[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR250.15]

[Page 452-455]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 250--DONATION OF FOODS FOR USE IN THE UNITED STATES, ITS TERRITORIES AND POSSESSIONS AND AREAS UNDER ITS JURISDICTION--Table of Contents
 
                 Subpart B--General Operating Provisions
 
Sec. 250.15  Financial management.

    (a) Distribution charges. (1) Recipient agencies may be required to 
pay part or all of the direct costs for intrastate storage and 
distribution of donated food through distribution charges assessed by 
the distributing or subdistributing agency, except as provided in 
paragraph (a)(2) of this section.
    (i) Distributing and subdistributing agencies assessing distribution 
charges shall submit a description of their system with all data used in 
calculating the rate to be used for the upcoming school year to the 
FNSRO for approval. The initial description and data shall be submitted 
by June 30, 1990. Updates to this information shall, at a minimum, be 
submitted to the FNSRO for approval every three years by March 31.
    (ii) At least 90 days before increasing distribution charges beyond 
normal inflation, the distributing/subdistributing agency shall submit 
to the FNSRO a description of the change together with all data used to 
calculate the change. FNS will take action on the proposed increase in 
accordance with paragraph (a)(1)(v) of this section.
    (iii) Allowable costs include but are not limited to those program 
costs referenced in paragraph (f)(2) of this section, i.e. 
transportation, storage and handling of donated foods, salaries of 
persons directly connected with the administration of the program and 
other program related expenses. Examples of other program related 
expenses are administrative costs such as fringe benefits, travel 
expenses, rent, utilities, accounting/auditing services, computer 
services, and the costs of providing program services to recipient 
agencies such as the cost for administering and monitoring the State's 
processing program, and technical assistance workshops.
    (iv) Distribution charges shall not be assessed for costs which 
would be unallowable under the Cost Principles in the Department's 
Uniform Federal Assistance Regulations, 7 CFR part 3015,

[[Page 453]]

subpart T. In no case may distribution charges be assessed for costs 
which are paid for by State Administrative Expense (SAE) funds, State or 
local appropriated funds or any other funds available to the 
distributing or subdistributing agency to administer the program. 
Distribution charges shall not be based on a percentage of the value of 
the commodities distributed.
    (v) FNS shall review the information and inform the distributing 
agency of the appropriateness of its distribution charges. If it is 
determined that a distributing agency's proposed distribution charges 
are excessive or incorporate inappropriate costs, the distributing/
subdistributing agency will be required to adjust the distribution 
charges to reflect an appropriate level or submit further justification 
sufficient to satisfy the FNSRO that the proposed distribution charges 
are essential to cover allowable costs and services. This further 
justification shall include information from recipient agencies 
regarding their satisfaction with services provided.
    (vi) Distribution charges, including any excess distribution charges 
which may accrue (as defined in paragraph (f)(4) of this section) shall 
be used in accordance with provisions of paragraph (f) of this section.
    (2) Whenever a commodity is donated to a State without charge or 
credit against entitlement, recipient agencies may not be assessed for 
any part of the intrastate costs of storage and transportation of such 
commodity that is in excess of the distributing or subdistributing 
agency's direct costs for such storage and transportation minus any 
amount that the Department provides to the State to pay such costs under 
part 251 of this chapter.
    (3) Under no circumstances shall recipients be required to make any 
payments in money, materials, or services for or in connection with the 
receipt of donated foods, nor shall voluntary contributions be solicited 
(except for the nutrition programs for the elderly) in connection with 
the receipt of donated foods for any purpose.
    (b) Sale of containers. When containers or packing materials in 
which donated foods are received are disposed of by sale, the proceeds 
of such sale shall be used solely in accordance with the provisions of 
paragraph (f)(2) of this section.
    (c) Claims. If a distributing agency improperly distributes or uses 
any donated foods, or causes loss of or damage to a donated food through 
its failure to provide proper storage, care, or handling, the 
distributing agency shall, at the Department's option:
    (1) Replace the donated food in its distribution program in kind, 
or, in the case of section 6 donated foods, where replacement in kind 
may not be practicable, with other similar foods, or
    (2) Pay to the Department the value of the donated food as 
determined by the Department.

Upon the happening of any event creating a claim in favor of a 
distributing agency against a subdistributing agency, recipient agency, 
warehouseman, carrier or other person, for the improper distribution, 
use, or loss of, or damage to, a donated food, the distributing agency 
shall take action to obtain recovery. All amounts collected by such 
action shall, at the Department's option, be used in accordance with the 
provisions of paragraph (c)(1) of this section, or, except for amounts 
collected on claims involving section 6 donated foods, shall be expended 
for program purposes in accordance with the provisions of paragraph (f) 
of this section. Determinations by a distributing agency that a claim 
has or has not arisen in favor of the distributing agency against a 
subdistributing agency, recipient agency, warehouseman, carrier or other 
person, shall, at the option of the Department, be approved by the 
Department prior to the distributing agency taking action thereon. Where 
prior approval has not been given by the Department, a distributing 
agency's claim determinations shall be subject to review by the 
Department. In the case of an inventory shortage, when the loss of any 
one commodity does not exceed one percent of the total quantity of the 
donated food distributed or utilized from any single storage facility 
during the fiscal year in which the loss occurred, or during the period 
for which an audit was conducted by representatives of the Department, 
or, if approved by FNS, during the period for which an

