changed 

their citations, such as the development 

of a standard form of written permanent 

agreement and provide information on 

Special Supplemental Nutrition 

Program for Women, Infants and 

Children (WIC) to participants, from 

their previous citations in the current 

collection. The development of a 

standard form of written permanent 

agreement has moved from § 226.6(p) to 

§ 226.6(n)(1). The burden for the 56 

State agencies is estimated as 90 (for 6 

hours and for 15 total annual 

responses), unchanged from the current 

collection. Meanwhile, the requirement 

to provide WIC information moved from 

§ 226.5(r) to § 226.6(p) and is estimated 

to have a burden of 14 (for 0.25 hours 

and for 56 total annual respondents. The 

estimated burden for the WIC 

information requirements is expected to 

remain unchanged from the current 

collection as well. The burden 

associated with this requirement will be 

included as a line item in the ICR 

associated with this rulemaking. To 

address comments from State agencies, 

the proposed rule will be amending 

§ 226.6(b)(1)(xix), (b)(2)(iii)(D)(2), 

(b)(2)(iii)(L), and (q) to add specific 

requirements regarding Multi-State 

Sponsoring Organizations (MSSOs). 

Prior to the proposed rule, the 

application process for MSSOs was 

extremely complicated. State agencies 

asked for guidance on how to approach 

MSSOs during the application process, 

but the existing FNS guidance was 

outdated and conflicted with the 

regulations in 2 CFR part 200. The new 

requirements provide a clear process as 

to how State agencies will approach 

MSSOs applying to participate in the 

CACFP. 

Under the new requirements, 

sponsoring organizations approved to 

operate in more than one state will be 

required to submit more information 

than is required in the application 

process, State agencies will be required 

to develop a process to share that 

information with other Child Nutrition 

Program State agencies, and ensure that 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13189 

the information on MSSO operations are 

up to date. Furthermore, State agencies 

will be required to determine if a 

sponsoring organization qualifies as an 

MSSO during their application, enter 

permanent written agreements with the 

MSSO, approve the MSSO 

administrative budget, conduct 

monitoring of the MSSOs program 

operations, conduct audit resolution 

activities, notify other State agencies 

that have an agreement with the MSSO 

after termination and disqualification 

actions, and assume the role of a 

Cognizant State Agency (CSA) if the 

MSSOs center of operations is located 

within the State. Adding the additional 

process should provide a clear process 

for State agencies to follow and 

eliminate any ambiguity under the 

current collection regarding MSSOs. 

The burden for the 56 State agencies 

determining whether an applying 

institution operates in more than one 

state is estimated at 294 (for 0.25 hours 

and for 1,176 total annual responses. 

Developing the required process to 

share MSSO information is estimated at 

56 (for 1 hour and for 56 total annual 

responses) while ensuring that MSSO 

operations are up to date is estimated at 

294 (for 0.25 hours and for 1,176 total 

annual responses). The burden for the 

56 State agencies to review participating 

MSSOs is estimated at 1,834 (for 1.75 

hours and 7,336 total annual responses). 

FNS expects the overall burden 

regarding the new MSSO requirements 

to increase burden to 2,478 annual 

burden hours, an increase of 2,478 

hours. 

Meanwhile, the burden hours for 

institutions is expected to increase to 

comply with the submission of 

additional information to the 

appropriate State agency. The burden 

for the estimated 3 local government 

agencies is expected at 0.75 (for 0.25 

hours and 3 total annual responses), 

increasing the burden to 0.75 annual 

burden hours, an increase of 0.75 hours. 

Business-level institutions must also 

comply with the new requirement. An 

estimated 997 business-level 

institutions are expected to have an 

estimated burden at 249 (for 0.25 hours 

and for 997 total annual responses), 

increasing the burden to 249 annual 

burden hours. The new MSSO 

requirements have been included as line 

items in the ICR associated with this 

rulemaking. 

The proposed rule will be extending 

the serious deficiency process to 

unaffiliated centers. While family day 

care homes and independent centers 

were included in the serious deficiency 

process, the current regulations exclude 

unaffiliated centers from the serious 

deficiency process. Excluding 

unaffiliated centers from the serious 

deficiency process created ambiguity 

between State agencies and unaffiliated 

centers as there was no defined process 

on how to treat unaffiliated centers in 

the CACFP. By extending the process to 

unaffiliated centers, the proposed rule 

formalizes the relationship between 

State agencies and unaffiliated centers 

and establishes a process for 

accountability for complying with 

program requirements, protecting the 

program integrity of the CACFP. The 

proposed rule amends regulations at 

§ 226.17(e) and (f), 226.17a(f)(2)(i) and 

(ii), 226.19(d), and 226.19a(d) to 

separate out unaffiliated centers from 

independent centers and extend the 

serious deficiency process to 

unaffiliated centers. 

The burden for an estimated 28,175 

business-level institutions is estimated 

at 5,423.124 (for 0.25 hours and for 

21,692) for unaffiliated child care 

centers; 1,710.8665 (for 0.25 hours and 

for 6,843 total annual responses) for 

independent child care centers; 

5,423.124 (for 0.25 hours and for 21,692) 

for unaffiliated afterschool child care 

centers; 1,710.8665 (for 0.25 hours and 

for 6,843 total annual responses) for 

independent afterschool child care 

centers; 5,423.124 (for 0.25 hours and 

for 21,692) for unaffiliated outsideschool-hours child care centers; and 

1,710.8665 (for 0.25 hours and for 6,843 

total annual responses) for independent 

outside-school-hours child care centers. 

FNS expects the burden to increase 

overall to 21,401.9715 annual burden 

hours, an increase of 21,401.9715, for 

these requirements. 

The burden for an estimated 28,535 

business-level facilities is estimated at 

5,423.12 (for 0.25 hours and for 21,692 

total annual responses) for unaffiliated 

child care centers; 1,710.87 (for 0.25 

hours and for 6,843 total annual 

responses) for independent child care 

centers; 5,423.12 (for 0.25 hours and for 

21,692 total annual responses) for 

unaffiliated afterschool child care 

centers; 1,710.87 (for 0.25 hours and for 

6,843 total annual responses) for 

independent afterschool child care 

centers; 5,423.12 (for 0.25 hours and for 

21,692 total annual responses) for 

unaffiliated outside-school-hours child 

care centers; and 1,710.87 (for 0.25 

hours and for 6,843 total annual 

responses) for independent outsideschool-hours child care centers. FNS 

expects the burden to increase overall to 

28,535 annual burden hours, an increase 

of 28,535, for these requirements. The 

requirements for unaffiliated centers 

will be included as line items in the ICR 

associated with this rulemaking. The 

current approved burden for OMB 

Control # 0584–0055 is 4,213,210.887 

hours. This rulemaking is expected to 

increase burden by 523,837.943 hours to 

account for the new requirements. In 

addition, the burden is expected to 

decrease by 446,677 hours due to 

adjustments accounting for CACFP 

participation data collected from 

FY2022. Taking account of decreases in 

the number of sponsoring organizations, 

facilities, and participating households 

in the SFSP, the burden is expected to 

increase by 77,170.390 hours, resulting 

in a revised total burden of 

4,290,381.277 hours. 

This rulemaking will add clarity to 

the serious deficiency process by 

defining key terms, establish a timeline 

for full correction, and establish criteria 

for determining when the serious 

deficiency process must be 

implemented. In addition, this 

rulemaking would also define 

procedures for termination for cause 

and disqualification, implement legal 

requirements for records maintained on 

individuals on the National Disqualified 

List, and incorporate additional 

procedures to account for the 

participation of multi-State sponsoring 

organizations. The proposed rule is 

intended to improve the integrity of the 

CACFP. 

Institutions 

The changes proposed in this rule 

will introduce new reporting 

requirements to the existing 

requirements currently approved under 

OMB Control Number 0584–0055 for 

business level institutions. 

USDA estimates that 1,116 

institutions will be required to fulfill the 

requirement at 7 CFR 226.6(b)(1)(xix) 

that institutions approved to participate 

in the Program that operate in more than 

one state must provide the State with 

additional information about their 

operations. USDA estimates that 1,116 

institutions will need to report on their 

operations once a year and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 279 annual burden 

hours and 1,116 responses to the 

collection. 

USDA expects that 21,692 institutions 

will be required to fulfill the 

requirement at 7 CFR 226.17(e) that 

sponsoring organizations must enter 

into a permanent written agreement, 

which specifies the rights and 

responsibilities of both parties, with an 

unaffiliated sponsored child care center 

participating in the Program. USDA 

expects that 21,692 institutions will 

have to enter into an agreement 

annually and that it takes approximately 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13190 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

15 minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

5,423.12 hours and 21,692 responses to 

the collection. 

USDA estimates that 6,843 

institutions will be required to fulfill the 

requirement at 7 CFR 226.17(f) that 

independent child care centers must 

enter into a permanent written 

agreement, which specifies the rights 

and responsibilities of both parties, with 

the State agency. USDA estimates that 

6,843 institutions will have to enter into 

an agreement annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 1,710.87 annual 

burden hours and 6,843 responses to the 

collection. 

USDA expects that 21,692 institutions 

will be required to fulfill the 

requirement at 7 CFR 226.17a(f)(2)(i) 

that sponsoring organizations must 

enter into a permanent written 

agreement, specifying the rights and 

responsibilities of both parties, with an 

unaffiliated sponsored afterschool child 

care center participating in the Program. 

USDA expects that 21,692 institutions 

will have to enter into an agreement 

annually and that it takes approximately 

15 minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

5,423.12 annual burden hours and 

21,692 responses to the collection. 

USDA estimates that 6,843 

institutions will be required to fulfill the 

requirement at 7 CFR 226.17a(f)(2)(ii) 

that independent afterschool child care 

centers must enter into a permanent 

written agreement, specifying the rights 

and responsibilities of both parties, with 

the State agency. USDA estimates that 

6,843 institutions will have to enter into 

an agreement annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 1,710.87 annual 

burden hours and 6,843 responses to the 

collection. 

USDA expects that 21,692 institutions 

will be required to fulfill the 

requirement at 7 CFR 226.19(d) that 

sponsoring organizations must enter 

into a permanent written agreement, 

specifying the rights and responsibilities 

of both parties, with an unaffiliated 

sponsored outside-school-hours child 

care centers participating in the 

Program. USDA expects that 21,692 

institutions will have to enter into an 

agreement annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 5,423.12 hours and 

21,692 responses to the collection. 

USDA estimates that 6,843 

institutions will be required to fulfill the 

requirement at 7 CFR 226.19a(d) that 

sponsoring organizations must enter 

into a permanent written agreement, 

specifying the rights and responsibilities 

of both parties, with an unaffiliated 

sponsored adult day care centers 

participating in the Program. USDA 

estimates that 6,843 institutions will 

have to enter into an agreement 

annually and that it takes approximately 

15 minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

1,710.87 annual burden hours and 6,843 

responses to the collection. 

USDA expects that 18,601 institutions 

will be required to fulfill the 

requirement at 226.25(a)(2)(i) and 

226.25(a)(3) that sponsoring 

organizations must identify serious 

management problems and define a set 

of standards to help measure the 

severity of a problem to determine what 

rises to the level of a serious 

management problem and how it affects 

the institution or facility’s ability to 

meet Program requirements. USDA 

expects that 18,601 institutions will 

develop a set of standards annually and 

that it takes approximately 1 hour to 

complete this requirement; which is 

estimated to add 18,601 annual burden 

hours and responses to the collection. 

The proposed rule will change the 

following citation belonging to the 

Serious Deficiency Process in 7 CFR 

226.16(l)(3)(i) to 7 CFR 226.25(a)(2)(ii), 

(a)(5) and (a)(7)(i). As these are changes 

only to citations, no new burden will be 

added to the collection. 

USDA estimates that 540 institutions 

will be required to fulfill the 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5) and (a)(7)(i) that sponsoring 

organizations notify day care homes or 

unaffiliated centers that serious 

management problems have been 

identified, must be addressed, and 

corrected. USDA estimates that 540 

institutions will send a notice each year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The proposed requirement 

remains unchanged from its currently 

approved citation at 7 CFR 

226.16(l)(3)(i), with a total of 135 annual 

burden hours and 540 responses. 

The proposed rule requirements for 

the Serious Deficiency Process in 7 CFR 

226.25 that affect institutions extend the 

Serious Deficiency Process to day care 

homes and unaffiliated centers, and 

reflect the added requirements for 

institutions. 

USDA expects that 18,601 institutions 

will be required to fulfill the reporting 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(7)(ii)(A) that sponsoring 

organizations notify an institution’s 

executive director, chairman of the 

board of directors, responsible 

principals, and responsible individuals 

that the serious management problems 

have been vacated. USDA expects that 

the 18,601 institutions will send a 

notification annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 4,650.25 annual 

burden hours and 18,601 responses to 

the collection. 

USDA estimates that 18,601 

institutions will be required to fulfill the 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(7)(ii)(B) that sponsoring 

organizations notify an institution’s 

executive director, chairman of the 

board of directors, responsible 

principals, and responsible individuals 

that the sponsoring organization 

proposes to terminate the institution’s 

agreement and disqualify the 

institution, responsible principals, and 

responsible individuals. USDA 

estimates that the 18,601 institutions 

will send a notification annually and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

4,650.25 annual burden hours and 

18,601 responses to the collection. 

USDA estimates that 18,601 

institutions will be required to fulfill the 

requirements at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(7)(iii)(A) that sponsoring 

organizations notify an institution’s 

executive director, chairman of the 

board of directors, responsible 

principals, and responsible individuals 

of the appeal determination. USDA 

estimates that 18,601 institutions will 

send a notification annually and that it 

takes approximately 15 minutes (0.25 

hours) to complete this requirement; 

which is estimated to add 4,650.25 

annual burden hours and 18,601 

responses to the collection. 

USDA expects that 18,601 institutions 

will be required to fulfill the 

requirement at 7 CFR 226.25(a)(2)(ii), 

(a)(5), and (a)(7)(iii)(B) that sponsoring 

organizations must notify the day care 

home or unaffiliated center’s executive 

director, chairman of the board of 

directors, responsible principals, and 

responsible individuals that the 

agreement is terminated and declare 

that the institution or facility is 

seriously deficient. USDA expects that 

the 18,601 institutions will send a 

notification annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 4,650.25 annual 

burden hours and 18,601 responses to 

the collection. 

USDA estimates that 18,601 

institutions will be required to fulfill the 

requirement at 7 CFR 226.25(c)(1) that 

the institution, unaffiliated center, or 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13191 

day care home must submit, in writing, 

what corrective actions have been taken 

to correct each serious management 

problem. USDA estimates that the 

18,601 institutions will submit a written 

record of corrective actions taken and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

4,650.25 annual burden hours and 

18,601 responses to the collection. 

USDA expects that 18,601 institutions 

will be required to fulfill the 

requirement at 7 CFR 226.25(c)(3)(ii) 

that sponsoring organizations must 

conduct reviews to confirm that the 

serious management problems are 

corrected. USDA expects that the 18,601 

institutions will conduct a follow-up 

review and that it takes approximately 

20 hours to complete this requirement; 

which is estimated to add 372,020 

annual burden hours and 18,601 to the 

collection. 

USDA estimates that 18,601 

institutions will be required to fulfill the 

requirement at 7 CFR 226.25(d)(1) that 

sponsoring organizations terminate for 

cause the Program agreement upon 

declaration of the institution or facility 

to be seriously deficient. USDA 

estimates that the 18,601 institutions 

will terminate an agreement annually 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

4,650.25 annual burden hours and 

18,601 responses to the collection. 

The proposed rule will change the 

following citation belonging to the 

Serious Deficiency Process in 7 CFR 

226.16(d)(4)(viii) to 7 CFR 

226.25(f)(1)(ii)(A) and (f)(2)(ii)(A). As 

these are changes only to citations, no 

new burden will be added to the 

collection. 

USDA estimates that 4,650 local 

government agencies will be required to 

fulfill the changed requirement at 7 CFR 

226.25(f)(1)(ii)(A) and 226.25(f)(2)(ii)(A) 

that sponsoring organizations initiate 

action for termination and 

disqualification upon determination of 

an imminent threat to the health and 

safety of participants or that the 

institution knowingly submitted a false 

or fraudulent claim. USDA estimates 

that the 4,650 local government agencies 

will take action for termination and 

disqualification against these 

participating institutions once a year 

and that it takes approximately 15 

minutes (0.25 hours) to complete this 

requirement. The number of annual 

burden hours and responses for this 

requirement remains unchanged from 

its older citation at 7 CFR 

226.16(d)(4)(viii), with a total of 

1,162.50 annual burden hours and 4,650 

responses. 

Facilities 

The changes proposed in this rule 

will introduce new reporting 

requirements to the existing 

requirements that are currently 

approved under OMB Control Number 

0584–0055 for business level facilities. 

USDA expects that 21,692 facilities 

will be required to fulfill the 

requirement at 7 CFR 226.17(e) that 

sponsoring organizations must enter 

into a permanent written agreement, 

specifying the rights and responsibilities 

of both parties, with an unaffiliated 

sponsored child care center 

participating in the Program. USDA 

expects that 21,692 facilities will have 

to enter into an agreement annually and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement’ which is estimated to add 

5,423.12 hours and 21,692 responses to 

the collection. 

USDA estimates that 6,843 facilities 

will be required to fulfill the 

requirement at 7 CFR 226.17(f) that 

independent child care centers must 

enter into a permanent written 

agreement, specifying the rights and 

responsibilities of both parties, with the 

State agency. USDA estimates that 6,843 

facilities will have to enter into an 

agreement annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 1,710.87 annual 

burden hours and 6,843 responses to the 

collection. 

USDA expects that 21,692 facilities 

will be required to fulfill the 

requirement at 7 CFR 226.17a(f)(2)(i) 

that sponsoring organizations must 

enter into a permanent written 

agreement, specifying the rights and 

responsibilities of both parties, with an 

unaffiliated sponsored afterschool child 

care center participating in the Program. 

USDA expects that 21,692 facilities will 

have to enter into an agreement 

annually and that it takes approximately 

15 minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

5,423.12 annual burden hours and 

21,692 responses to the collection. 

USDA estimates that 6,843 facilities 

will be required to fulfill the 

requirement at 7 CFR 226.17a(f)(2)(ii) 

that independent afterschool child care 

centers must enter into a permanent 

written agreement, specifying the rights 

and responsibilities of both parties, with 

the State agency. USDA estimates that 

6,843 facilities will have to enter into an 

agreement annually and that it takes 

approximately 15 minutes (0.25 hours) 

to complete this requirement; which is 

estimated to add 1,710.87 annual 

burden hours and 6,843 responses to the 

collection. 

USDA expects that 21,692 facilities 

will be required to fulfill the 

requirement at 7 CFR 226.19(d) that 

sponsoring organizations must enter 

into a permanent written agreement, 

specifying the rights and responsibilities 

of both parties, with an unaffiliated 

sponsored outside-school-hours child 

care center participating in the Program. 

USDA expects that 21,692 facilities will 

have to enter into an agreement 

annually and that it takes approximately 

15 minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

5,423.12 hours and 21,692 responses to 

the collection. 

USDA estimates that 6,843 facilities 

will be required to fulfill the 

requirement at 7 CFR 226.19a(d) that 

sponsoring organizations must enter 

into a permanent written agreement, 

specifying the rights and responsibilities 

of both parties, with an unaffiliated 

sponsored adult day care center 

participating in the Program. USDA 

estimates that 6,843 facilities will have 

to enter into an agreement annually and 

that it takes approximately 15 minutes 

(0.25 hours) to complete this 

requirement; which is estimated to add 

1,710.87 annual burden hours and 6,843 

responses to the collection. 

Recordkeeping 

State Agencies 

The proposed rule will change the 

recordkeeping requirement at 7 CFR 

226.6 to 7 CFR 226.25(b), which 

requires State agencies to collect and 

maintain on file CACFP agreements 

(Federal/State and State/Institutions), 

records received from applicant and 

participating institutions, National 

Disqualified Lists/State Agency Lists, 

and documentation of any 

administrative review (appeals), 

Program assistance, activities, results, 

and corrective actions. 

USDA estimates that 56 State agencies 

will fulfill the requirement at 7 CFR 

226.25(b). As a part of the requirement, 

USDA estimates that the 56 State 

agencies will maintain 5 sets of records 

and that it takes approximately 5 hours 

to complete this recordkeeping 

requirement for each record. The FNS– 

843 Report of Disqualification from 

Participation: Institution and 

Responsible Principals/Individuals and 

the FNS–844 Report of Disqualification 

from Participation—Individually 

Disqualified Responsible Principal/ 

Individual or Day Care Home Provider 

forms are included among the records 

associated with this requirement. The 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13192 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

proposed requirement does not change 

from the existing requirement at 7 CFR 

226.6 in the currently approved 

collection, so this requirement still has 

a total of 1,400 annual burden hours and 

280 responses. 

USDA expects that 56 State agencies 

will fulfill the requirement at 7 CFR 

226.25(c) that State agencies must 

collect and maintain on file corrective 

action plans submitted by institutions, 

unaffiliated centers, or day care homes, 

in writing, which must discuss what 

corrective actions have been taken to 

correct each serious management 

problem. USDA expects that the 56 

State agencies will each keep 3 records 

for submitted corrective action plans 

annually and that it takes 1 hour and 30 

minutes (1.5 hours) to complete this 

requirement; which is estimated to add 

252 annual burden hours and 168 

responses to the collection. 

Public Disclosure 

State Agencies 

The proposed rule will add an 

additional public disclosure 

requirement at 7 CFR 226.6(q)(2)(iii) as 

a part of the new review process for 

Multi-State Sponsoring Organizations 

(MSSOs). 

USDA estimates that 56 State agencies 

will fulfill the requirement at 7 CFR 

226.6(q)(2)(iii) that the Cognizant State 

Agency (CSA) must conduct a full 

review at the MSSO headquarters and 

financial records center, must 

coordinate the timing of the reviews and 

make copies of monitoring reports and 

findings available to all other State 

agencies that have agreements with the 

MSSO. USDA estimates that the 56 State 

agencies will each disclose the findings 

of 23 MSSO reviews to other State 

agencies annually and that it takes 15 

minutes (0.25 hours) to complete this 

requirement; which is estimated to add 

322 annual burden hours and 1,288 

responses to the collection. 

FNS estimates that the burden 

estimates for the proposals outlined in 

this rulemaking, will have 79,040 

respondents, 985,507 total annual 

responses, and 760,711 total burden 

hours. Therefore, FNS estimates that as 

a result of this proposed rulemaking, 

OMB Control Number 0584–0055 will 

have 3,852,077 respondents, 17,165,505 

responses and 4,968,899 burden hours, 

an increase of approximately 57,128 

respondents, 952,412 responses, and 

755,688 burden hours. The average 

burden per response and the annual 

burden hours are explained below and 

summarized in the charts which follow. 

Reporting 

Respondents (Affected Public): 

Businesses; and State, Local, and Tribal 

Government. The respondent groups 

identified includes institutions, 

facilities, State agencies, and Local 

government agencies. 

Estimated Number of Respondents: 

78,984. 

Estimated Number of Responses per 

Respondent: 12.455. 

Estimated Total Annual Responses: 

983,771. 

Estimated Time per Response: 0.77. 

Estimate Total Annual Burden on 

Respondents: 758,737. 

Recordkeeping 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

respondent groups identified include 

State agencies. 

Estimated Number of Respondents: 

56. 

Estimated Number of Responses per 

Respondent: 8. 

Estimated Total Annual Responses: 

448. 

Estimated Time per Response: 3.69. 

Estimate Total Annual Burden on 

Respondents: 1,652. 

Public Disclosure 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

respondent groups identified include 

State agencies. 

Estimated Number of Respondents: 

56. 

Estimated Number of Responses per 

Respondent: 23. 

Estimated Total Annual Responses: 

1,288. 

Estimated Time per Response: 0.250. 

Estimated Total Annual Burden on 

Respondents: 322. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13193 

ESTIMATED

ANNUAL

BURDEN FOR CACFP 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State Agencies ..... SAs must develop a process to share information on 

any institution, facility, or RPIs not approved to administer or participate in the programs as described under paragraph (b)(2)(iii)(A)(1) of this section. The SA must work closely with any other Child Nutrition Program SA within the State to ensure information is shared for program purposes and on a timely basis. The process must be approved by FNS. 

226.6(b)(2)(iii)(D)(2) 56 1.000 56.000 1.000 56.000 0.000 56.000 56.000 

State Agencies ..... SA must ensure that the MSSOs operations, as described in paragraph (b)(1)(xviii), are up-to-date. If 

the MSSO has facilities not previously reported to the SA, as described in paragraph (b)(1)(xviii), the MSSO must update the information. 

226.6(b)(2)(iii)(L) .... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... SAs must notify an institution’s executive director 

and chairman of the board of directors that the institution has been determined to be seriously deficient. At the same time the notice is issued, the SAs must add the institution to the SA list, along with the basis for the serious deficiency determination, and provide a copy of the notice to the appropriate FNS Regional Office (FNSRO). 

226.6(c)(4) .............. 56 5.000 280.000 0.250 70.000 140.000 ¥70.000 ¥70.000 

State Agencies ..... SAs must submit a copy of successful corrective action (temporary deferment or serious deficiency 

determination) notices to FNSRO for new, renewing, and participating institutions. 

226.6(c)(5)(i)(A) ...... 56 3.500 196.000 0.250 49.000 98.000 ¥49.000 ¥49.000 

State Agencies ..... SAs must submit a copy of application denial and 

proposed disqualification notice to FNSRO. 

226.6(c)(6) .............. 56 1.500 84.000 0.250 21.000 42.000 ¥21.000 ¥21.000 

State Agencies ..... SAs must submit copies of disqualification notices to 

the FNSRO for new, renewing, and participating institutions. 

226.6(c)(8) .............. 56 1.500 84.000 0.250 21.000 42.000 ¥21.000 ¥21.000 

State Agencies ..... SAs must develop and provide for the use of a 

standard form of written permanent agreement between each sponsoring organization and day care home or unaffiliated centers, outside-school-hourscare centers, at-risk afterschool care centers, emergency shelters, or adult day care centers for which it has the responsibility for Program operations. The agreement must specify the rights and responsibilities of both parties. 

226.6(n)(1) .............. 15 1.000 15.000 6.000 90.000 90.000 0.000 0.000 

State Agencies ..... SAs must determine if a sponsoring organization is 

an MSSO, as described in paragraphs (b)(1)(xv) and (b)(2)(iii)(L). SAs must assume the role of the CSA, if the MSSOs center of operations is located within the State. Each SA that approves an MSSO must follow the requirements described in paragraph (i). 

226.6(q) .................. 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... SAs must enter into a permanent written agreement 

with the MSSO, as described in paragraph (b)(4). 

226.6(q)(1)(i) .......... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... SAs must approve the MSSOs administrative budget. 226.6(q)(1)(ii) .......... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13194 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED

ANNUAL

BURDEN FOR CACFP—Continued 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State Agencies ..... SAs must conduct monitoring of MSSO Program operations within the State, as described in paragraph (k)(4). The SA should coordinate monitoring 

with the CSA to streamline reviews and minimize duplication of the review content. The SA may base the review cycle on the number of facilities operating within the State. 

226.6(q)(1)(iii) ......... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... SAs must provide summaries of the MSSO reviews 

that are conducted to the CSA. If the SA chooses to conduct a full review, the SA should request the necessary records from the CSA. 

226.6(q)(1)(iii)(C) .... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... SAs must conduct audit resolution activities. The SA 

must review audit reports, address audit findings, and implement corrective actions, as required under 2 CFR part 200, subpart D, and USDA implementing regulations 2 CFR parts 400 and 415. 

226.6(q)(1)(iv) ......... 56 5.000 280.000 0.250 70.000 0.000 70.000 70.000 

State Agencies ..... SAs must notify all other State agencies that have 

agreements with the MSSO of termination and disqualification actions, as described in paragraph (c)(2)(i). 

226.6(q)(1)(v) ......... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... If it determines that an MSSOs center of operations 

is located within the State, the SA must assume the role of the CSA. 

226.6(q)(2) .............. 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies ..... The CSA must conduct a full review at the MSSO 

headquarters and financial records center. The CSA must coordinate the timing of the reviews and make copies of monitoring reports and findings available to all other State agencies that have agreements with the MSSO. 

226.6(q)(2)(iii) ......... 56 23.000 1,288.000 20.000 25,760.000 0.000 25,760.000 25,760.000 

State Agencies ..... If an MSSO has for-profit status, the cognizant agency must establish audit thresholds and requirements. 226.6(q)(2)(iv) ......... 56 6.000 336.000 1.000 336.000 0.000 336.000 336.000 State Agencies ..... SAs must provide information on the importance and 

benefits of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and WIC income eligibility guidelines to participating institutions. 

226.6(p) .................. 56 1.000 56.000 0.250 14.000 14.000 0.000 0.000 

State Agencies ..... SAs must identify serious management problems 

and define a set of standards to help measure the severity of a problem to determine what rises to the level of a serious management problem and how it affects the institution or facility’s ability to meet Program requirements. 

226.25(a)(2)(i) and 

226.25(a)(3).

56 1.000 56.000 1.000 56.000 0.000 56.000 56.000 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13195 

State Agencies ..... SAs must notify an institution’s executive director 

and chairman of the board of directors, and RPIs, that serious management problems have been identified, must be addressed, and corrected. The notice must identify all aspects of the serious management problem; reference specific regulatory citations, instruction, or policies; name all of the RPIs; describe the action needed to correct the serious management problem; and set a deadline for completing the corrective action. At the same time, the SA must add the institution and RPIs to the SA list and provide a copy of the notice to the appropriate FNSRO. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(6)(i).

56 5.000 280.000 0.250 70.000 0.000 70.000 70.000 

State Agencies ..... If corrective action has been taken to fully correct 

each serious management problem, SAs must notify an institution’s executive director and chairman of the board of directors, and RPIs, that the serious management problem has been vacated. At the same time, the SA must update the SA list and provide a copy of the notice to the appropriate FNSRO. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(6)(ii)(A).

56 3.500 196.000 0.250 49.000 0.000 49.000 49.000 

State Agencies ..... If corrective action has not fully corrected each serious management problem, SAs must notify an institution’s executive director and chairman of the 

board of directors, and RPIs, that the SA proposes to terminate the institution’s agreement and disqualify the institution and RPIs. SA must notify the institution of the procedures for seeking a fair hearing in accordance with paragraph f of the proposed termination and proposed disqualifications. At the same time, the SA must update the SA list and provide a copy of the notice to the appropriate FNSRO. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(6)(ii)(B).

56 1.500 84.000 0.250 21.000 0.000 21.000 21.000 

State Agencies ..... If appeal is upheld, SAs must notify the institution 

and facility that confirms the serious management problem is vacated and advise the institution and facility that procedures and policies must be implemented to fully correct the serious management problem. If the fair hearing is denied, SAs must notify the institution’s executive director and chairman of the board of directors, and RPIs, that the agreement is terminated and declare the institution or facility seriously deficient. SAs must issue a serious deficiency notice that informs the institution, facility, and RPIs of their disqualification from Program participation. At the same time, the SA must update the SA list and provide a copy of the notice to the appropriate FNSRO. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(6)(iii)(A) and (B).

56 1.500 84.000 0.250 21.000 0.000 21.000 21.000 

State Agencies ..... The State agency must maintain a State agency list, 

made available to FNS upon request, and must include the following information: Names and mailing addresses of each institution, day care home or unaffiliated center that is determined to have a serious management problem; Names, mailing addresses, and dates of birth of each responsible principal and responsible individual; The status of the institution, day care home or unaffiliated center, as it progresses through the stages of corrective action, termination, suspension, and disqualification, full correction, as applicable. Within 10 days of receiving a notice of termination and disqualification from a sponsoring organization, the State agency must provide FNS with the information as described in paragraph (b)(1)(A) and (B) of this section. 

226.25(b) ................ 56 10,570 591,895.000 0.250 147,973.750 0.000 147,973.750 147,973.750 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13196 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED

ANNUAL

BURDEN FOR CACFP—Continued 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State Agencies ..... SAs must receive and approve the corrective action 

plan within 90 days from the date the institution received the notice and monitor the full implementation of the corrective action plan. 

226.25(c)(2)(iv)(C) .. 56 3.000 168.000 0.250 42.000 0.000 42.000 42.000 

State Agencies ..... SAs must conduct and prioritize follow-up reviews 

and more frequent full reviews of institutions with serious management problems, as described in 7 CFR 226.6(k)(6)(ii). An institution must have at least two full reviews occurring once every 2 years and at least 24 months apart that reveal no new or repeat serious management problems to achieve full correction. 

226.25(c)(3)(i) and 

226.6(k)(2).

56 39.000 2,184.000 20.000 43,680.000 0.000 43,680.000 43,680.000 

State Agencies ..... SAs must terminate for cause the Program agreement upon declaration of the institution or facility 

to be seriously deficient. 

226.25(d)(1) ............ 56 3.000 168.000 0.250 42.000 42.000 0.000 0.000 

State Agencies ..... SAs must develop a contingency plan in place for 

the transfer of facilities if a sponsoring organization is terminated or disqualified to ensure that eligible participants continue to have access to meal service. 

226.25(d)(2) ............ 56 3.000 168.000 2.000 336.000 0.000 336.000 336.000 

State Agencies ..... If all serious management problems have been corrected and all debts have been repaid, SAs may 

elect to remove an institution and RPIs from the National Disqualified List, and must submit all requests for early removals to the appropriate FNSRO. 

226.25(e)(2)(iii) ....... 56 3.000 168.000 0.250 42.000 0.000 42.000 42.000 

State Agencies ..... SAs must enter into written agreements with FNS, 

consistent with 5 U.S.C. 552a(o) of the CMA, in order to participate in a matching program involving a FNS Federal system of records. 

226.25(e)(3)(ii) ........ 56 1.000 56.000 1.000 56.000 0.000 56.000 56.000 

State Agencies ..... SAs may request FNS to waive the two-step independent verification and notice requirement of the 

CMA. 

226.25(e)(3)(iii)(B) .. 56 1 56 1 56 0 56 56 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13197 

State Agencies ..... If the SA or sponsoring organization determines that 

there is an imminent threat to the health or safety of participants, or that there is a threat to public health or safety, the appropriate State or local licensing and health authorities must immediately be notified and take action that is consistent with the recommendations and requirements of those authorities. The SA or sponsoring organization must initiate action for termination and disqualification. The SA must notify the institution’s executive director and chairman of the board of directors that the institution’s participation has been suspended and that the SA proposes to terminate the institution’s agreement and to disqualify the institution and the RPIs. The notice must identify the RPIs and must be sent to those persons as well. If the SA determines that an institution has knowingly submitted a false or fraudulent claim, the SA must initiate action to suspend the institution’s participation and must initiate action to terminate the institution’s agreement and initiate action to disqualify the institution and the RPIs. The SA must notify the institution’s executive director and chairman of the board of directors that the SA proposes to suspend the institution’s participation. At the same time this notice is sent, the SA must add the institution and the RPIs to the State agency list, along with the basis for the suspension and provide a copy of the notice to the appropriate FNSRO. 

226.25(f)(1)(i)(A) & 

226.25(f)(2)(i)(A).

56 1.000 56.000 0.250 14.000 14.000 0.000 0.000 

State Agencies ..... SAs must annually submit administrative review (appeal) procedures to all institutions. 226.25(g) ................ 56 390.000 21,840.000 0.017 364.728 364.728 0.000 0.000 State Agencies ..... Each SA must submit administrative review (appeal) 

procedures when applicable action is taken. 

226.25(g)(1)(i) ........ 56 5.000 280.000 0.250 70.000 70.000 0.000 0.000 

State Agencies ..... SAs must notify the institution’s executive director 

and chairman of the board of directors, and the responsible principals and responsible individuals, of the action being taken or proposed, the basis for the action, and the procedures under which the institution and the responsible principals or responsible individuals may request an administrative review (appeal) of the action. 

226.25(g)(1)(iii) ....... 56 3.000 168.000 0.250 42.000 42.000 0.000 0.000 

State Agencies ..... SAs must submit written documentation to the hearing official prior to the beginning of the hearing, 

within 30 days after receiving the notice of action. 

226.25(g)(1)(iv)(E) .. 56 3.000 168.000 2.000 336.000 336.000 0.000 0.000 

State Agencies ..... If a hearing is requested, the sponsor, the responsible principals, and responsible individuals must 

be provided with at least 5 days advance notice of the time and place of the hearing. 

226.25(g)(2) ............ 56 3.000 168.000 0.084 14.03 14.030 0.000 0.000 

State Agencies ..... Hearing official must hold hearing to determine that 

the SA followed Program requirements in taking action under appeal. 

226.25(g)(2) ............ 56 3.000 168.000 4.000 672.000 672.000 0.000 0.000 

State Agencies ..... Hearing official must inform the SA, sponsor, responsible principals, and responsible individuals of 

the decision within 60 days of the date the SA received the appeal request. 

226.25(g)(5)(i) and 

(ii).

56 3.000 168.000 0.500 84.000 84.000 0.000 0.000 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13198 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED

ANNUAL

BURDEN FOR CACFP—Continued 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State Agencies ..... SAs must send a necessary demand letter for the 

collection of unearned payments, including any assessment of interest, as described in § 226.14(a), and refer the claim to the appropriate State authority for pursuit of the debt payment. SAs must assess interest on institutions’ debts established on or after July 29, 2002, based on the Current Value of Funds Rate, which is published annually by Treasury in the Federal Reserve and is available from the FNSRO, and notify the institution that interest will be charged on debts not paid in full within 30 days of the initial demand for remittance up to the date of payment. 

226.25(h)(3)(i)) ....... 56 39.000 2,184.000 0.017 36.473 36.473 0.000 0.000 

State Agencies Total ................................................................................................................... 56 11,316.821 633,742.000 0.35 223,140.98 2,101.23 221,039.750 221,039.750 

Local Government 

Agencies.

Sponsoring organizations approved to participate in 

the Program in more than one State must provide: the number of affiliated centers it sponsors, by State; the number of unaffiliated centers it sponsors, by State; the number of day care homes it sponsors, by State; the names, addresses, and phone numbers of the organization’s headquarters and the official(s) who have administrative responsibility; the names, addresses, and phone numbers of the financial records center and the official(s) who has financial responsibility; and the organization’s decision on whether to use program funds for administrative expenses. 

226.6(b)(1)(xix) ....... 3 1.000 3.000 0.250 0.750 0.000 0.750 0.750 

Local Government 

Agencies.

Sponsoring organizations must identify serious management problems and define a set of standards 

to help measure the severity of a problem to determine what rises to the level of a serious management problem and how it affects the institution or facility’s ability to meet Program requirements. 

226.25(a)(2)(i) and 

226.25(a)(3).

3,257 1.000 3,257.000 1.000 3,257.000 0.000 3,257.000 3,257.000 

Local Government 

Agencies.

Sponsoring organizations must notify the day care 

home or unaffiliated center that serious management problems have been identified, must be addressed, and corrected. The notice must identify all aspects of the serious management problem; reference specific regulatory citations, instruction, or policies; name all of the RPIs; describe the action needed to correct the serious management problem; and set a deadline for completing the corrective action. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(i).

83 1.000 83.000 0.250 20.750 20.750 0.000 0.000 

Local Government 

Agencies.

If corrective action has been taken to fully correct 

each serious management problem, sponsoring organizations must notify an institution’s executive director and chairman of the board of directors, and RPIs, that the serious management problem has been vacated. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(ii)(A).

3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13199 

Local Government 

Agencies.

If corrective action has not fully corrected each serious management problem, sponsoring organizations must notify an institution’s executive director 

and chairman of the board of directors, and RPIs, that the sponsoring organizations proposes to terminate the institution’s agreement and disqualify the institution and RPIs. SA must notify the institution of the procedures for seeking a fair hearing in accordance with paragraph g of the proposed termination and proposed disqualifications. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(ii)(B).

3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250 

Local Government 

Agencies.

If appeal is upheld, sponsoring organizations must 

notify the institution and facility that confirms the serious management problem is vacated and advise the institution and facility that procedures and policies must be implemented to fully correct the serious management problem. If the fair hearing is denied, sponsoring organizations must notify the institution’s executive director and chairman of the board of directors, and RPIs, that the agreement is terminated and declare the institution or facility seriously deficient. Sponsoring organizations must issue a serious deficiency notice that informs the institution, facility, and RPIs of their disqualification from Program participation. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(iii)(A) and (B).

3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250 

Local Government 

Agencies.

In response to the notice of serious management 

problems, the institution, unaffiliated center, or day care home must submit, in writing, what corrective actions it has taken to correct each serious management system. The corrective action plan must address the root cause of each serious management problem, describe and document the action taken to correct serious management problems, and describe the action’s outcome. 

226.25(c)(1) ............ 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250 

Local Government 

Agencies.

Sponsoring organizations must conduct reviews, as 

described in § 226.16(d)(4) to confirm that the serious management problem(s) is corrected. A follow-up review must be conducted to confirm that the serious management problem is corrected. Full reviews occurring 3 times a year, as described in § 226.16(d)(4). Full correction is achieved when three consecutive reviews indicate no new serious management problems or no new repeat serious management problem(s). 

226.25(c)(3)(ii) ........ 3,257 1.000 3,257.000 20.000 65,140.000 0.000 65,140.000 65,140.000 

Local Government 

Agencies.

Sponsoring organizations must terminate for cause 

the Program agreement upon declaration of the institution or facility to be seriously deficient. 

226.25(d)(1) ............ 3,257 1.000 3,257.000 0.250 814.250 0.000 814.250 814.250 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13200 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED

ANNUAL

BURDEN FOR CACFP—Continued 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

Local Government 

Agencies.

If the sponsoring organization determines that there 

is an imminent threat to the health or safety of participants, or that there is a threat to public health or safety, the appropriate State or local licensing and health authorities must immediately be notified and take action that is consistent with the recommendations and requirements of those authorities. The sponsoring organization must initiate action for termination and disqualification. The sponsoring organization must submit a combined notice of suspension, proposed termination, and proposed disqualification to the day care home provider or unaffiliated center and the RPIs. The notice must identify the RPIs and must be sent to those persons as well. If the sponsoring organization determines that a day care home or unaffiliated center has knowingly submitted a false or fraudulent claim, the sponsoring organization must initiate action to suspend the day care home or unaffiliated center’s participation and must initiate action to terminate the day care home or unaffiliated center’s agreement and initiate action to disqualify the institution and the RPIs. The SA must submit a combined notice of suspension, proposed termination, and proposed disqualification to the day care home provider or unaffiliated center and the RPIs. At the same time this notice is sent, the SA must add the day care home or unaffiliated center and the RPIs to the State agency list, along with the basis for the suspension and provide a copy of the notice to the appropriate FNSRO. 

226.25(f)(1)(ii)(A) & 

226.25(f)(2)(ii)(A).

814 1.000 814.000 0.250 203.500 203.500 0.000 0.000 

Local Government Agencies Total .............................................................................................. 3,257 7.276 23,699.00 3.067 72,693.250 224.250 72,469.000 72,469.000 State/Local/Tribal Governments Total ......................................................................................... 3,313 198.443 657,441.000 0.450 295,834.23 2,325.48 293,508.750 293,508.750 

Institutions ............. Sponsoring organizations approved to participate in 

the Program in more than one State must provide: the number of affiliated centers it sponsors, by State; the number of unaffiliated centers it sponsors, by State; the number of day care homes it sponsors, by State; the names, addresses, and phone numbers of the organization’s headquarters and the official(s) who have administrative responsibility; the names, addresses, and phone numbers of the financial records center and the official(s) who has financial responsibility; and the organization’s decision on whether to use program funds for administrative expenses. 

226.6(b)(1)(xix) ....... 1,116 1.000 1,116.000 0.250 279.000 0.000 279.000 279.000 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13201 

Institutions ............. 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. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.17(e) ................ 21,692 1.000 21,692.496 0.250 5,423.124 0.000 5,423.124 5,423.124 

Institutions ............. 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. The SA may terminate this agreement for cause as described in § 226.25(a). 

226.17(f) ................. 6,843 1.000 6,843.466 0.250 1,710.867 0.000 1,710.867 1,710.867 

Institutions ............. Unaffiliated sponsored afterschool 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 applicable provisions set forth in this section. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.17a(f)(2)(i) ....... 21,692 1.000 21,692.496 0.250 5,423.124 0.000 5,423.124 5,423.124 

Institutions ............. Independent afterschool child care centers must 

enter into a written permanent agreement with the SA. 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. The SA may terminate this agreement for cause as described in § 226.25(a). 

226.17a(f)(2)(ii) ....... 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867 

Institutions ............. Unaffiliated sponsored outside-school-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. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.19(d) ................ 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124 

Institutions ............. 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) of this section. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.19a(d) .............. 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867 

Institutions ............. Sponsoring organizations must identify serious management problems and define a set of standards 

to help measure the severity of a problem to determine what rises to the level of a serious management problem and how it affects the institution or facility’s ability to meet Program requirements. 

226.25(a)(2)(i) and 

226.25(a)(3).

18,601 1.000 18,601.000 1.000 18,601.000 0.000 18,601.000 18,601.000 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13202 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED

ANNUAL

BURDEN FOR CACFP—Continued 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

Institutions ............. Sponsoring organizations must notify a day care 

home or unaffiliated center that serious management problems have been identified, must be addressed, and corrected. The notice must identify all aspects of the serious management problem; reference specific regulatory citations, instruction, or policies; name all of the RPIs; describe the action needed to correct the serious management problem; and set a deadline for completing the corrective action. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(i).

540 1.000 540.000 0.250 135.000 135.000 0.000 0.000 

Institutions ............. If corrective action has been taken to fully correct 

each serious management problem, sponsoring organizations must notify the day care home or unaffiliated center that the serious management problem has been vacated. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(ii)(A).

18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250 

Institutions ............. If corrective action has not fully corrected each serious management problem, sponsoring organizations must notify the day care home or unaffiliated 

center that the sponsoring organizations proposes to terminate the institution’s agreement and disqualify the institution and RPIs. SA must notify the institution of the procedures for seeking a fair hearing in accordance with paragraph g of the proposed termination and proposed disqualifications. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(ii)(B).

18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250 

Institutions ............. If appeal is upheld, sponsoring organizations must 

notify the day care home or unaffiliated center that confirms the serious management problem is vacated and advise the institution and facility that procedures and policies must be implemented to fully correct the serious management problem. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(iii)(A).

18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250 

Institutions ............. If the fair hearing is denied, sponsoring organizations must notify the day care home or unaffiliated 

center that the agreement is terminated and declare the institution or facility seriously deficient. Sponsoring organizations must issue a serious deficiency notice that informs the institution, facility, and RPIs of their disqualification from Program participation. 