[[Page 454]]

audit was conducted by the distributing agency, if the distributing 
agency finds that: (i) The cause of the shortage cannot be established, 
(ii) the lost donated foods were held in non-commercial storage or other 
facilities owned or operated by the distributing agency, a 
subdistributing agency or a recipient agency, and (iii) there is no 
indication that the loss was the result of negligence or continued 
inefficiency in operations, the distributing agency need not take any 
further claims action, but the factual basis for not taking further 
claims action shall be subject to review by the Department. Furthermore, 
distributing agencies shall not be required to file or pursue a claim 
for a loss which does not exceed an amount established by State law, 
regulations, or procedure as a minimum amount for which a claim will be 
made for State losses generally, but no such claim shall be disregarded 
where there is evidence of violation of Federal or State statutes. 
Distributing agencies which fail to pursue claims arising in their 
favor, or fail to provide for the right to assert such claims, or fail 
to require their subdistributing agencies and recipient agencies to 
provide for such rights in accordance with Sec. 250.12(b), shall be 
responsible to the Department for replacing the donated foods or paying 
the value thereof in accordance with the provisions of paragraph (c)(1) 
or (2) of this section. Distributing agencies which pursue claims 
arising in their favor, but fail to obtain full restitution shall not be 
liable to the Department for any deficiency unless the Department 
determines that the distributing agency fraudulently or negligently 
failed to take reasonable action to obtain restitution. The Department 
may, at its option, require assignment to it of any claim arising from 
the distribution of donated foods.
    (d) Demurrage. Demurrage or other charges which accrue after a car 
or truck has been placed for unloading by the delivering carrier, or 
which accrue because placement of a car or truck is prevented, shall be 
borne by the distributing agency, except that demurrage or other charges 
may be borne by the Department where such charges accrue because of 
actions by the Department and without the fault or negligence of the 
distributing agency.
    (e) Redonation expenditures. In accordance with Sec. 250.13(g), 
whenever a distributing agency requests authority to make redonation of 
any donated foods and the Department requests that the donated foods be 
federally inspected, these inspections will be made at the expense of 
the distributing agency. Any donated foods which the Department 
determines are acceptable for redonation shall be moved at the 
distributing agency's expense to the closest point within the FNS region 
in which the State is located where it can be utilized, or to a closer 
point outside the region, if such a transfer is mutually agreed to by 
the Department and the distributing agency. In those instances in which 
the distributing agency satisfactorily demonstrates to the Department 
that the need for any redonation resulted from no fault or negligence on 
its part, the Department shall assume such transportation costs as it 
determines to be proper. Whenever a redonation is made at the request of 
the Department, the Department shall pay all transportation and handling 
costs in connection with such redonation and shall pay to the 
distributing agency all storage and handling costs accrued on the 
donated foods at the time of redonation, as determined by the 
Department, except when the request is made as a result of negligence on 
the part of the distributing agency.
    (f) Use of funds accruing in operation of the program. (1) Funds 
accruing from claims. Funds accruing from recoveries from loss or damage 
claims (which are authorized under paragraph (c) of this section to be 
expended for program purposes) shall be used only for the payment of 
expenses of the food distributing program, including transportation, 
storage and handling or donated foods, salaries of persons directly 
connected with the program, and other administrative expenses. In 
accordance with paragraph (f)(4) of this section, the receipt and 
expenditure of funds so accrued shall be reviewed by the distributing 
agency to determine that fund balances are not in excess of program 
needs.

[[Page 455]]

    (2) Other funds. Funds accruing from the sale of containers, packing 
materials, salvage of donated foods, distribution charges, or insurance 
shall be returned to the Department or used only for the payment of 
expenses of the program which will improve program operations including, 
but not limited to, transportation, storage and handling of donated 
foods, salaries of persons directly connected with the program and other 
program-related expenses. Funds accruing from the collection of 
distribution charges which are determined to be in excess of program 
needs pursuant to paragraph (f)(4) of this section shall be used in 
accordance with that paragraph. Funds accruing from the operation of the 
program shall not be used for those costs which are unallowable under 
the cost Principles in the Department's Uniform Federal Assistance 
Regulations, 7 CFR part 3015, subpart T. These unallowable costs 
include, but are not limited to:
    (i) Bad debts;
    (ii) Contingencies;
    (iii) Contributions and donations;
    (iv) Entertainment;
    (v) Fines and penalties;
    (vi) Governor's expenses;
    (vii) Interest and other financial costs;
    (viii) Legislative expenses; and
    (ix) Losses on other grants.
    (3) Segregation of funds. Distributing agencies and subdistributing 
agencies shall maintain two separate accounts for funds accruing from 
program operations. Funds accruing from the collection of distribution 
charges shall be maintained in an operating account. Funds accruing from 
the sale of containers, salvage of foods, insurance and recoveries of 
claims for the loss or damage of donated foods shall be maintained in a 
salvage account.
    (4) Excess funds. The distributing agency shall review the receipt 
and expenditures of funds annually to ensure that fund balances are not 
in excess of program needs. At a maximum, the operating account fund 
shall not exceed the sum of the previous year's highest three-month 
expenditures. Funds exceeding this maximum shall be considered in excess 
of program needs unless the distributing agency provides sufficient 
justification as to the need for such funds and receives approval from 
the FNSRO. FNSRO may determine that funds equal to or less than the 
expenditures for the previous year's highest three months are in excess 
of what is needed. In such instances, the distributing agency shall 
reduce the excess funds in the operating account by reducing 
distributing charges or returning the funds to the contributor. The 
salvage account will have no set limit. FNSRO must, however, give prior 
approval to each deposit to or expenditure from the salvage fund which 
is in excess of $2,500. The distributing agency shall impose upon 
subdistributing agencies and recipient agencies similar provisions for 
the use of such funds accruing from the operation of their programs.

[53 FR 20426, June 3, 1988, as amended at 54 FR 42476, Oct. 17, 1989]