226.25(a)(2)(ii), 

226.25(a)(5), and 226.25(a)(7)(iii)(B).

18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250 

Institutions ............. In response to the notice of serious management 

problems, the institution, unaffiliated center, or day care home must submit, in writing, what corrective actions it has taken to correct each serious management system. The corrective action plan must address the root cause of each serious management problem, describe and document the action taken to correct serious management problems, and describe the action’s outcome. 

226.25(c)(1) ............ 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13203 

Institutions ............. Sponsoring organizations must conduct reviews that 

assess whether the facility has corrected the serious management problems, as described in § 226.16(d)(4). Follow-up reviews must be conducted to confirm that the serious management problem is corrected. A day care home or unaffiliated center must be reviewed at the same frequency as described in § 226.16(d)(4). Full correction is achieved when three consecutive reviews indicate no new serious management problems or no repeat of a serious management problem. 

226.25(c)(3)(ii) ........ 18,601 1.000 18,601.000 20.000 372,020.000 0.000 372,020.000 372,020.000 

Institutions ............. Sponsoring organizations must terminate for cause 

the Program agreement upon declaration of the institution or facility to be seriously deficient. 

226.25(d)(1) ............ 18,601 1.000 18,601.000 0.250 4,650.250 0.000 4,650.250 4,650.250 

Institutions ............. If the sponsoring organization determines that there 

is an imminent threat to the health or safety of participants, or that there is a threat to public health or safety, the appropriate State or local licensing and health authorities must immediately be notified and take action that is consistent with the recommendations and requirements of those authorities. The sponsoring organization must initiate action for termination and disqualification. The sponsoring organization must notify the day care home provider or unaffiliated center’s principals that the day care home or unaffiliated center’s participation has been suspended and that the SA proposes to terminate the day care home or unaffiliated center’s agreement and to disqualify the day care home or unaffiliated center and the RPIs. The notice must identify the RPIs and must be sent to those persons as well. If the sponsoring organization determines that an day care home or unaffiliated center has knowingly submitted a false or fraudulent claim, the sponsoring organization must initiate action to suspend the day care home or unaffiliated center’s participation and must initiate action to terminate the day care home or unaffiliated center’s agreement and initiate action to disqualify the institution and the RPIs. The SA must notify the day care home provider or unaffiliated center’s principals that the sponsoring organization proposes to suspend the day care home or unaffiliated center’s participation. At the same time this notice is sent, the SA must add the day care home or unaffiliated center and the RPIs to the State agency list, along with the basis for the suspension and provide a copy of the notice to the appropriate FNSRO. 

226.25(f)(1)(ii)(A) & 

226.25(f)(2)(ii)(A).

4,650 1.000 4,650.000 0.250 1,162.500 1,162.500 0.000 0.000 

Institutions Total .......................................................................................................................... 41,136 5.107 240,721.886 1.83 441,500.97 1,297.500 440,203.47 440,203.47 

Facilities ................ 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. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.17(e) ................ 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13204 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

ESTIMATED

ANNUAL

BURDEN FOR CACFP—Continued 

[Reporting] 

Respondent type Burden activities Section 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual burden 

hours 

Annual burden 

hours 

current 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

Facilities ................ 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. The SA may terminate this agreement for cause as described in § 226.25(a). 

226.17(f) ................. 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867 

Facilities ................ Unaffiliated sponsored afterschool 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 applicable provisions set forth in this section. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.17a(f)(2)(i) ....... 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124 

Facilities ................ Independent afterschool child care centers must 

enter into a written permanent agreement with the SA. 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. The SA may terminate this agreement for cause as described in § 226.25(a). 

226.17a(f)(2)(ii) ....... 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867 

Facilities ................ Unaffiliated sponsored outside-school-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. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.19(d) ................ 21,692 1.000 21,692 0.250 5,423.124 0.000 5,423.124 5,423.124 

Facilities ................ 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) of this section. The sponsoring organization may terminate this agreement for cause as described in § 226.25(a). 

226.19a(d) .............. 6,843 1.000 6,843 0.250 1,710.867 0.000 1,710.867 1,710.867 

Facilities Total .............................................................................................................................. 28,535 3.000 85,607.886 0.250 21,401.97 0.000 21,401.97 21,401.972 Business Total ............................................................................................................................. 75,671 4.312 326,329.772 1.42 462,902.94 1,297.500 461,605.44 461,605.44 Reporting Total ............................................................................................................................ 78,984 12.455 983,770.772 0.77 758,737.17 3,622.98 755,114.19 755,114.19 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13205 

State Agencies ..... SAs must collect and maintain on file CACFP agreements (Federal/State and State/Institutions), 

records received from applicant and participating institutions, National Disqualified List/State Agency Lists, and documentation of administrative review (appeals) and Program assistance activities, results, and corrective actions. 

226.25(b)/FNS–843 

& FNS–844.

56 5.000 280.000 5.000 1,400.000 1,400.000 0.000 0.000 

State Agencies ..... SAs must collect and maintain on file corrective action plans submitted by institutions, unaffiliated 

centers, or day care homes, in writing, what corrective actions have been taken to correct each serious management problem. 

226.25(c) ................ 56 3.000 168.000 1.500 252.000 0.000 252.000 252.000 

State Agencies Total ................................................................................................................... 56 8.000 448.000 3.688 1,652.000 1,400.000 252.000 252.000 State/Local/Tribal Governments Total ......................................................................................... 56 8.000 448.000 3.688 1,652.000 1,400.000 252.000 252.000 Recordkeeping Total ................................................................................................................... 56 8.000 448.000 3.688 1,652.000 1,400.000 252.000 252.000 

State Agencies ..... The CSA must conduct a full review at the MSSO 

headquarters and financial records center. The CSA must coordinate the timing of the reviews and make copies of monitoring reports and findings available to all other State agencies that have agreements with the MSSO. 

226.6(q)(2)(iii) ......... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 

State Agencies Total ................................................................................................................... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 State/Local/Tribal Governments Total ......................................................................................... 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 Public Disclosure Total ................................................................................................................ 56 23.000 1,288.000 0.250 322.000 0.000 322.000 322.000 Total Burden ................................................................................................................................ 79,040 12.468 985,507.772 0.772 760,711.172 5,022.981 755,688.190 755,688.190 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13206 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

SUMMARY OF BURDEN

[OMB #0584–0055] 

Total No. Respondents ............. 3,852,077 

Average No. Responses per 

Respondent ........................... 4.456 

Total Annual Responses .......... 17,165,505 

Average Hours per Response .. 0.289 

Total Burden Hours .................. 4,968,899 

Current OMB Approved Burden 

Hours ..................................... 4,213,211 

Adjustments .............................. 0 

Program Changes .................... 755,688 

Total Difference in Burden ....... 755,688 

Title: Child and Adult Care Food 

Program (CACFP) National Disqualified 

List. 

Form Number: FNS–843 & FNS–844. 

OMB Control Number: 0584–0584. 

Expiration Date: 09/30/2026. 

Type of Request: Revision. 

Abstract: This is a revision of 

requirements in the information 

collection under OMB Control Number 

0584–0584 that are being impacted by 

this rulemaking. USDA proposes to 

extend the serious deficiency process to 

the SFSP. As such, this proposed rule 

impacts reporting requirements for State 

agencies. No new recordkeeping 

requirements will be added to this 

collection, as the recordkeeping burden 

associated with the FNS–843 and FNS– 

844 forms are being captured under 

requirements in the information 

collections under OMB Control 

Numbers 0584–0280 and 0584–0055. 

This rulemaking will protect program 

integrity by extending the serious 

deficiency process to the SFSP. By 

extending the rulemaking, State 

agencies will create, update, and 

maintain data that will be reported to 

the National Disqualified List, ensuring 

that sponsors and responsible principals 

and individuals declared seriously 

deficient and disqualified from 

participation are prevented from reentering the program under sponsors or 

participating in another program. 

The burden for complying with the 

proposed reporting requirements at 

225.18(e)(2)(i)), for the 53 SFSP State 

agencies, is estimated at 239 hours 

annually (for 106 FNS–843 responses 

per State agency, 371 FNS–844 

responses per State agency, and 30 

minutes (0.5 hours) each to complete 

the necessary forms). Overall, the 

burden associated with meeting the 

proposed reporting requirements are 

expected to increase burden hours, 

responses, and respondents, from 784 

hours to an estimated 1,023 hours, from 

1,568 responses to an estimated 2,045 

responses annually, and from 56 

respondents to an estimated 109 

respondents, due to the proposed rule. 

The increase of 239 hours, 477 

responses, and 53 respondents is due to 

a program change by incorporating the 

SFSP into the National Disqualified List. 

The average burden per response and 

the annual burden hours for reporting 

are explained below and summarized in 

the charts which follow. 

Reporting 

Respondents (Affected Public): State, 

Local, and Tribal Government. The 

respondent group identified include 

State agencies which handle the SFSP. 

Estimated Number of Respondents: 

53. 

Estimated Number of Responses per 

Respondent: 9. 

Estimated Total Annual Responses: 

477. 

Estimated Time per Response: 0.50. 

Estimate Total Annual Burden on 

Respondents: 239. 

NATIONAL DISQUALIFIED LIST (NDL) ICR 

[OMB Control Number 0584–0584] 

Respondent 

type Burden activities Section Forms 

Estimated 

number of 

respondents 

Frequency 

of 

response 

Average 

annual 

responses 

Average 

burden 

per 

response 

Annual 

burden 

hours 

Current 

OMB 

approved 

burden 

hours 

Program 

changes 

Total 

difference 

in burden 

State Agency The State agency creates updates, and 

maintains a list 

of sponsoring 

organizations 

who have 

been terminated or otherwise disqualified from 

SFSP participation.

225.18(e)(2)(i) FNS–843 * 53 2 106 0.50 53 0 53 53 

FNS–844 * 53 7 371 0.50 185.5 0 185.5 185.5 

State agency 

Level Reporting Totals.

........................... ......................... .................. 53 9 477 0.50 238.5 0 238.5 238.5 

SUMMARY OF BURDEN

[OMB Control Number 0584–0584] 

Total No. Respondents ............. 109 

Average No. Responses per 

Respondent ........................... 18.76 

Total Annual Responses .......... 2,045 

Average Hours per Response .. 0.50 

Total Burden Hours .................. 1,023 

Current OMB Approved Burden 

Hours ..................................... 784 

Adjustments .............................. 0 

Program Changes .................... 239 

Total Difference in Burden ....... 239 

J. E-Government Act Compliance 

FNS is committed to complying with 

the E-Government Act of 2002, to 

promote the use of the internet and 

other information technologies to 

provide increased opportunities for 

citizen access to Government 

information and services, and for other 

purposes. 

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, 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13207 

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. 

For the reasons stated in the 

preamble, Food and Nutrition Services 

proposes to amend 7 CFR parts 210, 

215, 220, 225, and 226 as set forth 

below: 

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. In § 210.2, add in alphabetical order 

the definition for ‘‘Good standing’’ to 

read as follows: 

§ 210.2 Definitions. 

* * * * * 

Good standing means a school food 

authority or school that meets its 

program responsibilities, is current with 

its financial obligations, and, if 

applicable, has fully implemented all 

corrective actions within the required 

period of time. 

* * * * * 

■ 3. In § 210.9, add paragraph (d) to read 

as follows: 

§ 210.9 Agreement with State agency. 

* * * * * 

(d) Terminations or disqualifications. 

(1) The State agency is prohibited from 

approving any school food authority or 

school to administer or participate in 

the Program if the school food authority, 

school, responsible principals, or 

responsible individuals: 

(i) Have been terminated for cause 

from any program authorized under this 

part or parts 215, 220, 225, and 226 of 

this chapter; and 

(ii) Are currently included on a 

National Disqualified List described in 

§ 225.18(e)(2) and § 226.25(e)(2). 

(2) State agencies must ensure that 

school food authorities, schools, 

responsible principals, or responsible 

individuals described in paragraph 

(d)(1) of this section do not administer 

or participate in the Program until the 

State agency, in consultation with FNS, 

determines that each deficiency has 

been corrected, or until 7 years have 

elapsed since disqualification. However, 

the school food authority, school, 

responsible principals, or responsible 

individuals will remain ineligible until 

all debts owed to the Program have been 

repaid. 

(3) If school food authorities or 

schools currently administering or 

participating in the Program meet the 

criteria described in paragraph (d)(1) of 

this section, the State agency must 

terminate the Program agreement in 

accordance with the procedures set 

forth in § 210.25. 

PART 215—SPECIAL MILK PROGRAM 

FOR CHILDREN 

■ 4. The authority citation for part 215 

continues to read as follows: 

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

■ 5. In § 215.2, add in alphabetical order 

the definition for ‘‘Good standing’’ to 

read as follows: 

§ 215.2 Definitions. 

* * * * * 

Good standing means a school food 

authority or school that meets its 

program responsibilities, is current with 

its financial obligations, and, if 

applicable, has fully implemented all 

corrective actions within the required 

period of time. 

* * * * * 

■ 6. In § 215.7, add paragraph (g) to read 

as follows: 

§ 215.7 Requirements for participation. 

* * * * * 

(g) Terminations or disqualifications. 

(1) The State agency is prohibited from 

approving any school food authority or 

school to administer or participate in 

the Program if the school food authority, 

school, responsible principals, or 

responsible individuals: 

(i) Have been terminated for cause 

from any program authorized under this 

part or parts 210, 220, 225, and 226 of 

this chapter; and 

(ii) Are currently included on a 

National Disqualified List described in 

§ 225.18(e)(2) and § 226.25(e)(2). 

(2) State agencies must ensure that 

school food authorities, schools, 

responsible principals, or responsible 

individuals described in paragraph 

(g)(1) of this section do not administer 

or participate in the Program until the 

State agency, in consultation with FNS, 

determines that each deficiency has 

been corrected, or until 7 years have 

elapsed since disqualification. However, 

the school food authority, school, 

responsible principals, or responsible 

individuals will remain ineligible until 

all debts owed to the Program have been 

repaid. 

(3) If school food authorities or 

schools currently administering or 

participating in the Program meet the 

criteria described in paragraph (g)(1) of 

this section, the State agency must 

terminate the Program agreement in 

accordance with the procedures set 

forth in § 215.16. 

PART 220—SCHOOL BREAKFAST 

PROGRAM 

■ 7. The authority citation for part 220 

continues to read as follows: 

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

otherwise noted. 

■ 8. In § 220.2, add in alphabetical order 

the definition for ‘‘Good standing’’ to 

read as follows: 

§ 220.2 Definitions. 

* * * * * 

Good standing means a school food 

authority or school that meets its 

program responsibilities, is current with 

its financial obligations, and, if 

applicable, has fully implemented all 

corrective actions within the required 

period of time. 

* * * * * 

■ 9. In § 220.7, add paragraph (i) to read 

as follows: 

§ 220.7 Requirements for participation. 

* * * * * 

(i) Terminations or disqualifications. 

(1) The State agency is prohibited from 

approving any school food authority or 

school to administer or participate in 

the Program if the school food authority, 

school, responsible principals, or 

responsible individuals: 

(i) Have been terminated for cause 

from any program authorized under this 

part or parts 210, 215, 225, and 226 of 

this chapter; and 

(ii) Are currently included on a 

National Disqualified List described in 

§ 225.18(e)(2) and § 226.25(e)(2). 

(2) State agencies must ensure that 

school food authorities, schools, 

responsible principals, or responsible 

individuals described in paragraph (i)(1) 

of this section do not administer or 

participate in the Program until the 

State agency, in consultation with FNS, 

determines that each deficiency has 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13208 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

been corrected, or until 7 years have 

elapsed since disqualification. However, 

the school food authority, school, 

responsible principals, or responsible 

individuals will remain ineligible until 

all debts owed to the Program have been 

repaid. 

(3) If school food authorities or 

schools currently administering or 

participating in the Program meet the 

criteria described in paragraph (i)(1) of 

this section, the State agency must 

terminate the Program agreement in 

accordance with the procedures set 

forth in § 220.19. 

PART 225—SUMMER FOOD SERVICE 

PROGRAM 

■ 10. The authority citation for 7 CFR 

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). 

■ 11. In § 225.2, add in alphabetical 

order the definitions for ‘‘Cognizant 

Regional office’’, ‘‘Cognizant State 

agency’’, ‘‘Contingency plan’’, 

‘‘Corrective action’’, ‘‘Disqualified’’, 

‘‘Fair hearing’’, ‘‘Finding’’, ‘‘Fiscal 

action’’, ‘‘Full correction’’, ‘‘Hearing 

official’’, ‘‘Lack of business integrity’’, 

‘‘Legal basis’’, ‘‘Multi-State sponsoring 

organization (MSSO)’’, ‘‘National 

Disqualified List (NDL)’’, ‘‘Notice’’, 

‘‘Principal’’, ‘‘Program operator’’, 

‘‘Responsible individual’’, ‘‘Responsible 

principal’’, ‘‘Review cycle’’, ‘‘Seriously 

deficient’’, ‘‘Serious management 

problem’’, ‘‘State agency list’’, and 

‘‘Termination for cause’’ to read as 

follows: 

§ 225.2 Definitions 

* * * * * 

Cognizant Regional office means the 

FNSRO which acts on behalf of the 

Department in the administration of the 

Program and is responsible for 

determining which State agency has 

cognizance when a multi-State 

sponsoring organization operates the 

Program. 

Cognizant State agency (CSA) means 

the agency which is responsible for the 

administration of the Program in the 

State where a multi-State sponsoring 

organization’s headquarters is located. 

* * * * * 

Contingency plan means the State 

agency’s written process for the transfer 

of sponsored site service area that will 

help ensure that Program meals for 

children will continue to be available 

without interruption if a sponsor’s 

agreement is terminated. 

* * * * * 

Corrective action means 

implementation of a solution, written in 

a corrective action plan, to address the 

root cause and prevent the recurrence of 

a serious management problem. 

* * * * * 

Disqualified means the status of a 

sponsor, responsible principal, or 

responsible individual who is ineligible 

for participation in the Program. 

* * * * * 

Fair hearing means due process 

provided upon request to: 

(1) A sponsor that has been given 

notice by the State agency of an action 

that will affect participation or 

reimbursement under the Program; 

(2) A principal or individual 

responsible for a sponsor’s serious 

management problems and issued a 

notice of proposed termination and 

proposed disqualification from Program 

participation; or 

(3) a sponsor that has been given 

notice of proposed termination. 

* * * * * 

Finding means a violation of a 

regulatory requirement identified during 

a review. 

Fiscal action means the recovery of an 

overpayment or claim for 

reimbursement that is not properly 

payable through direct assessment of 

future claims, offset of future claims, 

disallowance of overclaims, submission 

of a revised claim for reimbursement, 

disallowance of funds for failure to take 

corrective action to meet Program 

requirements. 

* * * * * 

Full correction means the status 

achieved after a corrective action plan is 

accepted and approved, all corrective 

actions are fully implemented, and no 

new or repeat serious management 

problems are identified in subsequent 

reviews, as described § 225.18(c)(3). 

* * * * * 

Hearing official means an individual 

who is responsible for conducting an 

impartial and fair hearing—as requested 

by a sponsor, responsible principal, or 

responsible individual responding to a 

proposal for termination—and rendering 

a decision. 

* * * * * 

Lack of business integrity means the 

conviction or concealment of a 

conviction for fraud, antitrust 

violations, embezzlement, theft, forgery, 

bribery, falsification or destruction of 

records, making false statements, 

receiving stolen property, making false 

claims, obstruction of justice. 

Legal basis means the lawful authority 

established in statute or regulation. 

* * * * * 

Multi-State sponsoring organization 

(MSSO) means a sponsor that sponsors 

sites in more than one State. 

National Disqualified List (NDL) 

means a system of records, maintained 

by the Department, of sponsors, 

responsible principals, and responsible 

individuals disqualified from 

participation in the Program. 

* * * * * 

Notice means a letter sent by certified 

mail, return receipt (or the equivalent 

private delivery service), by facsimile, 

or by email, that describes an action 

proposed or taken by a State agency or 

FNS with regard to a sponsor’s Program 

reimbursement or participation. 

* * * * * 

Principal means any individual who 

holds a management position within, or 

is an officer of, a sponsor or a sponsored 

site, including all members of the 

sponsor’s board of directors or the 

sponsored site’s board of directors. 

* * * * * 

Program operator means any entity 

that participates in one or more child 

nutrition programs. 

* * * * * 

Responsible individual means any 

individual employed by, or under 

contract with a sponsor or an 

individual, including uncompensated 

individuals, who the State agency or 

FNS determines to be responsible for a 

sponsor’s serious management 

problems. 

Responsible principal means any 

principal, as described in this section, 

who the State agency or FNS determines 

to be responsible for a sponsor’s serious 

management problems. 

* * * * * 

Review cycle means the frequency and 

number of required reviews of sponsors 

and sites. 

* * * * * 

Seriously deficient means the status of 

a sponsor after it is determined that full 

correction has not been achieved and 

termination for cause is the only 

appropriate course of action. 

Serious management problem means 

the finding(s) that relate to a sponsor’s 

inability to meet the Program’s 

performance standards or that affect the 

integrity of a claim for reimbursement or 

the quality of meals served at a site. 

* * * * * 

State agency list means an actual 

paper or electronic list, or the 

retrievable paper records, maintained by 

the State agency, that includes 

information on sponsors through the 

serious deficiency process in that State. 

The list must be made available to FNS 

upon request, and must include 

information specified in § 225.18(b). 

* * * * * 

Termination for cause means the 

termination of a Program agreement due 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13209 

to considerations related to a sponsor’s 

performance of Program responsibilities 

under the agreement between the State 

agency and sponsor. 

* * * * * 

■ 12. In § 225.6: 

■ a. Revise paragraph (b)(9); 

■ b. Add paragraph (b)(13); 

■ c. In paragraph (c)(2), remove the 

words ‘‘significant operational’’ and add 

in their place the words ‘‘serious 

management’’; 

■ d. Add paragraph (c)(5); 

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

‘‘significant operational’’ and add in 

their place the words ‘‘serious 

management’’, wherever they appear; 

and 

■ f. Add paragraph (n). 

The revisions and additions read as 

follows: 

§ 225.6 State agency responsibilities. 

* * * * * 

(b) * * * 

(9) The State agency must not approve 

the application of any applicant sponsor 

identifiable through its organization or 

principals as a sponsor which has been 

determined to be seriously deficient as 

described in § 225.18(d). However, the 

State agency may approve the 

application of a sponsor, not on the 

NDL, which has been previously 

disapproved if the applicant 

demonstrates to the satisfaction of the 

State agency that it has taken 

appropriate corrective actions to prevent 

recurrence of serious management 

problems. 

* * * * * 

(13) Terminations or 

disqualifications. (i) The State agency is 

prohibited from approving any sponsor 

or site to administer or participate in the 

Program if the sponsor, site, responsible 

principals, or responsible individuals: 

(A) Have been terminated for cause 

from any Program authorized under this 

part or parts 210, 215, 220, or 226 of this 

chapter; and 

(B) Are currently included on a 

National Disqualified List described in 

§ 225.18(e)(2). 

(ii) State agencies must ensure that 

sponsors, sites, responsible principals, 

or responsible individuals described in 

paragraph (b)(13)(i) of this section do 

not administer or participate in the 

Program until the State agency, in 

consultation with FNS, determines that 

each serious management problem has 

been corrected, or until 7 years have 

elapsed since disqualification. However, 

a sponsor, site, responsible principals, 

or responsible individuals will remain 

ineligible until all debts owed to the 

Program have been repaid. 

(iii) If sponsors or sites currently 

administering or participating in the 

Program meet the criteria described in 

paragraph (b)(13)(i) of this section, the 

State agency must terminate the 

Program agreement in accordance with 

the procedures set forth in § 225.18(d). 

(c) * * * 

(5) Information about MSSO 

operations. The State agency must also 

determine if the sponsor operates in 

more than one State. Each sponsor that 

is approved to operate the Program in 

more than one State must provide: 

(i) The number of affiliated sites it 

operates, by State; 

(ii) The number of unaffiliated sites it 

operates; 

(iii) The names, addresses, and phone 

numbers of the organization’s 

headquarters and the officials who have 

administrative responsibility; and 

(iv) The names, addresses, and phone 

numbers of the financial records center 

and the officials who have financial 

responsibility. 

* * * * * 

(n) Oversight of MSSOs. An MSSO 

may include a sponsor that administers 

the Program in more than one State, a 

franchise operating multiple facilities in 

more than one State, or a for-profit 

organization whose parent corporation 

operates multiple affiliated centers in 

more than one State. Each State agency 

must determine if a sponsoring 

organization is an MSSO, as described 

in paragraph (c)(5) in this section. The 

State agency must assume the role of the 

CSA, if the MSSO’s center of operations 

is located within the State. Each State 

agency that approves an MSSO must 

follow the requirements described in 

paragraph (n)(1) of this section. The 

CSA must follow the requirements 

described in paragraph (n)(2) of this 

section. 

(1) State agency responsibilities. If a 

State agency determines that an MSSO 

operates the Program within the State, it 

must: 

(i) Enter into a permanent written 

agreement with the MSSO, as described 

in paragraph (n)(1) of this section. 

(ii) Approve the MSSO’s 

administrative budget (in consultation 

with the CSA, as appropriate). 

(A) The State agency must approve 

budget line items that are directly 

attributable to operations within the 

State. 

(B) The State agency must approve its 

portion of costs that are shared among 

other State agencies and costs that 

attribute directly to program operations 

within the State. 

(C) The State agency must notify the 

CSA if it has determined that the ratio 

of administrative to operating costs is 

high or that the net cash resources of an 

MSSO’s nonprofit food service exceed 

the limits that are described in 

§ 225.7(m) 

(iii) Conduct monitoring of MSSO 

Program operations within the State, as 

described in paragraph (k)(4) of this 

section. The State agency should 

coordinate monitoring with the CSA to 

streamline reviews and minimize 

duplication of the review content. The 

State agency may base the review cycle 

on the number of facilities operating 

within the State. 

(A) The State agency may use 

information from the CSA’s technical 

assistance activities to assess 

compliance in areas where the scope of 

review overlaps during the same review 

cycle. The State agency may choose to 

conduct a review of implementation of 

additional State agency requirements, 

financial records to support Statespecific administrative costs, and other 

areas of compliance that the CSA would 

not have reviewed. 

(B) The State agency may also choose 

to conduct a full review at the MSSO’s 

headquarters and financial records 

center. If the State agency chooses to 

conduct a full review, the State agency 

should request the necessary records 

from the CSA. 

(C) The State agency must provide 

summaries of the MSSO reviews that are 

conducted to the CSA. The summaries 

must include the prescribed corrective 

actions and follow-up efforts. 

(iv) Conduct audit resolution 

activities. The State agency must review 

audit reports, address audit findings, 

and implement corrective actions, as 

required under 2 CFR part 200, subpart 

D, and USDA implementing regulations 

2 CFR parts 400 and 415. 

(v) Notify all other State agencies that 

have agreements with the MSSO of 

termination and disqualification 

actions, as described in paragraph 

(c)(2)(i) of this section. 

(2) CSA responsibilities. If it 

determines that an MSSO’s center of 

operations is located within the State, 

the State agency must assume the role 

of the CSA, which must: 

(i) Comply with the requirements for 

a State agency that has approved an 

MSSO to provide Program operations 

within the State, as described in this 

paragraph (n)(1). 

(ii) Determine if there will be shared 

administrative costs among the States in 

which the MSSO operates and how the 

costs will be allocated. The CSA has the 

authority to approve cost levels for cost 

items that must be allocated. The CSA 

must approve the allocation method that 

the MSSO uses for shared costs. The 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13210 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

method must allocate the cost based on 

the benefits received, not the source of 

funds available to pay for the cost. If the 

MSSO administers the Program in 

centers, the CSA must also ensure that 

administrative costs do not exceed 15 

percent on an organization-wide basis. 

(iii) Coordinate monitoring. The CSA 

must conduct a full review at the MSSO 

headquarters and financial records 

center. The CSA must coordinate the 

timing of its reviews. The CSA must 

make copies of monitoring reports and 

findings available to all other State 

agencies that have agreements with the 

MSSO. 

(iv) Ensure that organization-wide 

audit requirements are met. Each MSSO 

must comply with audit requirements, 

as described under 2 CFR part 200, 

subpart D, and USDA implementing 

regulations 2 CFR parts 400 and 415. 

Since their operations are often large 

and complex, MSSOs should have 

annual audits. If an MSSO has for-profit 

status, the cognizant agency must 

establish audit thresholds and 

requirements. 

(v) Oversee audit funding and costs. 

The share of organization-wide audit 

costs may be based on a percentage of 

each State’s expenditure of CACFP 

funds and the MSSO’s expenditure of 

Federal and non-Federal funds during 

the audited fiscal year. The CSA should 

review audit costs as part of the overall 

budget review and make audit reports 

available to the other State agencies that 

have agreements with the MSSO. 

(vi) Ensure compliance with 

procurement requirements. Procurement 

actions involving MSSOs must follow 

the requirements under 2 CFR part 200, 

subpart D, and USDA implementing 

regulations 2 CFR parts 400 and 415. If 

the procurement action benefits all 

States in which the MSSO operates, the 

procurement standards of the State that 

are the most restrictive apply. If the 

procurement action only benefits a 

single State’s Program, the procurement 

standards of that State agency apply. 

* * * * * 

§ 225.7 [Amended] 

■ 13. In § 225.7: 

■ a. In paragraph (e)(4)(ii), remove the 

words ‘‘significant operational’’ and add 

in their place the words ‘‘serious 

management’’; and 

■ b. In paragraph (k), remove the 

citation ‘‘§ 225.11’’ and add in its place 

the citations ‘‘§§ 225.11 and 225.18’’. 

■ 14. In § 225.11, revise paragraph (c) 

introductory text to read as follows: 

§ 225.11 Corrective action procedures. 

* * * * * 

(c) Denial of applications and 

termination of sponsors. Except as 

specified in § 225.6(b)(9), the State 

agency shall not enter into an agreement 

with any applicant sponsor identifiable 

through its corporate organization, 

officers, employees, or otherwise, as an 

institution which participated in any 

Federal child nutrition program and was 

seriously deficient in its operation of 

any such program. The State agency 

shall terminate the Program agreement 

with any sponsor which is determined 

to be seriously deficient. However, the 

State agency shall afford a sponsor 

reasonable opportunity to correct 

serious management problems before 

terminating the sponsor and declaring 

them seriously deficient. State agencies 

may approve the application of a 

sponsor in accordance with 

§ 225.6(b)(9). Uncorrected serious 

management problems which are 

grounds for disapproval of applications 

and for termination include, but are not 

limited to, any of the following: 

* * * * * 

■ 15. Revise § 225.13 to read as follows: 

§ 225.13 Fair hearing procedures. 

(a) Each State agency must establish a 

procedure to be followed by an 

applicant appealing: 

(1) A denial of an application for 

participation (except if the applicant has 

failed to complete a corrective action 

plan from the previous year); 

(2) A denial of a sponsor’s request for 

an advance payment; 

(3) A denial of a sponsor’s claim for 

reimbursement (except for late 

submission under § 225.9(d)(6)); 

(4) A State agency’s refusal to forward 

to FNS an exception request by the 

sponsor for payment of a late claim or 

a request for an upward adjustment to 

a claim; 

(5) A claim against a sponsor for 

remittance of a payment; 

(6) The termination of the sponsor or 

a site; 

(7) The termination of a sponsor’s 

agreement; 

(8) A denial of a sponsor’s application 

for a site; 

(9) A denial of a food service 

management company’s application for 

registration, if applicable; 

(10) The revocation of a food service 

management company’s registration, if 

applicable; or 

(11) Any other action of the State 

agency affecting a sponsor’s 

participation or its claim for 

reimbursement. 

(b) If after a fair hearing, an entity or 

individual is denied participation based 

on the National Disqualified List, their 

right to appeal the application denial is 

solely granted to contest the accuracy of 

the information on the National 

Disqualified List or the match to the 

National Disqualified List. 

(c) Appeals must not be allowed on 

decisions made by FNS with respect to 

late claims or upward adjustments 

under § 225.9(d)(6). 

(d) When a sponsor or a food service 

management company requests a fair 

hearing, the State agency must follow 

the procedures described in § 225.18(f). 

§§ 225.18 through 225.20 [Redesignated as 

§§ 225.19 through 225.21] 

■ 16. Redesignate §§ 225.18 through 

225.20 as §§ 225.19 through 225.21, 

respectively. 

■ 17. Add new section § 225.18 to read 

as follows: 

§ 225.18 Administrative actions to address 

serious management problems. 

(a) Serious management problems. (1) 

General. State agencies must follow the 

procedures outlined in this section to 

address any serious management 

problems. The State agency must 

provide the sponsor an opportunity for 

corrective action and due process. 

(2) Six steps. The serious deficiency 

process includes a standard set of 

procedures that State agencies follow to 

address serious management problems 

in the operation of the Program. These 

procedures apply to serious 

management problems in new or 

experienced sponsors. The State agency 

must: 

(i) Identify serious management 

problems. 

(ii) Issue a notice of serious 

management problems. 

(iii) Receive and assess corrective 

action. 

(iv) Issue a notice of successful 

corrective action or a notice of proposed 

termination with appeal rights. 

(v) Provide a fair hearing, if requested. 

(vi) Issue a notice of successful appeal 

if the fair hearing vacates the proposed 

termination, or issue a notice of 

termination, serious deficiency, and 

disqualification, if the fair hearing 

upholds the proposed termination or the 

timeframe for requesting a fair hearing 

has passed. 

(3) Identifying serious management 

problems. State agencies must consider 

the type and magnitude of the finding(s) 

to determine whether it rises to the level 

of a serious management problem. State 

agencies should define a set of 

standards to identify serious 

management problems. At a minimum, 

to identify serious management 

problems, State agencies and must 

consider: 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13211 

(i) The severity of the problem. Is the 

finding minor or substantial? Is the 

finding systemic or isolated? 

(ii) The degree of responsibility. Is the 

finding best described as an inadvertent 

error or is there evidence of negligence 

or conscious indifference to regulatory 

requirements, or even deception? Is the 

finding at the site level or the sponsor 

level? If it is at the sponsor level, has the 

State agency taken appropriate steps to 

resolve it through monitoring, training, 

and technical assistance? If it is at the 

site level, has the sponsor taken the 

appropriate steps to resolve it through 

monitoring, training, and technical 

assistance? 

(iii) The history of participation in the 

Program. Is this the first instance or is 

there a history of frequently recurring 

Program findings or serious 

management problems at the same 

sponsor? 

(iv) The nature of requirements that 

relate to the finding. Is the action a clear 

finding of Program requirements or a 

simple mistake? Are new policies 

incorporated correctly? 

(v) The degree to which the problem 

impacts Program integrity. Does the 

finding undermine the intent of the 

Program? Is the finding administrative 

or does it impact viability, capability or 

accountability? Is the finding at the 

sponsor level or the site level? If it is at 

the sponsor level, has the State agency 

taken appropriate steps to resolve it 

through monitoring, training, and 

technical assistance? If it is at the site 

level, has the sponsor taken the 

appropriate steps to resolve it through 

monitoring, training, and technical 

assistance? 

(4) Good standing. If a State agency 

identifies a serious management 

problem, the institution, day care home 

or unaffiliated center is considered to be 

not in good standing. At a minimum, 

the following criteria need to be met to 

return to good standing. 

(i) Outstanding debts are paid; 

(ii) All corrective actions are fully 

implemented; and 

(iii) Meets its Program 

responsibilities. 

(5) Notifications. The State agency 

must provide a written notice of action 

through each step of the serious 

deficiency process. 

(i) Each type of notice must include 

a basis and an explanation of any action 

that is proposed and any action that is 

taken. 

(ii) The notice must be delivered via 

certified mail, return receipt, or an 

equivalent private delivery service, 

facsimile, or email. 

(iii) The notice is considered to be 

received on the date it is delivered, sent 

by facsimile, or sent by email. 

(iv) If the notice is undeliverable, it is 

considered to be received 5 days after it 

is sent to the addressee’s last known 

mailing address, facsimile number, or 

email address. 

(6) Serious management problems 

notification procedures for sponsors. If 

the State agency determines that the 

sponsor has serious management 

problems, the sponsor must use the 

following procedures. The State agency 

must notify the sponsor of all findings, 

including those that do not rise to a 

serious management problem, and they 

must be corrected. 

(i) First notification—notice of serious 

management problems. The State 

agency must notify the sponsor’s 

executive director, chair of the board of 

directors that the sponsor has serious 

management problems and provide an 

opportunity to take corrective action. 

The notice must also be sent to all other 

responsible principal, other responsible 

individual. At the same time the notice 

is issued, the State agency must add the 

sponsor to the State agency list, as 

described in paragraph (b) of this 

section and provide a copy of the notice 

to the FNSRO. This notice documents 

that a serious management problem 

must be addressed and corrected. 

Prompt action must be taken to 

minimize the time that elapses between 

the identification of a serious 

management problem and the issuance 

of the notice. For each serious 

management problem, the notice must: 

(A) Specify the serious management 

problem; 

(B) Cite the specific regulatory 

requirements, instructions, or policies 

as the basis for the serious management 

problems; 

(C) Identify the responsible principals 

and responsible individuals; 

(D) Specify the actions that must be 

taken to correct the serious management 

problem. The notice may specify 

different corrective actions and time 

periods for completing the corrective 

action for the institution and the 

responsible principal and the 

responsible individual; 

(E) Set time allotted for implementing 

the corrective action. The corrective 

action must include milestones and a 

definite completion date that will be 

monitored. Although paragraph (c)(2) of 

this section sets maximum timeframes, 

shorter timeframes for corrective action 

may be established. 

(F) Specify that failure to fully 

implement corrective actions for each 

serious management problem within the 

allotted time will result in the State 

agency’s proposed termination of the 

sponsor’s agreement and the proposed 

disqualification of the sponsor and the 

responsible principals and responsible 

individuals; 

(G) Clearly state that, if the sponsor 

voluntarily terminates its agreement 

with the State agency after having been 

notified of serious management 

problems it will still result in the 

sponsor’s agreement being terminated 

for cause and the placement of the 

sponsor and its responsible principals 

and responsible individuals on the 

National Disqualified List; 

(H) Submission of the date of birth for 

any individual named as a responsible 

principal or responsible individual in 

the notice of serious management 

problems is a condition of corrective 

action for the sponsor and/or 

responsible principal or responsible 

individual. 

(I) The serious management problems 

are not subject to a fair hearing. 

(ii) Second notification—notice of 

successful corrective action or notice of 

proposed termination, proposed 

disqualification. (A) Notice of successful 

corrective action. If corrective action has 

been implemented to correct each 

serious management problem within the 

time allotted and to the State agency’s 

satisfaction, the State agency must: 

(1) Notify the executive director, chair 

of the board of directors, owner, 

responsible principals, and responsible 

individuals, that corrective actions are 

fully implemented. 

(2) If corrective action is complete for 

the sponsor, but not for all of the 

responsible principals and responsible 

individuals (or vice versa), the State 

agency must continue with actions, in 

accordance with paragraph (a)(6)(ii)(B) 

of this section against the remaining 

parties. 

(3) At the same time the notice is 

issued, the State agency must also 

update the State agency list, as 

described in paragraph (b) of this 

section and provide a copy of the notice 

to the appropriate FNSRO. 

(4) Ensure the sponsor continues to 

implement procedures and policies to 

fully correct the serious management 

problems, as described in paragraph 

(c)(3) of this section. 

(B) Notice of proposed termination 

and proposed disqualification. If 

corrective action has not been taken or 

fully implemented for each serious 

management problem within the time 

allotted and to the State agency’s 

satisfaction, or repeat serious 

management problems occur before full 

correction is achieved (as described in 

paragraph (c)(3) of this section), the 

State agency must: 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13212 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

(1) Notify the executive director, chair 

of the board of directors, owner, 

responsible principals, and responsible 

individuals, that the State agency 

proposes to terminate the sponsor’s 

agreement and proposes to disqualify 

the sponsor, responsible principals and 

responsible individuals and explain the 

sponsor’s opportunity for seeking a fair 

hearing as described in paragraph (g) of 

this section. 

(2) At the same time the notice is 

issued, the State agency must also 

update the State agency list, as 

described in paragraph (b) of this 

section and provide a copy of the notice 

the appropriate FNSRO. 

(3) The notice must specify: 

(i) That the State agency is proposing 

to terminate the sponsor’s agreement 

and proposing to disqualify the sponsor 

and the responsible principals and the 

responsible individuals; 

(ii) The basis for the proposal to 

terminate; 

(iii) That, if the sponsor voluntarily 

terminates its agreement with the State 

agency after receiving the notice of 

proposed termination, it will still result 

in the sponsor’s agreement being 

terminated for cause and the placement 

of the institution and its responsible 

principals and responsible individuals 

on the National Disqualified List; 

(iv) The procedures for seeking a fair 

hearing (in accordance with paragraph 

(g) of this section) of the proposed 

termination and proposed 

disqualifications; and 

(v) That, unless participation has been 

suspended, the sponsor may continue to 

participate and receive Program 

reimbursement for eligible meals served 

and allowable administrative costs 

incurred until the fair hearing is 

complete. 

(iii) Third notification—Notice to 

vacate the proposed termination of the 

sponsor’s agreement or notice of serious 

deficiency, termination of the 

agreement, and disqualifications— 

(A) Notice to vacate the proposed 

termination of a sponsor’s agreement. If 

the fair hearing vacates the proposed 

termination, the State agency must 

notify the sponsor and must: 

(1) Notify the sponsor’s executive 

director and chair of the board of 

directors that the proposed termination 

of the sponsor’s agreement has been 

vacated. 

(2) Update the State agency list at the 

time the notice is issued; 

(3) Provide a copy of the notice to the 

appropriate FNSRO. 

(B) Notice of serious deficiency, 

termination of the sponsor’s agreement 

and disqualifications. When the time for 

requesting a fair hearing expires or 

when the hearing official upholds the 

State agency’s proposed termination and 

disqualifications, the State agency must: 

(1) Notify the institution’s executive 

director and chair of the board of 

directors, and the responsible principals 

and responsible individuals, that the 

sponsor’s agreement is terminated and 

that the sponsor and the responsible 

principals and responsible individuals 

are disqualified and placed on the 

National Disqualified List; 

(2) Update the State agency list at the 

time notice is issued; and 

(3) Provide a copy of the notice and 

the mailing address and date of birth for 

each responsible principal and 

responsible individual to the 

appropriate FNSRO. 

(b) Placement on the State agency list. 

(1) The State agency must maintain a 

State agency list, made available to FNS 

upon request, and must include the 

following information: 

(i) Names and mailing addresses of 

each sponsor that is determined to have 

a serious management problem; 

(ii) Names, mailing addresses, and 

dates of birth of each responsible 

principal and responsible individual; 

(iii) The status of the sponsor as it 

progresses through the stages of 

corrective action, termination, and 

disqualification, full correction, as 

applicable. 

(2) Within 10 days of receiving a 

notice of termination and 

disqualification from a sponsoring 

organization, the State agency must 

provide FNS with the information as 

described in paragraphs (b)(1)(i) and (ii) 

of this section. 

(c) Correcting serious management 

problems. In response to the notice of 

serious management problems, the 

sponsor must submit, in writing, what 

corrective actions it has taken to correct 

each serious management problem. 

(1) Corrective action plans. An 

acceptable corrective action plan must 

demonstrate that the serious 

management problem is resolved. The 

plan must address the root cause of each 

serious management problem, describe 

and document the action taken to 

correct serious management problems, 

and describe the action’s outcome. The 

corrective action plan must include the 

following: 

(i) What is the serious management 

problem and the action taken to address 

it? 

(ii) Who addressed the serious 

management problem? List personnel 

responsible for this task. 

(iii) When was the action taken to 

address the serious management 

problem? Provide a timeline for 

implementing the action (i.e., daily, 

weekly, monthly, or annually, and when 

did implementation of the plan begin)? 

(iv) Where is documentation of the 

corrective action plan filed? 

(v) How were staff and providers 

informed of the new policies and 

procedures? 

(2) Corrective action timeframes. 

Corrective action must be taken within 

the allotted time to ensures that serious 

management problems are quickly 

addressed and fully corrected. The time 

allotted to correct the serious 

management problem must be 

appropriate for the type of serious 

management problem. The allotted time 

begins on the date the first notification 

is received, as described in paragraph 

(a)(6)(i) of this section. The serious 

management problems must be 

corrected as soon as possible and: 

(i) Up to 10 days from the date the 

sponsor receives the first notification. 

(ii) More than 10 days only if the State 

agency determines that corrective action 

will require the long-term revision of 

management systems or processes, such 

as, but not limited to, the purchase and 

implementation of new claims payment 

software or a major reorganization of 

Program management duties that will 

require action by the board of directors. 

(A) The State agency may permit more 

than 10 days to complete the corrective 

action. 

(B) The sponsor’s corrective action 

plan must include milestones and a 

definite completion date. 

(C) The State agency must receive and 

approve the corrective action plan 

within 15 days from the date the 

sponsor received the notice. 

(D) The State agency must monitor 

full implementation of the corrective 

action plan. 

(iii) Up to 5 days for a sponsor that: 

(A) Engaged in an unlawful practice, 

(B) Submitted a false or fraudulent 

claim to the State agency, 

(C) Submitted other false or 

fraudulent information to the State 

agency, 

(D) Was convicted of a crime, or 

(E) Concealed a criminal background. 

(3) Achieving full correction of serious 

management problems. The path to full 

correction requires the sponsor to 

demonstrate that it has the ability to 

operate the Program with no serious 

management problems, as described in 

paragraph (a) of this section. The State 

agency must prioritize follow-up 

reviews and more frequent full reviews 

of sponsors with serious management 

problems, as described in 

§ 225.7(e)(4)(ii). A follow-up review 

must be conducted to confirm that the 

serious management problem is 

corrected. Full reviews must be 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13213 

conducted at least once every year. Full 

correction of a sponsor’s serious 

management problems is achieved 

when: 

(i) At least two full reviews reveal no 

new or repeat serious management 

problems; 

(ii) The first and last full reviews are 

at least 12 months apart and reveal no 

new or repeat serious management 

problems; and 

(iii) All reviews, including any 

follow-up reviews, between the first and 

last full review reveal no new or repeat 

serious management problems. 

(iv) Once full correction is achieved, 

a serious management problem that 

recurs again, is not considered repeat 

and therefore, would not lead to an 

immediate proposal of termination. Any 

new or recurrence of a serious 

management problem would require the 

State agency to issue a new notice of 

serious management problems, as 

described in paragraph (a)(6) of this 

section. 

(d) Termination—(1) Termination for 

cause. If the State agency determines 

that the sponsor is unable to properly 

perform its responsibilities under its 

Program agreement and fails to take 

successful corrective action, the 

Program agreement must be terminated 

for cause. The State agency and 

sponsoring organization must declare 

the sponsor to be seriously deficient at 

the point of termination, which would 

be followed by disqualification. The 

State agency shall not terminate for 

convenience to avoid implementing the 

serious deficiency process. 

(2) Contingency plan. The State 

agency must have a contingency plan in 

place for the transfer of sites if a sponsor 

is terminated or disqualified to ensure 

that eligible children continue to have 

access to meal services. 

(e) Disqualification—(1) Reciprocal 

disqualification. A State agency may not 

enter into an agreement with any 

sponsor, if they have been terminated 

for cause from any child nutrition 

program and placed on a National 

Disqualified List. Any existing 

agreements with the sponsor must also 

be terminated and the sponsor and all 

responsible principals and responsible 

individuals must also be terminated and 

disqualified. 

(i) No individual on the National 

Disqualified List may serve as a 

principal at any sponsor. 

(ii) The State agency must not 

approve the application of a new or 

experienced sponsor if any of the 

sponsor’s principals is on the National 

Disqualified List. 

(iii) A sponsor is prohibited from 

submitting an application on behalf of a 

site if any of the site’s principals are on 

the National Disqualified List. 

(iv) A sponsor is prohibited from 

submitting an application on behalf of a 

site if the site is on the National 

Disqualified List. 

(v) The State agency must not approve 

an application described in paragraphs 

(e)(1)(iii) and (iv) of this section. 

(vi) Once included on the National 

Disqualified List, a sponsor, responsible 

principal, or responsible individual will 

remain on the list until such time as the 

State agency determines that either the 

serious management problem that led to 

its placement on the list has been 

corrected or until 7 years have elapsed 

since its agreement was terminated for 

cause, whichever is longer. Any debt 

owed under the Program must be 

repaid. 

(2) National Disqualified List. FNS 

will maintain the National Disqualified 

List and make it available to all State 

agencies and all sponsors. This 

computer matching program uses a 

Computer Matching Act system of 

records of information on institutions 

and individuals who are disqualified 

from participation in SFSP and CACFP. 

(i) Placement on the National 

Disqualified List. The State agency must 

provide the following information to 

FNS for each sponsor, responsible 

principle, and responsible individual: 

(A) Name and address of the sponsor 

(including city, State, and zip code); 

(B) Any known aliases; 

(C) Termination date; 

(D) Amount of debt owed, if any; 

(E) Reason, and if other is checked, an 

explanation; 

(F) Date of birth of the responsible 

principal and responsible individual; 

and 

(G) Position within the institution or 

facility of the responsible principal and 

responsible individual. 

(ii) Removal from the National 

Disqualified List. A sponsor, responsible 

principal and responsible individual 

that has been disqualified from the 

Program due to uncorrected serious 

management problems will remain on 

the National Disqualified List until the 

State agency and FNS have determined 

that the serious management problems 

are corrected, or for 7 years, whichever 

is longer. Any debt under the Program 

must be repaid. After a sponsor, 

responsible principal or responsible 

individual has been removed from the 

National Disqualified List, they will be 

considered to be in good standing, and 

eligible to apply for the Program. 

(iii) Early removal of sponsors, 

principals, and individuals from the list. 

The State agency must review and 

approve a sponsor or responsible 

principal and responsible individual’s 

request for removal from the National 

Disqualified List. If the State agency 

approves the request, and ensures that 

any debt associated has been paid, it 

may submit the information to the 

FNSRO, where it will be reviewed for 

completeness. The FNSRO will also 

ensure that the State agency’s request is 

within Program requirements and that 

the documentation supports the early 

removal. Once reviewed, the FNSRO 

will submit the request to the FNS 

National Office for removal. The 

effective date of National Disqualified 

List removal will be the date on which 

the FNS National Office processes the 

removal request. The FNSRO will be 

notified once the removal has been 

completed and inform the State agency. 

(3) Computer Matching Act (CMA). 

The Computer Matching and Privacy 

Protection Act addresses the use of 

information from computer matching 

programs that involve a Federal System 

of Records. Address: compliance, 

matching agreement, and independent 

verification. 

(i) Each State agency participating in 

a computer matching program must 

comply with the provisions of the 

Computer Matching Act if it uses an 

FNS system of records in order to: 

(A) Establish eligibility for a Federal 

benefit program; 

(B) Verify eligibility for a Federal 

benefit program; 

(C) Verify compliance with either 

statutory or regulatory requirements of a 

Federal benefit program; or 

(D) Recover payments or delinquent 

debts owed under a Federal benefit 

program. 

(ii) State agencies must enter into 

written agreements with USDA/FNS, 

consistent with 5 U.S.C. 552a(o) of the 

Computer Matching Act, in order to 

participate in a matching program 

involving a USDA/FNS Federal system 

of records. The agreement must include 

the State agency’s independent 

verification requirements. 

(iii) State agencies are prohibited from 

taking any adverse action to terminate, 

deny, suspend, or reduce benefits to an 

applicant or recipient based on 

information produced by a Federal 

computer matching program that is 

subject to the requirements of the 

Computer Matching Act, unless: 

(A) The information has been 

independently verified by the State 

agency; and 

(B) FNS has waived the two-step 

independent verification and notice 

requirement. 

(iv) A State agency that receives a 

request for verification from another 

State agency or from FNS must provide 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13214 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

the necessary verification. The State 

agency must respond within 20 calendar 

days of receiving the request. 

(v) A State agency may use the record 

of a certified notice to independently 

verify the accuracy of a computer 

match. 

(f) Fair hearing—(1) Right to a fair 

hearing. (i) The sponsor must be 

advised in writing of the grounds upon 

which the State agency based the action 

and its right to a fair hearing. The State 

agency must offer a fair hearing in the 

notice to the sponsor for any of the 

actions described in § 225.13(a). A fair 

hearing for any other action is not 

required. 

(ii) The notice of due process must 

inform the sponsor of: 

(A) The action that is taken or 

proposed to be taken; 

(B) The legal basis for the action; 

(C) The right to appeal the action; and 

(D) The procedures and deadlines for 

requesting an appeal of the action. 

(iii) If a fair hearing is requested: 

(A) The State agency must continue to 

pay any valid claims for reimbursement 

of eligible meals served and allowable 

administrative expenses incurred until 

the hearing official issues a decision. 

(B) Any information upon which the 

State agency based its action must be 

available to the appellants for 

inspection from the date of receipt of 

the hearing request. 

(C) Appellants may request a fair 

hearing in person or by submitting 

written documentation to the hearing 

official. 

(D) Appellants may represent 

themselves, retain legal counsel, or be 

represented by another person. 

(E) All parties must submit written 

documentation to the hearing official 

prior to the beginning of the hearing, 

within 30 days after receiving the notice 

of action. 

(F) Appellants must be permitted to 

contact the hearing official directly. 

(2) Fair hearing procedures. A hearing 

must be held by the fair hearing official 

in addition to, or in lieu of, a review of 

written information only if the sponsor 

or the responsible principals and 

responsible individuals request a 

hearing in the written request for a fair 

hearing. If the sponsor’s representative 

or the responsible principals or 

responsible individuals or their 

representatives, fails to appear at a 

scheduled hearing, they waive the right 

to a personal appearance before the 

hearing official, unless the hearing 

official agrees to reschedule the hearing. 

A representative of the State agency 

must be allowed to attend the hearing to 

respond to the testimony of the sponsor 

and the responsible principals and 

responsible individuals and to answer 

questions posed by the hearing official. 

If a hearing is requested, the sponsor, 

the responsible principals, and 

responsible individuals, and the State 

agency must be provided with at least 

5 days advance notice of the time and 

place of the hearing. 

(i) The purpose of the hearing is to 

determine that the State agency, 

sponsor, responsible principals, or 

responsible individuals, followed 

Program requirements. 

(ii) The hearing official’s decisions 

should be limited to that purpose. 

(iii) The purpose is not to determine 

whether to uphold the legality of 

Federal or State Program requirements. 

(iv) The request for a fair hearing must 

be submitted in writing no later than 10 

calendar days after the date the notice 

of action is received. The State agency 

must acknowledge the request for a fair 

hearing within 5 calendar days of its 

receipt of the request. The State agency 

must provide a copy of the written 

request for a fair hearing, including the 

date of receipt of the request to FNS 

within 10 calendar days of its receipt of 

the request. 

(3) Hearing officials. The individual 

who is appointed to conduct the fair 

hearing, including any State agency 

employee or contractor, must be 

independent and impartial. The 

sponsor, responsible principals, and 

responsible individuals must be 

permitted to contact the hearing official 

directly if they so desire. The State 

agency must ensure that the hearing 

official: 

(i) Has no involvement in the action 

under appeal; 

(ii) Does not occupy a position that 

may potentially be subject to undue 

influence from any party that is 

responsible for the action under appeal; 

(iii) Does not occupy a position that 

may exercise undue influence on any 

party that is responsible for the action 

under appeal; 

(iv) Has no personal interest in the 

outcome of the fair hearing; 

(v) Has no financial interest in the 

outcome of the fair hearing. 

(4) Basis for decision. The hearing 

official must render a decision that is 

based on: 

(i) The determination that the State 

agency, sponsor, responsible principals, 

or responsible individuals, followed 

Program requirements; 

(ii) The information provided by the 

State agency, sponsor, responsible 

principals, and responsible individuals; 

and 

(iii) The Program requirements 

established in Federal and State laws, 

regulations, policies, and procedures. 

(5) Final decision. The hearing 

official’s decision is the final action in 

the appeal process. 

(i) Within 10 days of the State 

agency’s receipt of the request for a fair 

hearing, the fair hearing official must 

inform the State agency, the sponsor’s 

executive director and chairman of the 

board of directors, and the responsible 

principals and responsible individuals, 

of the fair hearing’s outcome. 

(ii) The hearing official must render a 

decision within 30 days of the date the 

State agency received the appeal 

request. 

(iii) The hearing official must inform 

the State agency, sponsor, responsible 

principals, and responsible individuals 

of the decision within this 30-day 

period. 

(iv) This timeframe is a requirement 

and cannot be used to justify 

overturning the State agency action if a 

decision is not made within the 30-day 

period. 

(v) The hearing official’s decision is 

final. 

(vi) The decision is not subject to 

appeal. 

(6) Effect of State agency action. The 

State agency’s action must remain in 

effect during the fair hearing. The effect 

of this requirement on particular State 

agency actions is as follows: 

(i) Overpayment demand. During the 

period of the fair hearing, the State 

agency is prohibited from taking action 

to collect or offset the overpayment. 

However, the State agency must assess 

interest beginning with the initial 

demand for remittance of the 

overpayment and continuing through 

the period of administrative review 

unless the administrative review official 

overturns the State agency’s action. 

(ii) Recovery of advances. During the 

fair hearing, the State agency must 

continue its efforts to recover advances 

in excess of the claim for reimbursement 

for the applicable period. The recovery 

may be through a demand for full 

repayment or an adjustment of 

subsequent payments. 

(g) Payments—(1) Payment of valid 

claims. If a fair hearing is requested, the 

State agency must continue to pay any 

valid claims for reimbursement of 

eligible meals served and allowable 

administrative expenses incurred un the 

hearing official issues a decision. 

(2) Debts owed to the Program. The 

State agency is responsible for the 

collection of unearned payments, 

including any assessment of interest, as 

described in § 225.12(b). 

(i) After the State agency has sent the 

necessary demand letter for debt 

collection, State agency staff must refer 

the claim to the appropriate State 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13215 

authority for pursuit of the debt 

payment. 

(ii) FNS defers to the State’s laws and 

procedures to establish a repayment 

plan to recover funds as quickly as 

possible. 

(iii) It is the responsibility of the State 

agency to notify the sponsor that 

interest will be charged. Interest must be 

assessed on sponsors’ debts established 

on or after July 29, 2002. Interest will 

continue to accrue on debts not paid in 

full within 30 days of the initial demand 

for remittance up to the date of 

payment, including during an extended 

payment plan and each month while on 

the National Disqualified List. 

(iv) State agencies are required to 

assess interest using one uniform rate. 

The appropriate rate to use is the 

Current Value of Funds Rate, which is 

published annually by Treasury in the 

Federal Register and is available from 

the FNSRO. 

(h) FNS determination of serious 

management problems—(1) General. 

FNS may determine independently that 

a sponsor has one or more serious 

management problems, as described in 

paragraph (a) of this section. FNS will 

follow procedures outlined in this 

section to address any finding that 

prevents a sponsor from meeting the 

Program’s performance standards, 

affects the integrity of a claim for 

reimbursement, or affects the integrity 

of the meals served in a day care home 

or unaffiliated center. 

(2) Required State agency action—(i) 

Termination of agreements. If the State 

agency holds an agreement with a 

sponsor that FNS determines to be 

seriously deficient and subsequently 

disqualifies, the State agency must 

terminate the sponsor’s agreement 

effective no later than 45 days after the 

date of the sponsor’s disqualification by 

FNS. As noted in paragraph (f) of this 

section, the termination of an agreement 

for this reason is not subject to a fair 

hearing. At the same time the notice of 

termination is issued, the State agency 

must add the sponsor to the State 

agency list and provide a copy of the 

notice to the appropriate FNSRO. 

(ii) Disqualified responsible principal 

and individuals. If the State agency 

holds an agreement with a sponsor 

whose principal FNS determines to be 

seriously deficient and subsequently 

disqualifies, the State agency must 

initiate action to terminate and 

disqualify the sponsor in accordance 

with the procedures in paragraph 

(a)(6)(ii)(B) of this section. The State 

agency must initiate these actions no 

later than 45 days after the date of the 

principal’s disqualification by FNS. 

PART 226—CHILD AND ADULT CARE 

FOOD PROGRAM 

■ 18. 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. 

■ 19. In § 226.2: 

■ a. Remove the definitions for 

‘‘Administrative review’’ and 

‘‘Administrative review official’’; 

■ b. Add in alphabetical order the 

definitions for ‘‘Cognizant Regional 

office’’, ‘‘Cognizant State agency’’, 

‘‘Contingency plan’’, and ‘‘Corrective 

action’’; 

■ c. Revise the definition for 

‘‘Disqualified’’; 

■ d. Add in alphabetical order the 

definitions for ‘‘Fair hearing’’, 

‘‘Finding’’, ‘‘Fiscal action’’, ‘‘Full 

correction’’, ‘‘Good standing’’, ‘‘Hearing 

official’’, ‘‘Lack of business integrity’’, 

‘‘Legal basis’’, and ‘‘Multi-State 

sponsoring organization (MSSO)’’; 

■ e. Revises the definitions for 

‘‘National Disqualified List’’ and 

‘‘Notice’’; 

■ f. Add the definitions for ‘‘Program 

operator’’, ‘‘Responsible individual’’ 

and ‘‘Responsible principal’’; 

■ g. Remove the definition for 

‘‘Responsible principal or responsible 

individual’’; 

■ h. Add the definitions for ‘‘Review 

cycle’’ and ‘‘Serious management 

problem’’; and 

■ i. Revise the definitions for ‘‘Seriously 

deficient’’, ‘‘State agency list’’, 

‘‘Termination for cause’’. 

The revisions and additions read as 

follows: 

§ 226.2 Definitions 

* * * * * 

Cognizant Regional office means the 

FNSRO which acts on behalf of the 

Department in the administration of the 

Program and is responsible for 

determining which State agency has 

cognizance when a multi-State 

sponsoring organization operates the 

Program. 

Cognizant State agency means the 

agency which is responsible for the 

administration of the Program in the 

State where a multi-State sponsoring 

organization’s headquarters is located. 

Contingency plan means the State 

agency’s written process for the transfer 

of sponsored centers and day care 

homes that will help ensure that 

Program meals for children and adult 

participants will continue to be 

available without interruption if a 

sponsoring organization’s agreement is 

terminated. 

Corrective action means 

implementation of a solution, written in 

a corrective action plan, to address the 

root cause and prevent the recurrence of 

a serious management problem. 

* * * * * 

Disqualified means the status of an 

institution, facility, responsible 

principal, or responsible individual who 

is ineligible for participation in the 

Program. 

* * * * * 

Fair hearing means due process 

provided upon request to: 

(1) An institution that has been given 

notice by the State agency of an action 

that will affect participation or 

reimbursement under the Program; 

(2) A principal or individual 

responsible for an institution’s serious 

management problem and issued a 

notice of proposed termination and 

proposed disqualification from Program 

participation; or 

(3) An individual responsible for a 

day care home or unaffiliated center’s 

serious management problem and 

issued a notice of proposed 

disqualification from Program 

participation. 

* * * * * 

Finding means a violation of a 

regulatory requirement identified during 

a review. 

Fiscal action means the recovery of an 

overpayment or claim for 

reimbursement that is not properly 

payable through direct assessment of 

future claims, offset of future claims, 

disallowance of overclaims, submission 

of a revised claim for reimbursement, or 

disallowance of funds for failure to take 

corrective action to meet Program 

requirements. 

* * * * * 

Full correction means the status 

achieved after a corrective action plan is 

accepted and approved, all corrective 

actions are fully implemented, and no 

new or repeat serious management 

problem is identified in subsequent 

reviews, as described in § 226.25(c). 

* * * * * 

Good standing means the status of a 

program operator that meets its Program 

responsibilities, is current with its 

financial obligations, and if applicable, 

has fully implemented all corrective 

actions within the required period of 

time. 

* * * * * 

Hearing official means an individual 

who is responsible for conducting an 

impartial and fair hearing—as requested 

by an institution, responsible principal, 

or responsible individual responding to 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13216 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

a proposal for termination—and 

rendering a decision. 

* * * * * 

Lack of business integrity means the 

conviction or concealment of a 

conviction for fraud, antitrust 

violations, embezzlement, theft, forgery, 

bribery, falsification or destruction of 

records, making false statements, 

receiving stolen property, making false 

claims, or obstruction of justice. 

Legal basis means the lawful authority 

established in statute or regulation. 

* * * * * 

Multi-State sponsoring organization 

(MSSO) means an organization that 

sponsors facilities in more than one 

State. 

National Disqualified List (NDL) 

means a system of records, maintained 

by the Department, of institutions, 

responsible principals, and responsible 

individuals disqualified from 

participation in the Program. 

* * * * * 

Notice means a letter sent by certified 

mail, return receipt (or the equivalent 

private delivery service), by facsimile, 

or by email, that describes an action 

proposed or taken by a State agency or 

FNS with regard to an institution’s 

Program reimbursement or 

participation. Notice also means a letter 

sent by certified mail, return receipt (or 

the equivalent private delivery service), 

by facsimile, or by email, that describes 

an action proposed or taken by a 

sponsoring organization with regard to a 

day care home or unaffiliated center’s 

participation. 

* * * * * 

Program operator means any entity 

that participates in one or more Child 

Nutrition Programs. 

* * * * * 

Responsible individual means any 

individual employed by, or under 

contract with an institution or facility, 

or any other individual, including 

uncompensated individuals, who the 

State agency or FNS determines to be 

responsible for an institution or 

facility’s serious management problem. 

Responsible principal means any 

principal, as described in this section, 

who the State agency or FNS 

determined to be responsible for an 

institution’s serious management 

problem. 

Review cycle means the frequency and 

number of required reviews of 

institutions and facilities. 

* * * * * 

Serious management problem means 

the finding(s) that relates to an 

institution’s inability to meet the 

Program’s performance standards or that 

affects the integrity of a claim for 

reimbursement or the quality of meals 

served in a day care home or center. 

Seriously deficient means the status of 

an institution or facility after it is 

determined that full corrective action 

will not be achieved and termination for 

cause is the only appropriate course of 

action. 

* * * * * 

State agency list means an actual 

paper or electronic list, or the 

retrievable paper records, maintained by 

the State agency, that includes 

information on institutions and day care 

home providers or unaffiliated centers 

through the serious deficiency process 

in that State. The list must be made 

available to FNS upon request and must 

include information specified in 

§ 226.25(b). 

* * * * * 

Termination for cause means the 

termination of a Program agreement due 

to considerations related to an 

institution or a facility’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. 

* * * * * 

■ 20. In § 226.6: 

■ a. In paragraph (b)(1), revise the 

second sentence; 

■ b. In paragraph (b)(1)(xii), remove the 

word ‘‘principals’’ and adding in its 

place the words ‘‘responsible principals 

or responsible individuals’’ wherever it 

appears; 

■ c. Revise paragraphs (b)(1)(xiii) and 

(b)(1)(xiv)(A) and (B); 

■ d. Add paragraphs (b)(1)(xv)(A) and 

(b)(1)(xix) ; 

■ e. In paragraph (b)(2), remove the 

word ‘‘principals’’ and adding in its 

place the words ‘‘responsible principals 

or responsible individuals’’ wherever it 

appears; 

■ f. In paragraph (b)(2)(ii)(F), remove the 

word ‘‘and’’; 

■ g. In paragraph (b)(2)(ii)(G), remove 

‘‘.’’ and adding in its place ‘‘; and’’; 

■ h. Add paragraph (b)(2)(ii)(H); 

■ i. Revise paragraph (b)(2)(iii)(D); 

■ j. In paragraph (b)(2)(iii)(F), add a new 

second sentence; 

■ k. Add paragraph (b)(2)(iii)(L); 

■ l. In paragraph (b)(3)(i), revise the last 

two sentences; 

■ m. Revise paragraphs (b)(4)(ii) and 

(iii) and (c); 

■ n. Remove paragraphs (k) and (l) and 

redesignate paragraphs (m) through (q) 

as paragraphs (k) through (o), 

respectively; 

■ o. Revise newly redesignated 

paragraph (k)(2); 

■ p. In newly redesignated paragraph 

(k)(3)(x), remove the words ‘‘paragraph 

(m)(5)’’ and add in their place the words 

‘‘paragraph (k)(5)’’; 

■ q. In newly redesignated paragraph 

(k)(3)(xi) remove the word ‘‘and’’; 

■ r. In newly redesignated paragraph 

(k)(3)(xii) remove ‘‘.’’ and add in its 

place ‘‘; and’’; 

■ s. Add paragraph (k)(3)(xiii); 

■ t. In newly redesignated paragraph 

(k)(4) remove the words ‘‘paragraph 

(m)(6)’’ and add in their place the words 

‘‘paragraph (k)(6)’’; 

■ u. In newly redesignated paragraph 

(k)(5) remove the words ‘‘paragraph 

(m)’’ and add in their place the words 

‘‘paragraph (k)’’; 

■ v. Revise newly redesignated 

paragraph (m); 

■ w. In newly designated paragraph (n), 

remove the citation ‘‘§ 226.16(l)’’ and 

add in its place the citation ‘‘§ 226.25’’; 

■ x. Redesignate paragraph (r) as 

paragraph (p) and add new paragraph 

(q). 

The additions and revisions read as 

follows: 

§ 226.6 State agency administrative 

responsibilities. 

* * * * * 

(b) * * * 

(1) * * * The State agency must also 

determine if the sponsoring organization 

operates in more than one State. * * * 

* * * * * 

(xiii) Ineligibility for other publicly 

funded programs—(A) General. 

Ineligibility for other publicly funded 

programs. A State agency is prohibited 

from approving an institution or 

facility’s application if, the institution, 

facility, responsible principals, or 

responsible individuals: 

(1) Have been declared ineligible for 

any other publicly funded program by 

reason of violating that program’s 

requirements, during the past 7 years. 

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. 

(2) Were terminated for cause from 

any program authorized under this part 

or parts 210, 215, 220, or 225 of this 

chapter and are currently listed on a 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13217 

National Disqualified List, per 

paragraph (b)(1)(xiii) of this section;. 

State agencies must develop a process to 

share information on any institution, 

facility, responsible principal, or 

responsible individual not approved to 

administer or participate in the 

programs as described under paragraph 

(b)(2)(iii)(A)(1) of this section. The State 

agency must work closely with any 

other Child Nutrition Program State 

agency within the State to ensure 

information is shared for program 

purposes and on a timely basis. The 

process must be approved by FNS. 

(B) Certification. Institutions must 

submit: 

(1) A statement listing the publicly 

funded programs in which the 

institution, and its responsible 

principals and responsible individuals 

have participated in the past 7 years; 

and 

(2) A certification that, during the past 

7 years, neither the institution nor any 

of its responsible principals or 

responsible individuals have been 

declared ineligible to participate in any 

other publicly funded program by 

reason of violating that program’s 

requirements; or 

(3) In lieu of the certification, 

documentation that the institution or 

the responsible principals or 

responsible individuals previously 

declared ineligible was later fully 

reinstated in, or determined eligible for, 

the program, including the payment of 

any debts owed. 

(C) Follow-up. If the State agency has 

reason to believe that the institution, 

facility, its responsible principals or 

responsible individuals were 

determined ineligible to participate in 

another publicly funded program by 

reason of violating that program’s 

requirements, the State agency must 

follow up with the entity administering 

the publicly funded program to gather 

sufficient evidence to determine 

whether the institution or its principals 

were, in fact, determined ineligible. 

(xiv) Information on criminal 

convictions. (A) A State agency is 

prohibited from approving an 

institution’s application if the 

institution or any of its principals has 

been convicted of any activity that 

occurred during the past 7 years and 

that indicated a lack of business 

integrity, as described in § 226.2, any 

other activity indicating a lack of 

business integrity as defined by the 

State agency; and 

(B) Institutions must submit a 

certification that neither the institution 

nor any of its principals has been 

convicted of any activity that occurred 

during the past seven years and that 

indicated a lack of business integrity, as 

described in § 226.2, or any other 

activity indicating a lack of business 

integrity as defined by the State agency; 

(xv) * * * 

(A) Each principal who fills a position 

that the State agency designates as 

responsible must submit signed 

certifications acknowledging Program 

responsibility. 

(B) [Reserved] * * * * * 

(xix) Information about MSSO 

operations. Sponsoring organizations 

approved to participate in the Program 

in more than one State must provide: 

(A) The number of affiliated centers it 

sponsors, by State; 

(B) The number of unaffiliated centers 

it sponsors, by State; 

(C) The number of day care homes it 

sponsors, by State; 

(D) The names, addresses, and phone 

numbers of the organization’s 

headquarters and the officials who have 

administrative responsibility; 

(E) The names, addresses, and phone 

numbers of the financial records center 

and the officials who have financial 

responsibility; and 

(F) The organization’s decision on 

whether to use program funds for 

administrative expenses. 

* * * * * 

(2) * * * 

(ii) * * * 

(H) Information about MSSO 

operations, as described in paragraph 

(b)(1)(xix) of this section, is up-to-date. 

(iii) * * * 

(D) Ineligibility for other publicly 

funded programs. A State agency is 

prohibited from approving a renewing 

institution or facility’s application if, 

the institution, facility, responsible 

principals, or responsible individuals: 

(1) Have been declared ineligible for 

any other publicly funded program by 

reason of violating that program’s 

requirements, during the past 7 years. 

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. 

(2) Were terminated for cause from 

any program authorized under this part 

or parts 210, 215, 220, or 225 of this 

chapter and are currently listed on a 

National Disqualified List, per 

paragraph (b)(1)(xiii) of this section. 

State agencies must develop a process to 

share information on any institution, 

facility, responsible principal, or 

responsible individual not approved to 

administer or participate in the 

programs as described under paragraph 

(b)(2)(iii)(A)(1) of this section. The State 

agency must work closely with any 

other Child Nutrition Program State 

agency within the State to ensure 

information is shared for program 

purposes and on a timely basis. The 

process must be approved by FNS. 

* * * * * 

(F) Submission of names and 

addresses. * * * The State agency must 

also ensure that the signed certifications 

acknowledging Program responsibility, 

as described in paragraph (b)(1)(xv)(A) 

of this section are up-to-date. * * * 

* * * * * 

(L) Multi-state sponsoring 

organizations. The State agency must 

ensure that the MSSO’s operations, as 

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

section, are up-to-date. If the MSSO has 

facilities not previously reported to the 

State agency, as described in paragraph 

(b)(1)(xix) of this section, the MSSO 

must update the information. 

* * * * * 

(3) * * * 

(i) * * * Any disapproved applicant 

institution must be notified of the 

reasons for its disapproval and its right 

to appeal. 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 § 226.25(g). 

* * * * * 

(4) * * * 

(ii) 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 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13218 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

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. 

(iii) 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. 

(A) The State agency must terminate 

the agreement for cause as described in 

§ 226.25(d)(1). 

(B) 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. 

(C) 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. 

(D) The State agency, institution, or 

facility cannot terminate for 

convenience to avoid actions related to 

serious management problems. 

Termination procedures as a result of 

the serious deficiency process can be 

found in § 226.25. 

(c) Denial of a new institution’s 

application. (1) Denial of applications 

that do not meet minimum 

requirements. The State agency must 

deny the application, if a new 

institution’s application does not meet 

all of the requirements in paragraph (b) 

of this section and in §§ 226.15(b) and 

226.16(b). 

(2) Denial of applications by ineligible 

applicants. The State agency must deny 

the application and must initiate action 

to disqualify the new institution and the 

responsible principals, including the 

person who signs the application, and 

responsible individuals if the State 

agency determines that the institution 

has: 

(i) Submitted false information on its 

application, including but not limited to 

a determination that the institution has 

concealed a conviction for any activity 

that occurred during the past seven 

years and that indicates a lack of 

business integrity; or 

(ii) Any other action affecting the 

institution’s ability to administer the 

Program in accordance with Program 

requirements. 

(3) Denial and disqualification 

notification procedures. If the State 

agency initiates action to deny and 

disqualify the new institution, the State 

agency must use the procedures 

described in paragraph (c)(4) of this 

section to provide the institution and 

the responsible principals and 

responsible individuals with notice for 

the basis of denial and an opportunity 

to take corrective action. 

(4) Notice of proposed denial and 

proposed disqualification. If the State 

agency initiates action to deny the 

institution’s application, the State 

agency must notify the institution’s 

executive director and chairman of the 

board of directors. The notice must 

identify the responsible principals, 

including the person who signed the 

application, and responsible individuals 

and must be sent to those persons as 

well. The State agency may specify in 

the notice different corrective actions 

and time periods for completing the 

corrective action for the institution and 

the responsible principals and 

responsible individuals. At the same 

time the notice is issued, the State 

agency must add the institution to the 

State agency list, along with the basis 

for denial, and provide a copy of the 

notice to the appropriate FNSRO. The 

notice must also specify: 

(i) The basis of denial; 

(ii) The corrective actions required to 

be taken; 

(iii) The time allotted for corrective 

actions; 

(v) That failure to complete the 

corrective actions within the allotted 

time will result in denial of the 

institution’s application and the 

disqualification of the institution and 

the responsible principals and 

responsible individuals; 

(vi) That the State agency will not pay 

any claims for reimbursement for 

eligible meals served or allowable 

administrative expenses incurred until 

the State agency has approved the 

institution’s application and the 

institution has signed a Program 

agreement; and 

(vii) That the institution’s withdrawal 

of its application, after having been 

notified of its proposed denial and 

proposed disqualification, will still 

result in the institution’s application 

being denied and placement of the 

institution and its responsible 

principals and responsible individuals 

on the National Disqualified List by the 

State agency; and 

(viii) That, if the State agency does 

not possess the date of birth for any 

individual named as a ‘‘responsible 

principal’’ or ‘‘responsible individual’’ 

in the notice of proposed denial and 

proposed disqualification, the 

submission of that person’s date of birth 

is a condition of corrective action. 

(5) Successful corrective action. (i) If 

corrective action has been completed 

within the allotted time and to the State 

agency’s satisfaction, the State agency 

must: 

(A) Notify the institution’s executive 

director and chairman of the board of 

directors, and the responsible principals 

and responsible individuals, that the 

corrective actions are complete; and 

(B) Offer the new institution the 

opportunity to resubmit its application. 

If the new institution resubmits its 

application, the State agency must 

complete its review of the application 

within 30 days after receiving a 

complete and correct application. 

(ii) If corrective action is complete for 

the institution but not for all of the 

responsible principals and responsible 

individuals, the State agency must: 

(A) Continue with the actions, as 

described in paragraph (c)(4) of this 

section, against the remaining parties; 

(B) At the same time the notice is 

issued, the State agency must also 

update the State agency list to indicate 

that the corrective actions are complete 

and provide a copy of the notice to the 

appropriate FNSRO. 

(iii) If the State agency initially 

approves the institution’s application 

and the State agency and institution 

have a signed permanent agreement, the 

State agency must follow procedures, as 

described in § 226.25, for any serious 

management problems that occur. 

(iv) If the institution is still in the 

process of applying and the State agency 

initially determined that the 

institution’s corrective action is 

complete, but later the same problem 

occurs, the State agency must move 

immediately to issue a notice of intent 

to deny the application and disqualify 

the institution, as described in 

paragraph (c)(6) of this section. 

(6) Application denial and proposed 

disqualification. If timely corrective 

action is not completed, the State 

agency must notify the institution’s 

executive director and chair of the board 

of directors, and the responsible 

principals and responsible individuals, 

that the institution’s application has 

been denied. At the same time the 

notice is issued, the State agency must 

also update the State agency list and 

provide a copy of the notice to the 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13219 

appropriate FNSRO. The notice must 

also specify: 

(i) That the institution’s application 

has been denied and the State agency is 

proposing to disqualify the institution 

and the responsible principals and 

responsible individuals; 

(ii) The basis for denial; and 

(iii) The procedures for seeking a fair 

hearing, as described in § 226.25(g), of 

the application denial and proposed 

disqualifications. 

(7) Program payments. The State 

agency is prohibited from paying any 

claims for reimbursement from a new 

institution for eligible meals served or 

allowable administrative expenses 

incurred until the State agency has 

approved its application and the 

institution and State agency have signed 

a Program agreement. 

(8) Disqualification. When the time 

for requesting a fair hearing expires or 

when the hearing official upholds the 

State agency’s denial and proposed 

disqualifications, the State agency must 

notify the institution’s executive 

director and chair of the board of 

directors, and the responsible principals 

and responsible individuals that the 

institution and the responsible principal 

and responsible individuals have been 

disqualified. At the same time the notice 

is issued, the State agency must also 

update the State agency list and provide 

a copy of the notice and the mailing 

address and date of birth for each 

responsible principal and responsible 

individual to the appropriate FNSRO. 

* * * * * 

(k) * * * 

(2) Review priorities. In choosing 

institutions for review, as described in 

paragraph (k)(6) of this section, the State 

agency must target for more frequent 

review of institutions whose prior 

review included serious management 

problems. 

(3) * * * 

(xiii) If a sponsoring organization of 

day care homes or unaffiliated centers, 

implementation of the serious 

deficiency and termination procedures 

for day care homes and unaffiliated 

centers and, if these procedures have 

been delegated to sponsoring 

organizations, as described in paragraph 

§ 226.25(g) of this section, the fair 

hearing procedures for day care homes 

or unaffiliated centers. 

* * * * * 

(m) Child care standards compliance. 

The State agency shall, when 

conducting reviews of child care 

centers, and day care homes approved 

by the State agency under paragraph 

(d)(3) of this section, determine 

compliance with the child care 

standards used to establish eligibility, 

and the institution shall ensure that all 

findings are corrected and the State 

shall ensure that the institution has 

corrected all findings. If findings are not 

corrected within the specified 

timeframe for corrective action, the 

State agency must follow procedures for 

termination, described in § 226.25(d). 

However, if the health or safety of the 

children is imminently threatened, the 

State agency or sponsoring organization 

must follow the procedures, described 

in § 226.25(f). The State agency may 

deny reimbursement for meals served to 

attending children in excess of 

authorized capacity. 

* * * * * 

(q) Oversight of MSSOs. An MSSO 

may include a sponsoring organization 

that administers the Program in more 

than one State, a franchise operating 

multiple facilities in more than one 

State, or a for-profit organization whose 

parent corporation operates multiple 

affiliated centers in more than one State. 

Each State agency must determine if a 

sponsoring organization is an MSSO, as 

described in paragraphs (b)(1)(xix) and 

(b)(2)(iii)(L). The State agency must 

assume the role of the CSA, if the 

MSSO’s center of operations is located 

within the State. Each State agency that 

approves an MSSO must follow the 

requirements described in paragraph 

(q)(1) of this section. The CSA must 

follow the requirements described in 

paragraph (q)(2) of this section. 

(1) If the State agency determines that 

an MSSO provides operates the Program 

within the State, 

(i) Enter into a permanent written 

agreement with the MSSO, as described 

in paragraph (b)(4) of this section. 

(ii) Approve the MSSO’s 

administrative budget (in consultation 

with the CSA, as appropriate). 

(A) The State agency must approve 

budget line items that are directly 

attributable to operations within the 

State. 

(B) The State agency must approve its 

portion of costs that are shared among 

other State agencies and costs that 

attribute directly to program operations 

within the State. 

(C) The State agency must notify the 

CSA if any of the MSSO’s 

administrative costs exceed the 15 

percent limit, as described in paragraph 

(f)(1)(iv) of this section. 

(iii) Conduct monitoring of MSSO 

Program operations within the State, as 

described in paragraph (k)(4) of this 

section. The State agency should 

coordinate monitoring with the CSA to 

streamline reviews and minimize 

duplication of the review content. The 

State agency may base the review cycle 

on the number of facilities operating 

within the State. 

(A) The State agency may use 

information from the CSA’s technical 

assistance activities to assess 

compliance in areas where the scope of 

review overlaps during the same review 

cycle. The State agency may choose to 

conduct a review of implementation of 

additional State agency requirements, 

financial records to support Statespecific administrative costs, and other 

areas of compliance that the CSA would 

not have reviewed. 

(B) The State agency may also choose 

to conduct a full review at the MSSO’s 

headquarters and financial records 

center. If the State agency chooses to 

conduct a full review, the State agency 

should request the necessary records 

from the CSA. 

(C) The State agency must provide 

summaries of the MSSO reviews that are 

conducted to the CSA. The summaries 

must include the prescribed corrective 

actions and follow-up efforts. 

(iv) Conduct audit resolution 

activities. The State agency must review 

audit reports, address audit findings, 

and implement corrective actions, as 

required under 2 CFR part 200, subpart 

D, and USDA implementing regulations 

2 CFR parts 400 and 415. 

(v) Notify all other State agencies that 

have agreements with the MSSO of 

termination and disqualification 

actions, as described in paragraph 

(c)(2)(i) of this section. 

(2) CSA responsibilities. If it 

determines that an MSSO’s center of 

operations is located within the State, 

the State agency must assume the role 

of the CSA, which must: 

(i) Comply with the requirements for 

a State agency that has approved an 

MSSO to provide Program operations 

within the State, as described in 

paragraph (q)(1). 

(ii) Determine if there will be shared 

administrative costs among the States in 

which the MSSO operates and how the 

costs will be allocated. The CSA has the 

authority to approve cost levels for cost 

items that must be allocated. The CSA 

must approve the allocation method that 

the MSSO uses for shared costs. The 

method must allocate the cost based on 

the benefits received, not the source of 

funds available to pay for the cost. If the 

MSSO administers the Program in 

centers, the CSA must also ensure that 

administrative costs do not exceed 15 

percent on an organization-wide basis. 

(iii) Coordinate monitoring. The CSA 

must conduct a full review at the MSSO 

headquarters and financial records 

center. The CSA must coordinate the 

timing of reviews. The CSA must make 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13220 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

copies of monitoring reports and 

findings available to all other State 

agencies that have agreements with the 

MSSO. 

(iv) Ensure that organization-wide 

audit requirements are met. Each MSSO 

must comply with audit requirements, 

as described under 2 CFR part 200, 

subpart D, and USDA implementing 

regulations 2 CFR parts 400 and 415. 

Since their operations are often large 

and complex, MSSOs should have 

annual audits. If an MSSO has for-profit 

status, the cognizant agency must 

establish audit thresholds and 

requirements. 

(v) Oversee audit funding and costs. 

The share of organization-wide audit 

costs may be based on a percentage of 

each State’s expenditure of CACFP 

funds and the MSSO’s expenditure of 

Federal and non-Federal funds during 

the audited fiscal year. The CSA should 

review audit costs as part of the overall 

budget review and make audit reports 

available to the other State agencies that 

have agreements with the MSSO. 

(vi) Ensure compliance with 

procurement requirements. Procurement 

actions involving MSSOs must follow 

the requirements under 2 CFR part 200, 

subpart D, and USDA implementing 

regulations 2 CFR parts 400 and 415. If 

the procurement action benefits all 

States in which the MSSO operates, the 

procurement standards of the State that 

are the most restrictive apply. If the 

procurement action only benefits a 

single State’s Program, the procurement 

standards of that State agency apply. 

§ 226.7 [Amended] 

■ 21. In § 226.7, in paragraph (c), 

remove the word ‘‘deficiencies’’ and add 

in its place the words ‘‘management 

problems’’. 

■ 22. In § 226.10, revise paragraph (b)(2) 

to read as follows: 

§ 226.10 Program payment procedures. 

* * * * * 

(b) * * * 

(2) If the State agency has audit or 

monitoring evidence of extensive 

serious management problems or other 

reasons to believe that an institution 

will not be able to submit a valid claim 

for reimbursement, advance payments 

must be withheld until the claim is 

received or the corrective actions are 

complete. 

* * * * * 

§ 226.12 [Amended] 

■ 23. In § 226.12, in paragraph (b)(3) 

remove the citation ‘‘§ 226.6(k)’’ and 

add in its place the citation 

‘‘§ 226.25(g)’’. 

§ 226.14 [Amended] 

■ 24. In § 226.14, in paragraph (a), 

remove the words ‘‘an administrative 

review’’ and ‘‘the administrative 

review’’ and add in their place the 

words ‘‘fair hearing’’ and remove the 

words ‘‘§ 226.6(k). Minimum’’ and add 

in their place the words ‘‘§ 226.25(g). 

Minimum’’. 

§ 226.15 [Amended] 

■ 25. In § 226.15, in paragraph (b), 

remove the citation ‘‘§ 226.6(b)(1)(viii)’’ 

and add in its place the citation 

‘‘§ 226.6(b)(1)(xvi)’’. 

■ 26. In § 226.16: 

■ a. Revise paragraphs (b)(3) and (6), the 

first sentence of (d)(4)(iv), and (d)(4)(v); 

■ b. Remove paragraph (l) and 

redesignate paragraph (m) as paragraph 

(l). 

The revisions read as follows: 

§ 226.16 Sponsoring organization 

provisions. 

(b) * * * 

(3) Timely information concerning the 

eligibility status of each facility, such as 

licensing or approval actions; 

* * * * * 

(6) A copy of the sponsoring 

organization’s procedures, if the State 

agency has made the sponsoring 

organization responsible for the fair 

hearing of a proposed termination of a 

day care home or an unaffiliated center, 

as described in § 226.25(g); 

* * * * * 

(d) * * * 

(4) * * * 

(iv) Averaging of required reviews. If 

a sponsoring organization conducts one 

unannounced review of a day care home 

or an unaffiliated center in a year and 

finds no serious management problems, 

as described in § 226.25, the sponsoring 

organization may choose not to conduct 

a third review of the facility that year, 

and may make its second review 

announced, provided that the 

sponsoring organization conducts an 

average of three reviews of all of its 

facilities that year, and that it conducts 

an average of two unannounced reviews 

of all of its facilities that year. * * * 

(v) Follow-up reviews. If, in 

conducting a review of a day care home 

or an unaffiliated center, a sponsoring 

organization detects a serious 

management problem, the next review 

of that day care home or unaffiliated 

center must be unannounced. Serious 

management problems are those 

described in § 226.25(a)(3) regardless of 

the type of facility. 

* * * * * 

■ 27. In § 226.17, add a new sentence at 

the end of paragraphs (e) and (f) to read 

as follows: 

§ 226.17 Child care center provisions. 

* * * * * 

(e) * * * The sponsoring organization 

may terminate this agreement for cause 

as described in § 226.25(a). 

(f) * * * The State agency may 

terminate this agreement for cause as 

described in § 226.25(a). 

■ 28. In § 226.17a, add a new sentence 

at the end of paragraphs (f)(2)(i) and (ii) 

to read as follows: 

§ 226.17a At-risk afterschool center 

provisions. 

* * * * * 

(f) * * * 

(2) * * * 

(i) * * * The sponsoring organization 

may terminate this agreement for cause 

as described in § 226.25(a). 

(ii) * * * The State agency may 

terminate this agreement for cause as 

described in § 226.25(a). 

* * * * * 

§ 226.18 [Amended] 

■ 29. In § 226.18: 

■ a. In paragraph (b) introductory text, 

remove the citation ‘‘§ 226.16(l)’’ and 

add in its place the citation ‘‘§ 226.25’’; 

and 

■ b. In paragraph (b)(16): 

■ i. Remove the words ‘‘an 

administrative review’’ and add in their 

place the words ‘‘a fair hearing’’; and 

■ ii. Remove the citation 

‘‘§ 226.16(l)(2)’’ and add in its place the 

citation ‘‘§ 226.25’’. 

■ 30. In § 226.19, add a new sentence at 

the end of paragraph (d) to read as 

follows: 

§ 226.19 Outside-school-hours care center 

provisions. 

(d) * * * The sponsoring 

organization may terminate this 

agreement for cause as described in 

§ 226.25(a). 

* * * * * 

■ 31. In § 226.19a, add a new sentence 

at the end of paragraph (d) to read as 

follows: 

§ 226.19a Outside-school-hours care 

center provisions. 

(d) * * * The sponsoring 

organization may terminate this 

agreement for cause as described in 

§ 226.25(a). 

* * * * * 

§§ 226.25 through 226.27 [Redesignated as 

§§ 226.26 through 226.28] 

■ 32. §§ 226.25 through 226.27 are 

redesignated as §§ 226.26 through 

226.28, respectively. 

■ 33. Add new § 226.25 to read as 

follows: 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13221 

§ 226.25 Administrative actions to address 

serious management problems 

(a) Serious management problems— 

(1) General. State agencies and 

sponsoring organizations must follow 

the procedures outlined in this section 

to address any serious management 

problems. The State agency must 

provide the institution an opportunity 

for corrective action and due process. 

The sponsoring organization must 

provide the day care home or 

unaffiliated center an opportunity for 

corrective action and due process. 

(2) Six steps. The serious deficiency 

process includes a standard set of 

procedures that State agencies and 

sponsoring organizations follow to 

address serious management problems 

in the operation of the Program. These 

procedures apply to serious 

management problems in new 

institutions with a signed permanent 

agreement, participating institutions, 

day care homes, and unaffiliated 

centers. The State agency or sponsoring 

organization must: 

(i) Identify serious management 

problems. 

(ii) Issue a notice of serious 

management problems. 

(iii) Receive and assess corrective 

action(s). 

(iv) Issue a notice of successful 

corrective action or a notice of proposed 

termination with appeal rights. 

(v) Provide a fair hearing, if requested. 

(vi) Issue a notice of successful appeal 

if the fair hearing vacates the proposed 

termination, or issue a notice of 

termination, serious deficiency, and 

disqualification, if the fair hearing 

upholds the proposed termination or the 

timeframe for requesting a fair hearing 

has passed. 

(3) Identifying serious management 

problems. State agencies must consider 

the type and magnitude of the finding(s) 

to determine whether it rises to the level 

of a serious management problem. State 

agencies should define a set of 

standards to identify serious 

management problems. At a minimum, 

to identify serious management 

problems, State agencies and must 

consider: 

(i) The severity of the problem. Is the 

finding minor or substantial? Is the 

finding systemic or isolated? 

(ii) The degree of responsibility. Is the 

finding best described as an inadvertent 

error or is there evidence of negligence 

or conscious indifference to regulatory 

requirements, or even deception? Is the 

finding at the facility level or the 

institution level? If it is at the institution 

level, has the State agency taken 

appropriate steps to resolve it through 

monitoring, training, and technical 

assistance? If it is at the facility level, 

has the sponsoring organization taken 

the appropriate steps to resolve it 

through monitoring, training, and 

technical assistance? 

(iii) The history of participation in the 

Program. Is this the first instance or is 

there a history of frequently recurring 

Program findings or serious 

management problems at the same 

institution, day care home or 

unaffiliated center? 

(iv) The nature of requirements that 

relate to the finding. Is the action a clear 

finding of Program requirements or a 

simple mistake? Are new policies 

incorporated correctly? 

(v) The degree to which the problem 

impacts Program integrity. Does the 

finding undermine the intent of the 

Program? Is the finding administrative 

or does it impact viability, capability or 

accountability? Is the finding at the 

facility level or the institution level? If 

it is at the institution level, has the State 

agency taken appropriate steps to 

resolve it through monitoring, training, 

and technical assistance? If it is at the 

facility level, has the sponsoring 

organization taken the appropriate steps 

to resolve it through monitoring, 

training, and technical assistance? 

(4) Good standing. If a State agency 

identifies a serious management 

problem, the institution, day care home 

or unaffiliated center is considered to be 

not in good standing. At a minimum, 

the following criteria need to be met to 

return to good standing. 

(i) Outstanding debts are paid; 

(ii) All corrective actions are fully 

implemented; and 

(iii) Meets its Program 

responsibilities. 

(5) Notifications. The State agency 

and sponsoring organization must 

provide written notice of action through 

each step of the serious deficiency 

process. 

(i) Each type of notice must include 

a basis and an explanation of any action 

that is proposed and any action that is 

taken. 

(ii) The notice must be delivered via 

certified mail, return receipt, or an 

equivalent private delivery service, 

facsimile, or email. 

(iii) The notice is considered to be 

received on the date it is delivered, sent 

by facsimile, or sent by email. 

(iv) If the notice is undeliverable, it is 

considered to be received 5 days after it 

is sent to the addressee’s last known 

mailing address, facsimile number, or 

email address. 

(6) Serious management problems 

notification procedures for institutions. 

If the State agency determines that 

institution has serious management 

problems, the sponsoring organization 

must use the following procedures. The 

State agency must notify the institution 

of all findings, even those that do not 

rise to a serious management problem, 

and they must be corrected. 

(i) First notification—notice of serious 

management problem. The State agency 

must notify the institution’s executive 

director, chair of the board of directors 

that the institution has serious 

management problems and provide an 

opportunity to take corrective action. 

The notice must also be sent to all other 

responsible principal and other 

responsible individual. At the same 

time the notice is issued, the State 

agency must add the institution to the 

State agency list, as described in 

paragraph (b) of this section and provide 

a copy of the notice to the FNSRO. This 

notice documents that a serious 

management problem must be 

addressed and corrected. Prompt action 

must be taken to minimize the time that 

elapses between the identification of a 

serious management problem and the 

issuance of the notice. For each serious 

management problem, the notice must: 

(A) Specify each serious management 

problem; 

(B) Cite the specific regulatory 

requirements, instructions, or policies 

as the basis for the serious management 

problems; 

(C) Identify the responsible principals 

and responsible individuals; 

(D) Specify the actions that must be 

taken to correct each serious 

management problem. The notice may 

specify different corrective actions and 

time periods for completing the 

corrective actions for the institution and 

the responsible principal and the 

responsible individual; 

(E) Set time allotted for implementing 

the corrective action. The corrective 

action must include milestones and a 

definite completion date that will be 

monitored. Although paragraph (c)(2) of 

this section sets maximum timeframes, 

shorter timeframes for corrective action 

may be established. 

(F) Specify that failure to fully 

implement corrective actions for each 

serious management problem within the 

allotted time will result in the State 

agency’s proposed termination of the 

institution’s agreement and the 

proposed disqualification of the 

institution and the responsible 

principals and responsible individuals; 

(G) Clearly state that, if the institution 

voluntarily terminates its agreement 

with the State agency after having been 

notified of serious management 

problems it will still result in the 

institution’s agreement being terminated 

for cause and the placement of the 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13222 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

institution and its responsible 

principals and responsible individuals 

on the National Disqualified List; 

(H) Clearly state that submission of 

the date of birth for any individual 

named as a responsible principal or 

responsible individual in the notice of 

serious management problems is a 

condition of corrective action for the 

institution and/or responsible principal 

or responsible individual. 

(I) Clearly state that the serious 

management problems are not subject to 

a fair hearing. 

(ii) Second notification—notice of 

successful corrective action or notice of 

proposed termination, proposed 

disqualification—(A) Notice of 

successful corrective action. If corrective 

action has been implemented to correct 

each serious management problem 

within the time allotted and to the State 

agency’s satisfaction, the State agency 

must: 

(1) Notify the executive director, chair 

of the board of directors, owner, 

responsible principals, and responsible 

individuals, that the corrective actions 

are fully implemented; 

(2) If corrective action is complete for 

the institution, but not for all of the 

responsible principals and responsible 

individuals, the State agency must 

continue with actions, as described in 

paragraph (a)(6)(ii)(B) of this section, 

against the remaining parties. 

(3) At the same time the notice is 

issued, the State agency must also 

update the State agency list, as 

described in paragraph (b) of this 

section and provide a copy of the notice 

the appropriate FNSRO. 

(4) Ensure the institution continues to 

implement procedures and policies to 

fully correct the serious management 

problems and achieve full correction, as 

described in paragraph (c)(3) of this 

section. 

(B) Notice of proposed termination 

and proposed disqualification. If 

corrective action has not been taken or 

fully implemented for each serious 

management problem within the time 

allotted and to the State agency’s 

satisfaction, or repeat serious 

management problems occur before full 

correction is achieved, the State agency 

must: 

(1) Notify the executive director, chair 

of the board of directors, owner, 

responsible principals, and responsible 

individuals, that the State agency 

proposes to terminate the institution’s 

agreement and proposes to disqualify 

the institution, responsible principals 

and responsible individuals and explain 

the institution’s opportunity for seeking 

a fair hearing; 

(2) At the same time the notice is 

issued, the State agency must also 

update the State agency list, and 

provide a copy of the notice the 

appropriate FNSRO. 

(3) The notice must specify: 

(i) That the State agency is proposing 

to terminate the institution’s agreement 

and proposing to disqualify the 

institution and the responsible 

principals and the responsible 

individuals; 

(ii) The basis for the proposal to 

terminate; 

(iii) That, if the institution voluntarily 

terminates its agreement with the State 

agency after receiving the notice of 

proposed termination, it will still result 

in the institution’s agreement being 

terminated for cause and the placement 

of the institution and its responsible 

principals and responsible individuals 

on the National Disqualified List; 

(iv) The procedures for seeking a fair 

hearing (in accordance with paragraph 

(g) of this section) of the proposed 

termination and proposed 

disqualifications; and 

(v) That, unless participation has been 

suspended, the institution may continue 

to participate and receive Program 

reimbursement for eligible meals served 

and allowable administrative costs 

incurred until the fair hearing is 

complete. 

(iii) Third notification—Notice to 

vacate the proposed termination of the 

institution’s agreement or notice of 

serious deficiency, termination of the 

agreement, and disqualifications—(A) 

Notice to vacate the proposed 

termination of an institution’s 

agreement. If the fair hearing vacates the 

proposed termination, the State agency 

must notify the institution and must: 

(1) Notify the institution’s executive 

director and chairman of the board of 

directors that the proposed termination 

of the institution’s agreement has been 

vacated. 

(2) Update the State agency list at the 

time the notice is issued; 

(3) Provide a copy of the notice to the 

appropriate FNSRO. 

(B) Notice of serious deficiency, 

termination of the institution’s 

agreement and disqualifications. When 

the time for requesting a fair hearing 

expires or when the hearing official 

upholds the State agency’s proposed 

termination and disqualifications, the 

State agency must: 

(1) Notify the institution’s executive 

director and chairman of the board of 

directors, and the responsible principals 

and responsible individuals, that the 

institution’s agreement is terminated 

and that the institution and the 

responsible principals and responsible 

individuals are disqualified and placed 

on the National Disqualified List; 

(2) Update the State agency list at the 

time notice is issued; and 

(3) Provide a copy of the notice and 

the mailing address and date of birth for 

each responsible principal and 

responsible individual to the 

appropriate FNSRO. 

(7) Serious management problem(s) 

notification procedures for day care 

homes and unaffiliated centers. If the 

sponsoring organization determines that 

a day care home or unaffiliated center 

has serious management problems, the 

sponsoring organization must use the 

following procedures. The sponsoring 

organization must notify the day care 

home and unaffiliated centers of all 

findings, even those that do not rise to 

a serious management problem and they 

must be corrected. 

(i) First notification—notice of serious 

management problem. The sponsoring 

organization must notify the day care 

home or unaffiliated center that it has 

serious management problems and offer 

it an opportunity to take corrective 

action. At the same time the notice is 

issued, the sponsoring organization 

must provide a copy of the notice to the 

State agency. Prompt action must be 

taken to minimize the time that elapses 

between the identification of serious 

management problem(s) and the 

issuance of the notice. For each serious 

management problem, the notice must: 

(A) Specify the serious management 

problem; 

(B) Cite the specific regulatory 

requirements, instructions, or policies 

as the basis for each serious 

management problem. 

(C) Specify the actions that must be 

taken to correct the serious management 

problem(s). The notice may specify 

different corrective actions and time 

periods for completing the corrective 

action(s) for the day care home or 

unaffiliated center; 

(D) Set time allotted for implementing 

the corrective action. The corrective 

action must include milestones and a 

definite completion date that will be 

monitored. Although paragraph (c)(2) of 

this section sets maximum timeframes, 

shorter timeframes for corrective action 

may be established. 

(E) Specify that failure to fully 

implement corrective actions for each 

serious management problem within the 

allotted time will result in the 

sponsoring organization’s proposed 

termination of the Program agreement 

and the proposed disqualification of the 

day care home and provider or 

unaffiliated center and its principals; 

(F) Clearly state that, if the day care 

home or unaffiliated center voluntarily 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13223 

terminates its agreement with the State 

agency after having been notified of 

serious management problems, it will 

still result in the day care home or 

unaffiliated center’s agreement being 

terminated for cause and the placement 

of the day care home and provider or 

unaffiliated center and its principals on 

the National Disqualified List; 

(G) Clearly state that the serious 

management problems are not subject to 

a fair hearing. 

(ii) Second notification—notice of 

successful corrective action or notice of 

proposed termination, proposed 

disqualification. (A) Notice of successful 

corrective action. If corrective action has 

been implemented to correct each 

serious management problem within the 

time allotted and to the sponsoring 

organization’s satisfaction, the 

sponsoring organization must: 

(1) Notify the day care home or 

unaffiliated center, that the corrective 

actions are fully implemented; 

(2) At the same time the notice is 

issued, the sponsoring organization 

must provide a copy of the notice to the 

State agency. 

(3) Ensure the day care home and 

unaffiliated center continues to 

implement procedures and policies to 

fully correct the serious management 

problems, as described in paragraph 

(c)(3) of this section. 

(B) Notice of proposed termination 

and proposed disqualification. If 

corrective action has not been taken or 

fully implemented for each serious 

management problem within the time 

allotted and to the sponsoring 

organization’s satisfaction, or repeat 

serious management problems occur 

before full correction is achieved, the 

State agency must: 

(1) Notify the day care home or 

unaffiliated center, that the sponsoring 

organization proposes to terminate the 

agreement and proposes to disqualify 

the day care home or unaffiliated center 

and explain the day care home or 

unaffiliated center’s opportunity for 

seeking a fair hearing. 

(2) At the same time the notice is 

issued, the sponsoring organization 

must also provide a copy of the notice 

to the State agency. 

(3) The notice must also specify: 

(i) The basis for the proposal to 

terminate; 

(ii) That, if the day care home or 

unaffiliated center voluntarily 

terminates its agreement with the 

sponsoring organization after receiving 

the notice of proposed termination, it 

will still result in the day care home or 

unaffiliated center’s agreement being 

terminated for cause and the placement 

of the day care home provider or 

unaffiliated center and its principals on 

the National Disqualified List; 

(iii) The procedures for seeking a fair 

hearing of the proposed termination and 

proposed disqualifications; and 

(iv) That, unless participation has 

been suspended, the day care home or 

unaffiliated center may continue to 

participate and receive Program 

reimbursement for eligible meals served 

until the fair hearing is complete. 

(iii) Third notification—Notice to 

vacate the proposed termination of the 

facility’s agreement, or notice of serious 

deficiency, termination of the 

agreement, and disqualifications—(A) 

Notice to vacate the proposed 

termination of a day care home or 

unaffiliated center’s agreement. If the 

fair hearing vacates the proposed 

termination, the State agency must 

notify the institution and must: 

(1) Notify the institution’s executive 

director and chairman of the board of 

directors that the proposed termination 

of the institution’s agreement has been 

vacated. 

(2) Provide a copy of the notice to the 

State agency. 

(B) Notice of serious deficiency, 

termination of the day care home or 

unaffiliated center’s agreement and 

disqualifications. When the time for 

requesting a fair hearing expires or 

when the hearing official upholds the 

sponsoring organization’s proposed 

termination and proposed 

disqualifications, the sponsoring 

organization must immediately 

terminate the day care home or 

unaffiliated center’s agreement and 

disqualify the day care home or 

unaffiliated center and its principals: 

(1) Notify the day care home or 

unaffiliated center that its agreement is 

terminated and that the day care home 

or unaffiliated center and its principals 

are placed on the National Disqualified 

List; and 

(2) Provide a copy of the notice to the 

State agency. 

(b) Placement on the State agency list. 

(1) The State agency must maintain a 

State agency list, made available to FNS 

upon request, and must include the 

following information: 

(i) Names and mailing addresses of 

each institution, day care home or 

unaffiliated center that is determined to 

have a serious management problem; 

(ii) Names, mailing addresses, and 

dates of birth of each responsible 

principal and responsible individual; 

(iii) The status of the institution, day 

care home or unaffiliated center, as it 

progresses through the stages of 

corrective action, termination, 

suspension, and disqualification, full 

correction, as applicable. 

(2) Within 10 days of receiving a 

notice of termination and 

disqualification from a sponsoring 

organization, the State agency must 

provide FNS with the information as 

described in paragraphs (b)(1)(i) and (ii) 

of this section. 

(c) Correcting serious management 

problems. In response to the notice of 

serious management problems, the 

institution, unaffiliated center or day 

care home must submit, in writing, what 

corrective actions it has taken to correct 

each serious management problem. 

(1) Corrective action plans. An 

acceptable corrective action plan must 

demonstrate that the serious 

management problem is resolved. The 

plan must address the root cause of each 

serious management problem, describe 

and document the action taken to 

correct serious management problems, 

and describe the action’s outcome. The 

corrective action plan must include the 

following: 

(i) What is the serious management 

problem and the action taken to address 

it? 

(ii) Who addressed the serious 

management problem? 

(iii) When was the action taken to 

address the serious management 

problem? Provide a timeline for 

implementing the action (i.e., daily, 

weekly, monthly, or annually, and when 

did implementation of the plan begin)? 

(iv) Where is documentation of the 

corrective action plan filed? 

(v) How were staff and providers 

informed of the new policies and 

procedures? 

(2) Corrective action timeframes. 

Corrective action must be taken within 

the allotted time that ensures that 

serious management problems are 

quickly addressed and fully corrected. 

The time allotted to correct the serious 

management problem must be 

appropriate for the type of serious 

management problem and the type of 

institution or facility where the serious 

management problem is found. The 

allotted time begins on the date the first 

notification is received, as described in 

paragraphs (a)(7)(i) and (a)(8)(i) of this 

section. 

(i) For day care homes and 

unaffiliated centers, the serious 

management problems must be 

corrected as soon as possible or up to 30 

days from the date a day care home or 

unaffiliated center receives the notice. 

(ii) For institutions, the serious 

management problems must be 

corrected as soon as possible or up to 90 

days from the date a day care home or 

unaffiliated center receives the first 

notification. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13224 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

(iii) More than 90 days only if the 

State agency determines that corrective 

action will require the long-term 

revision of management systems or 

processes, such as, but not limited to, 

the purchase and implementation of 

new claims payment software or a major 

reorganization of Program management 

duties that will require action by the 

board of directors. 

(A) The State agency may permit more 

than 90 days to complete the corrective 

action. 

(B) The institution’s corrective action 

plan must include milestones and a 

definite completion date. 

(C) The State agency must receive and 

approve the corrective action plan 

within 90 days from the date the 

institution received the notice. 

(D) The State agency must monitor 

full implementation of the corrective 

action plan. 

(iv) Up to 30 days for a false claim or 

unlawful practice. The State agency is 

prohibited from allowing more than 30 

days for corrective action if it 

determines that an institution: 

(A) Engaged in an unlawful practice, 

(B) Submitted a false or fraudulent 

claim to the State agency, 

(C) Submitted other false or 

fraudulent information to the State 

agency, 

(D) Was convicted of a crime, or 

(E) Concealed a criminal background. 

(3) Achieving full correction of serious 

management problems. The path to full 

correction requires demonstrating the 

ability to operate the Program with no 

serious management problems, as 

described in paragraph (a) of this 

section. 

(i) Full correction of an institution’s 

serious management problems. The 

State agency must prioritize follow-up 

reviews and more frequent full reviews 

of institutions with serious management 

problems, as described in 

§ 226.6(k)(6)(ii). A follow-up review 

must be conducted to confirm that the 

serious management problem is 

corrected. Full reviews must be 

conducted at least once every 2 years. 

Full correction of an institution’s 

serious management problems is 

achieved when: 

(A) At least two full reviews reveal no 

new or repeat serious management 

problems; 

(B) The first and last full reviews are 

at least 24 months apart and reveal no 

new or repeat serious management 

problems; and 

(C) All reviews, including any followup reviews, between the first and last 

full review reveal no new or repeat 

serious management problems. 

(ii) Full correction of a day care home 

or unaffiliated center’s serious 

management problems. Sponsoring 

organization’s must conduct reviews, as 

described in § 226.16(d)(4) to confirm 

that the serious management problem is 

corrected. A follow-up review must be 

conducted to confirm that the serious 

management problem is corrected. Full 

correction of a day care home or 

unaffiliated center’s serious 

management problems is achieved 

when: 

(A) At least three full reviews, reveal 

no new or repeat serious management 

problems. 

(B) All reviews, including any followup reviews, between the first and last 

full review reveal no new or repeat 

serious management problems. 

(iii) Once full correction is achieved, 

a serious management problem that 

recurs again, is not considered repeat 

and therefore, would not lead to 

immediate proposal to terminate. Any 

new or recurrence of a serious 

management problem after the initial 

full correction is achieved would 

require the State agency or sponsoring 

organization to issue a new notice of 

serious management problem, as 

described in paragraph (a) of this 

section. 

(iv) The recurrence of a serious 

management problem before full 

correction is achieved would lead 

directly to proposed termination. 

(d) Termination—(1) Termination for 

cause. If the State agency or sponsoring 

organization determines that the 

institution or facility is unable to 

properly perform its responsibilities 

under its Program agreement and fails to 

take successful corrective action, the 

Program agreement must be terminated 

for cause. The State agency and 

sponsoring organization would declare 

the institution or facility to be seriously 

deficient at the point of termination, 

which would be followed by 

disqualification. The State agency, 

institution, or facility shall not 

terminate for convenience to avoid 

implementing the serious deficiency 

process. Termination not related to 

performance can be found in 

§ 226.6(b)(4). 

(2) Contingency plan. A State agency 

must have a contingency plan in place 

for the transfer of facilities if a 

sponsoring organization is terminated or 

disqualified to ensure that eligible 

participants continue to have access to 

meal services. 

(e) Disqualification—(1) Reciprocal 

disqualification. A State agency may not 

enter into an agreement with any 

institution, responsible principal, or 

responsible individual, if they have 

been terminated for cause from any 

Child Nutrition Program and placed on 

a National Disqualified List, as 

described in § 226.6(b)(1)(xiii). Any 

existing agreements with an institution, 

responsible individual, or responsible 

principal must also be terminated and 

disqualified. 

(i) No individual on the National 

Disqualified List may serve as a 

principal in any institution or facility or 

as a day care home provider. 

(ii) The State agency must not 

approve the application of a new or 

renewing institution if any of the 

institution’s principals is on the 

National Disqualified List. 

(iii) A sponsoring organization is 

prohibited from submitting an 

application on behalf of a sponsored 

facility if any of the facility’s principals 

are on the National Disqualified List. 

(iv) A sponsoring organization is 

prohibited from submitting an 

application on behalf of a sponsored 

facility if the facility is on the National 

Disqualified List. 

(v) The State agency must not approve 

an application described in paragraphs 

(e)(1)(iii) and (iv) of this section. 

(vi) Once included on the National 

Disqualified List, an institution, 

unaffiliated center, or day care home, 

responsible principal, or responsible 

individual will remain on the list until 

the State agency determines that either 

the serious management problem that 

led to placement on the National 

Disqualified List has been corrected or 

7 years have elapsed since 

disqualification from the Program, 

whichever is longer. Any debt owed 

under the Program must be repaid. 

(2) National Disqualified List. FNS 

will maintain the National Disqualified 

List and make it available to all State 

agencies and all sponsoring 

organizations. This computer matching 

program uses a Computer Matching Act 

system of records of information on 

institutions and individuals who are 

disqualified from participation in 

CACFP. 

(i) Placement on the National 

Disqualified List. The State agency must 

provide the following information to 

FNS for each institution, facility, 

responsible principal, and responsible 

individual: 

(A) Name and address of the 

institution, including city, State, and zip 

code; 

(B) Any known aliases; 

(C) Termination date; 

(D) Amount of debt owed, if any; 

(E) Reason, and if other is checked, an 

explanation, for the; 

(F) Date of birth of the responsible 

principal and responsible individual; 

and 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13225 

(G) Position within the institution or 

facility of the responsible principal and 

responsible individual. 

(ii) Removal from the National 

Disqualified List. An institution, 

responsible principal and responsible 

individual disqualified from the 

Program due to uncorrected serious 

management problems will remain on 

the National Disqualified List until the 

State agency and FNS have determined 

that the serious management problems 

are corrected, or for 7 years, whichever 

is longer. Any debts owed under the 

Program must be repaid. After an 

institution, responsible principal or 

responsible individual has been 

removed from the National Disqualified 

List, they will be considered to be in 

good standing, and eligible to apply for 

the Program. 

(iii) Early removal of institutions, 

principals, and individuals from the list. 

The State agency must review and 

approve a request for removal from the 

National Disqualified List. If the State 

agency approves the request, and 

ensures that any debt associated has 

been paid, it may submit the 

information to the FNSRO, where it will 

be reviewed for completeness. The 

FNSRO will also ensure that the State 

agency’s request is within Program 

requirements and that the 

documentation supports the early 

removal. Once reviewed, the FNSRO 

will submit the request to the FNSRO 

for removal. The effective date of 

removal will be the date on which the 

FNS National Office processes the 

removal request. The FNSRO will be 

notified once the removal has been 

completed and inform the State agency. 

(3) Computer Matching Act (CMA). 

The Computer Matching and Privacy 

Protection Act addresses the use of 

information from computer matching 

programs that involve a Federal System 

of Records. Address: compliance, 

matching agreement, and independent 

verification 

(i) Each State agency participating in 

a computer matching program must 

comply with the provisions of the 

Computer Matching Act if it uses an 

FNS system of records in order to: 

(A) Establish eligibility for a Federal 

benefit program; 

(B) Verify eligibility for a Federal 

benefit program; 

(C) Verify compliance with either 

statutory or regulatory requirements of a 

Federal benefit program; or 

(D) Recover payments or delinquent 

debts owed under a Federal benefit 

program. 

(ii) State agencies must enter into 

written agreements with FNS, consistent 

with 5 U.S.C. 552a(o) of the Computer 

Matching Act, in order to participate in 

a matching program involving a FNS 

Federal system of records. The 

agreement must include the State 

agency’s independent verification 

requirements. 

(iii) State agencies are prohibited from 

taking any adverse action to terminate, 

deny, suspend, or reduce benefits to an 

applicant or recipient based on 

information produced by a Federal 

computer matching program that is 

subject to the requirements of the 

Computer Matching Act, unless: 

(A) The information has been 

independently verified by the State 

agency; and 

(B) FNS has waived the two-step 

independent verification and notice 

requirement. 

(iv) A State agency that receives a 

request for verification from another 

State agency or from FNS must provide 

the necessary verification. The State 

agency must respond within 20 calendar 

days of receiving the request. 

(v) A State agency may use the record 

of a certified notice to independently 

verify the accuracy of a computer 

match. 

(f) Suspension—(1) Public health or 

safety. If State or local health or 

licensing officials have cited an 

institution, day care home or 

unaffiliated center for serious health or 

safety violations, Program participation 

must be immediately suspended prior to 

any formal action to revoke the 

institution, day care home or 

unaffiliated center’s licensure or 

approval. If the State agency or 

sponsoring organization determines that 

there is an imminent threat to the health 

or safety of participants, or that there is 

a threat to public health or safety, the 

appropriate State or local licensing and 

health authorities must immediately be 

notified and take action that is 

consistent with the recommendations 

and requirements of those authorities. 

The State agency or sponsoring 

organization must initiate action for 

termination and disqualification. 

(i) Notification procedures for 

institutions engaging in activities that 

threaten public health or safety or pose 

an imminent threat to the health or 

safety of participants: 

(A) Notice of suspension, proposed 

termination, and proposed 

disqualification. The State agency must 

notify the institution’s executive 

director and chairman of the board of 

directors that the institution’s 

participation (including Program 

payments) has been suspended and that 

the State agency proposes to terminate 

the institution’s agreement and to 

disqualify the institution and the 

responsible principals and responsible 

individuals. The notice must also 

identify the responsible principals and 

responsible individuals and must be 

sent to those persons as well. At the 

same time this notice is sent, the State 

agency must add the institution and the 

responsible principals and responsible 

individuals to the State agency list, 

along with the basis for the suspension 

and provide a copy of the notice to the 

appropriate FNSRO. The notice must 

also specify: 

(1) That the State agency is 

suspending the institution’s 

participation (including Program 

payments), proposing to terminate the 

institution’s agreement, and proposing 

to disqualify the institution and the 

responsible principals and responsible 

individuals; 

(2) The basis for the suspension; 

(3) That, if the institution voluntary 

terminates its agreement with the State 

agency after having been notified of the 

proposed termination, the institution 

and the responsible principals and 

responsible individuals will be 

disqualified; 

(4) The procedures for seeking a fair 

hearing (consistent with paragraph (g) of 

this section) of the suspension, 

proposed termination, and proposed 

disqualifications; and 

(5) That, if the suspension review 

official overturns the suspension, the 

institution may claim reimbursement for 

eligible meals served and allowable 

administrative costs incurred during the 

suspension period. 

(B) Notice of agreement termination, 

serious deficiency and disqualifications. 

When time for requesting a fair hearing 

expires or when the hearing official 

upholds the State agency’s proposed 

termination and disqualifications, the 

State agency must: 

(1) Notify the institution’s executive 

director and chairman of the board of 

directors, and the responsible principals 

and responsible individuals, that the 

institution’s agreement has been 

terminated and that the institution and 

the responsible principals and 

responsible individuals have been 

disqualified; 

(2) Update the State agency list at the 

time such notice is issued; and 

(3) Provide a copy of the notice and 

the mailing address and date of birth for 

each responsible principal and 

responsible individual to the 

appropriate FNSRO. 

(ii) Notification procedures for day 

care homes and unaffiliated centers 

engaging in activities that threaten 

public health or safety or pose an 

imminent threat to the health or safety 

of participants: 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13226 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

(A) Notice of suspension, proposed 

termination, and proposed 

disqualification. The sponsoring 

organization must notify the day care 

home provider or the unaffiliated 

center’s principals that the day care 

home or unaffiliated center’s 

participation (including Program 

payments) has been suspended and that 

the sponsoring organization proposes to 

terminate the day care home or 

unaffiliated center’s agreement and to 

disqualify the day care home or 

unaffiliated and its principals. The 

notice must also identify the principals. 

At the same time this notice is sent, the 

sponsoring organization must also 

provide a copy of the notice to the State 

agency. The notice must also specify: 

(1) That the sponsoring organization 

is suspending the day care home or 

unaffiliated center’s participation 

(including Program payments), 

proposing to terminate the institution’s 

agreement, and proposing to disqualify 

the day care home or unaffiliated center 

and its principals; 

(2) The basis for the suspension; 

(3) That, if the day care home or 

unaffiliated center voluntary terminates 

its agreement with the State agency after 

having been notified of the proposed 

termination, the day care home or 

unaffiliated center and its principals 

will be disqualified; 

(4) The procedures for seeking a fair 

hearing (consistent with paragraph (g) of 

this section) of the suspension, 

proposed termination, and proposed 

disqualifications; and 

(5) That, if the suspension review 

official overturns the suspension, the 

day care home or unaffiliated center 

may claim reimbursement for eligible 

meals served and allowable 

administrative costs incurred during the 

suspension period. 

(B) Notice of agreement termination, 

serious deficiency and disqualifications. 

When time for requesting a fair hearing 

expires or when the hearing official 

upholds the sponsoring organization’s 

proposed termination and 

disqualifications, the sponsoring 

organization must: 

(1) Notify the day care home provider 

or unaffiliated center and its principals, 

that the day care home or unaffiliated 

center’s agreement has been terminated 

and that the day care home or 

unaffiliated center and its principals 

have been disqualified; and 

(2) Provide a copy of the notice to the 

State agency. 

(2) Submission of a false or fraudulent 

claim for reimbursement. If the State 

agency determines that an institution 

has knowingly submitted a false or 

fraudulent claim, the State agency must 

initiate action to suspend the 

institution’s participation and must 

initiate action to terminate the 

institution’s agreement and initiate 

action to disqualify the institution and 

the responsible principals and 

responsible individuals. The following 

procedures must be used to issue a 

notice of proposed suspension of 

participation at the same time it issues 

a notice of proposed termination, which 

must include the following information: 

(i) Notice of proposed suspension of 

participation. The State agency must 

notify the institution’s executive 

director and chairman of the board of 

directors that the State agency proposes 

to suspend the institution’s 

participation, including Program 

payments. At the same time this notice 

is sent, the State agency must add the 

institution and the responsible 

principals and responsible individuals 

to the State agency list, along with the 

basis for the suspension and provide a 

copy of the notice to the appropriate 

FNSRO. The notice must also specify: 

(A) That the State agency is proposing 

to suspend the institution’s 

participation; 

(B) The basis for the suspension; 

(C) That, if the institution voluntarily 

terminates its agreement with the State 

agency after having been notified of the 

proposed termination, the institution 

and the responsible principals and 

responsible individuals will be 

disqualified; 

(D) The procedures for seeking a fair 

hearing (consistent with paragraph (g) of 

this section) of the suspension, 

proposed termination, and proposed 

disqualifications; 

(E) The effective date of the 

suspension (which may be no earlier 

than 10 days after the institution 

receives the suspension notice); 

(F) The name, address and telephone 

number of the suspension review 

official who will conduct the 

suspension review; and 

(G) That if the institution intends to 

request a suspension review, it must 

submit the request a written 

documentation opposing the proposed 

suspension to the suspension review 

official within 10 days of the 

institution’s receipt of the notice. 

(ii) Maximum time for suspension. 

Under no circumstances may the 

suspension of participation remain in 

effect for more than 120 days following 

the suspension review decision. 

(iii) Notice of suspension, proposed 

termination, and proposed 

disqualification. The State agency must 

notify the institution’s executive 

director and chairman of the board of 

directors that the institution’s 

participation (including Program 

payments) has been suspended and that 

the State agency proposes to terminate 

the institution’s agreement and to 

disqualify the institution and the 

responsible principals and responsible 

individuals. The notice must also 

identify the responsible principals and 

responsible individuals and must be 

sent to those persons as well. At the 

same time this notice is sent, the State 

agency must add the institution and the 

responsible principals and responsible 

individuals to the State agency list, 

along with the basis for the suspension 

and provide a copy of the notice to the 

appropriate FNSRO. The notice must 

also specify: 

(A) That the State agency is 

suspending the institution’s 

participation (including Program 

payments), proposing to terminate the 

institution’s agreement, and proposing 

to disqualify the institution and the 

responsible principals and responsible 

individuals; 

(B) The basis for the suspension; 

(C) That, if the institution voluntary 

terminates its agreement with the State 

agency after having been notified of the 

proposed termination, the institution 

and the responsible principals and 

responsible individuals will be 

disqualified; 

(D) The procedures for seeking a fair 

hearing of the suspension, proposed 

termination, and proposed 

disqualifications as described in 

paragraph (g) of this section; and 

(E) That, if the suspension review 

official overturns the suspension, the 

institution may claim reimbursement for 

eligible meals served and allowable 

administrative costs incurred during the 

suspension period. 

(iv) Notice of agreement termination, 

serious deficiency and disqualifications. 

When time for requesting a fair hearing 

expires or when the hearing official 

upholds the State agency’s proposed 

termination and disqualifications, the 

State agency must: 

(A) Notify the institution’s executive 

director and chairman of the board of 

directors, and the responsible principals 

and responsible individuals, that the 

institution’s agreement has been 

terminated and that the institution and 

the responsible principals and 

responsible individuals have been 

disqualified; 

(B) Update the State agency list at the 

time such notice is issued; and 

(C) Provide a copy of the notice and 

the mailing address and date of birth for 

each responsible principal and 

responsible individual to the 

appropriate FNSRO. 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13227 

(g) Fair hearing—(1) Right to a fair 

hearing. (i) The institution must be 

advised in writing of the grounds upon 

which the State agency based the action 

and its right to a fair hearing. The State 

agency must offer a fair hearing in the 

notice to the institution of any of the 

following actions: 

(A) Denial of a new institution’s 

application for participation (see 

§ 226.6(b)(1) on the State agency review 

of a new institution’s application; and 

§ 226.6(c)(1), on the State agency’s 

denial of new institution’s application); 

(B) Denial of an application submitted 

by a sponsoring organization on behalf 

of a facility; 

(C) Proposed termination of an 

institution’s agreement (see paragraph 

(a)(6)(ii)(B) of this section, dealing with 

proposed termination of agreements and 

paragraph (f) of this section dealing with 

proposed termination of agreements for 

suspended institutions); 

(D) Suspension of an institution’s 

participation (see paragraph (f) of this 

section, dealing with suspension for 

health or safety reasons or submission of 

a false or fraudulent claim); 

(E) Denial of an institution’s 

application for start-up or expansion 

payments (§ 226.7(h)); 

(F) Denial of a request for an advance 

payment (see § 226.10(b)); 

(G) Recovery of all or part of an 

advance in excess of the claim for 

application period. The recovery may be 

through a demand for full repayment or 

an adjustment of subsequent payments 

(see § 226.10(b)(3)); or 

(H) Denial of all or part of an 

institution’s claim for reimbursement 

(except for denial based on a late 

submission under § 226.10(e)) (see 

§§ 226.10(f) and 226.14(a)); 

(I) Decision by the State agency to not 

forward to FNS an exception request by 

an institution for payment of a late 

claim, or a request for an upward 

adjustment to a claim (§ 226.10(e)); 

(J) Demand for the remittance of an 

overpayment (see § 226.14(a)); and 

(K) Any other action of the State 

agency affecting an institution’s 

participation of its claim for 

reimbursement. 

(ii) The facility must be advised in 

writing of the grounds upon which the 

sponsoring organization based the 

action and its right to a fair hearing. The 

State agency or sponsoring organization 

must offer a fair hearing for proposed 

termination or suspension. A fair 

hearing for any other action is not 

required. 

(iii) The notice of due process must 

inform the institution or facility of: 

(A) The action that is taken or 

proposed to be taken; 

(B) The legal basis for the action; 

(C) The right to appeal the action; and 

(D) The procedures and deadlines for 

requesting an appeal of the action. 

(iv) If a fair hearing is requested: 

(A) The State agency must continue to 

pay any valid claims for reimbursement 

of eligible meals served and allowable 

administrative expenses incurred until 

the hearing official issues a decision. 

(B) Any information upon which the 

State agency or sponsoring organization 

based its action must be available to the 

appellants for inspection from the date 

of receipt of the hearing request. 

(C) Appellants may request a fair 

hearing in person or by submitting 

written documentation to the hearing 

official. 

(D) Appellants may represent 

themselves, retain legal counsel, or be 

represented by another person. 

(E) All parties must submit written 

documentation to the hearing official 

prior to the beginning of the hearing, 

within 30 days after receiving the notice 

of action. 

(F) Appellants must be permitted to 

contact the hearing official directly. 

(2) Fair hearing procedures. A hearing 

must be held by the fair hearing official 

in addition to, or in lieu of, a review of 

written information only if the 

institution, facility or the responsible 

principals and responsible individuals 

request a hearing in the written request 

for a fair hearing. If the institution’s 

representative, facility’s representative, 

or the responsible principals or 

responsible individuals or their 

representative, fail to appear at a 

scheduled hearing, they waive the right 

to a personal appearance before the 

hearing official, unless the hearing 

official agrees to reschedule the hearing. 

A representative of the State agency 

must be allowed to attend the hearing to 

respond to the testimony of the 

institution and the responsible 

principals and responsible individuals 

and to answer questions posed by the 

hearing official. If a hearing is 

requested, the institution, the 

responsible principals, and responsible 

individuals, and the State agency must 

be provided with at least 10 calendar 

days advance notice of the time and 

place of the hearing. 

(i) The purpose of the hearing is to 

determine that the State agency or 

sponsoring organization followed 

Program requirements. 

(ii) The hearing official’s decisions 

should be limited to that purpose. 

(iii) The purpose is not to determine 

whether to uphold the legality of 

Federal or State Program requirements. 

(iv) The request for a fair hearing must 

be submitted in writing no later than 15 

calendar days after the date the notice 

of action is received. The State agency 

or sponsoring organization must 

acknowledge the request for a fair 

hearing within 10 calendar days of its 

receipt of the request. The State agency 

must provide a copy of the written 

request for a fair hearing, including the 

date of receipt of the request to FNS 

within 10 calendar days of its receipt of 

the request. 

(3) Hearing officials. The individual 

who is appointed to conduct the fair 

hearing, including any State agency or 

sponsoring organization employee or 

contractor, must be independent and 

impartial. The institution, facility, 

responsible principals and responsible 

individuals must be permitted to 

contact the hearing official directly if 

they so desire. The State agency or 

sponsoring organization must ensure 

that the hearing official: 

(i) Has no involvement in the action 

under appeal; 

(ii) Does not occupy a position that 

may potentially be subject to undue 

influence from any party that is 

responsible for the action under appeal; 

(iii) Does not occupy a position that 

may exercise undue influence on any 

party that is responsible for the action 

under appeal; 

(iv) Has no personal interest in the 

outcome of the fair hearing; 

(v) Has no financial interest in the 

outcome of the fair hearing. 

(4) Basis for decision. The hearing 

official must render a decision that is 

based on: 

(i) The determination that the State 

agency or sponsoring organization 

followed Program requirements; 

(ii) The information provided by the 

State agency, institution, responsible 

principals, and responsible individual; 

and 

(iii) The Program requirements 

established in Federal and State laws, 

regulations, policies, and procedures. 

(5) Final decision. The hearing 

official’s decision is the final action in 

the appeal process. 

(i) Within 60 calendar days of the 

State agency’s receipt of the request for 

a fair hearing, the fair hearing official 

must inform the State agency, the 

institution’s executive director and 

chair of the board of directors, and the 

responsible principals and responsible 

individuals, of the fair hearing’s 

outcome. 

(ii) The hearing official must inform 

the sponsoring organization and the 

facility of the outcome within the period 

of time specified in the State agency or 

sponsoring organization’s fair hearing 

procedures. This timeframe is an 

administrative requirement for the State 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
13228 Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 

agency or sponsoring organization, and 

may not be used as a basis for 

overturning a termination if a decision 

is not made within the specified 

timeframe. 

(iii) The hearing official must render 

a decision within 60 calendar days of 

the date the State agency received the 

appeal request. 

(iv) The hearing official must inform 

the State agency, institution, responsible 

principals, and responsible individuals 

of the decision within this 60-day 

period. 

(v) This timeframe is a requirement 

and cannot be used to justify 

overturning the State agency or 

sponsoring organization’s action if a 

decision is not made within the 60-day 

period. 

(vi) 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 (h)(4) of this 

section. 

(vii) The hearing official’s decision is 

final. 

(viii) The decision is not subject to 

appeal. 

(6) Provision of fair hearing 

procedures. The State agency or 

sponsoring organization’s fairing 

hearing procedures must be provided: 

(i) Annually to all institutions, day 

care homes and unaffiliated centers; 

(ii) To an institution, to each 

responsible principal and responsible 

individual, to a day care home or 

unaffiliated center when the State 

agency or sponsoring organization takes 

any action subject to a fair hearing; and 

(iii) Any other time upon request. 

(7) Effect of State agency action. The 

State agency’s action must remain in 

effect during the fair hearing. The effect 

of this requirement on particular State 

agency actions is as follows: 

(i) Overpayment demand. During the 

period of the fair hearing, the State 

agency is prohibited from taking action 

to collect or offset the overpayment. 

However, the State agency must assess 

interest beginning with the initial 

demand for remittance of the 

overpayment and continuing through 

the period of administrative review 

unless the administrative review official 

overturns the State agency’s action. 

(ii) Recovery of advances. During the 

fair hearing, the State agency must 

continue its efforts to recover advances 

in excess of the claim for reimbursement 

for the applicable period. The recovery 

may be through a demand for full 

repayment or an adjustment of 

subsequent payments. 

(h) Payments—(1) Payment of valid 

claims. If the State agency holds an 

agreement with an institution that is 

proposed to be terminated, the State 

agency must continue to pay any valid 

unpaid claims for reimbursement for 

eligible meals served and allowable 

administrative expenses incurred until 

the agreement is terminated, as 

described in paragraphs (a)(6)(ii) and 

(iii) of this section, including the period 

of any fair hearing, unless participation 

has been suspended. 

(2) Suspension of payments. The State 

agency is prohibited from paying any 

claims for reimbursement submitted by 

a suspended institution. 

(i) If the suspended institution 

prevails in the fair hearing of the 

proposed termination, the State agency 

must pay any claims for reimbursement 

for eligible meals served and allowable 

administrative costs incurred during the 

suspension period. 

(ii) If the institution suspended for the 

submission of false or fraudulent claims 

is a sponsoring organization, the State 

agency must ensure that sponsored 

facilities continue to receive 

reimbursement for eligible meals served 

during the suspension period. If the 

suspended institution prevails in the 

fair hearing of the proposed termination, 

the State agency must pay any valid 

unpaid claims for reimbursement for 

eligible meals served and allowable 

administrative costs incurred during the 

suspension period. 

(3) Debts owed to the Program. The 

State agency is responsible for the 

collection of unearned payments, 

including any assessment of interest, as 

described in § 226.14(a). 

(i) After the State agency has sent the 

necessary demand letter for debt 

collection, State agency staff must refer 

the claim to the appropriate State 

authority for pursuit of the debt 

payment. 

(ii) FNS defers to the State’s laws and 

procedures to establish a repayment 

plan to recover funds as quickly as 

possible. 

(iii) It is the responsibility of the State 

agency to notify the institution that 

interest will be charged. Interest must be 

assessed on institutions’ debts 

established on or after July 29, 2002. 

Interest will continue to accrue on debts 

not paid in full within 30 days of the 

initial demand for remittance up to the 

date of payment, including during an 

extended payment plan and each month 

while on the National Disqualified List. 

(iv) State agencies are required to 

assess interest using one uniform rate. 

The appropriate rate to use is the 

Current Value of Funds Rate, which is 

published annually by Treasury in the 

Federal Register and is available from 

the FNSRO. 

(4) State liability for payment. (i) A 

State agency that fails to meet the 60- 

day timeframe set forth in paragraph 

(g)(5)(i) 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. 

(i) FNS determination of serious 

management problems. (1) General. FNS 

may determine independently that an 

institution has one or more serious 

management problems, as described in 

paragraph (a) of this section. FNS will 

follow procedures outlined in this 

section to address any finding that 

prevents an institution from meeting the 

Program’s performance standards, 

affects the integrity of a claim for 

reimbursement, or affects the integrity 

of the meals served in a day care home 

or unaffiliated center. 

(2) Required State agency action—(i) 

Termination of agreements. If the State 

agency holds an agreement with an 

institution that FNS determines to be 

seriously deficient and subsequently 

disqualifies, the State agency must 

terminate the institution’s agreement 

effective no later than 45 days after the 

date of the institution’s disqualification 

by FNS. As noted in paragraph (g) of 

this section, the termination of an 

agreement for this reason is not subject 

to a fair hearing. At the same time the 

notice of termination is issued, the State 

agency must add the institution to the 

State agency list and provide a copy of 

the notice to the appropriate FNSRO. 

(ii) Disqualified responsible principal 

and individuals. If the State agency 

holds an agreement with an institution 

whose principal FNS determines to be 

seriously deficient and subsequently 

disqualifies, the State agency must 

initiate action to terminate and 

disqualify the institution in accordance 

with the procedures in paragraph 

(a)(6)(ii)(B) of this section. The State 

agency must initiate these actions no 


khammond on DSKJM1Z7X2PROD with PROPOSALS2
Federal Register / Vol. 89, No. 35 / Wednesday, February 21, 2024 / Proposed Rules 13229 

later than 45 days after the date of the 

principal’s disqualification by FNS. 

* * * * * 

Cynthia Long, 

Administrator, Food and Nutrition Service. 

[FR Doc. 2024–02108 Filed 2–20–24; 8:45 am] 

BILLING CODE 3410–30–P 


khammond on DSKJM1Z7X2PROD with PROPOSALS2