[Code of Federal Regulations]

[Title 7, Volume 4]

[Revised as of January 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 7CFR226.16]



[Page 217-223]

 

                          TITLE 7--AGRICULTURE

 

    CHAPTER II--FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE

 

PART 226_CHILD AND ADULT CARE FOOD PROGRAM--Table of Contents

 

                    Subpart E_Operational Provisions

 

Sec. 226.16  Sponsoring organization provisions.



    (a) Each sponsoring organization shall comply with all provisions of 

Sec. 226.15.

    (b) Each sponsoring organization must submit to the State agency 

with its application all information required for its approval, and the 

approval of the facilities under its jurisdiction, as set forth in 

Sec. Sec. 226.6(b) and 226.6(f). The application must demonstrate that 

the institution has the administrative and financial capability to 

operate the Program in accordance with the Program regulations. In 

addition to the information required in Sec. Sec. 226.6(b) and 

226.6(f), the application must include:

    (1) A sponsoring organization management plan and administrative 

budget, in accordance with Sec. Sec. 226.6(b)(1)(iv), 226.6(b)(1)(v), 

226.6(b)(2)(i), 226.6(f)(2)(ii), and 226.7(g), which includes 

information sufficient to document the sponsoring organization's 

compliance with the performance standards set forth at Sec. 

226.6(b)(1)(xvii) and 226.6(b)(2)(vii). As part of its management plan, 

a sponsoring organization of day care homes must document that, to 

perform monitoring, it will employ the equivalent of one full-time staff 

person for each 50 to 150 day care homes it sponsors. As part of its 

management plan, a sponsoring organization of centers must document 

that, to perform monitoring, it will employ the equivalent of one full-

time staff person for each 25 to 150 centers it sponsors. It is the 

State agency's responsibility to determine the appropriate level of 

staffing for monitoring for each sponsoring organization, consistent 

with these specified ranges and factors that the State agency will use 

to determine the appropriate level of monitoring staff for each sponsor. 

The monitoring staff equivalent may include the employee's time spent on 

scheduling, travel time, review time, follow-up activity, report 

writing, and activities related to the annual updating of children's 

enrollment forms. Sponsoring organizations that were participating in 

the Program on July 29, 2002, were to have submitted, no later than July 

29, 2003, a management plan or plan amendment that meets the monitoring 

staffing requirement. For sponsoring organizations of centers, the 

portion of the administrative costs to be charged to the Program may not 

exceed 15 percent of the meal reimbursements estimated or actually 

earned during the budget year, unless the State agency grants a waiver 

in accordance with Sec. 226.7(g). A sponsoring organization of centers 

must include in the administrative budget all administrative costs, 

whether incurred by the sponsoring organization or its sponsored 

centers. If at any point a sponsoring organization determines that the 

meal reimbursements estimated to be earned during the budget year will 

be lower than that estimated in its administrative budget, the 

sponsoring organization must amend its administrative budget to stay 

within the 15 percent limitation (or any higher limit established 

pursuant to a waiver granted under Sec. 226.7(g)) or seek a waiver. 

Failure to do so will result in appropriate fiscal action in accordance 

with Sec. 226.14(a).

    (2) An application for participation, or renewal materials, for each 

child



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care and adult day care facility accompanied by all necessary supporting 

documentation;

    (3) Timely information concerning the eligibility status of child 

care and adult day care facilities (such as licensing/approval actions);

    (4) For sponsoring organizations applying for initial participation 

on or after June 20, 2000, if required by State law, regulation, or 

policy, a bond in the form prescribed by such law, regulation, or 

policy;

    (5) A copy of the sponsoring organization's notice to parents, in a 

form and, to the maximum extent practicable, language easily 

understandable by the participant's parents or guardians. The notice 

must inform them of their facility's participation in CACFP, the 

Program's benefits, the name and telephone number of the sponsoring 

organization, and the name and telephone number of the State agency 

responsible for administration of CACFP;

    (6) If the sponsoring organization chooses to establish procedures 

for determining a day care home seriously deficient that supplement the 

procedures in paragraph (l) of this section, a copy of those 

supplemental procedures. If the State agency has made the sponsoring 

organization responsible for the administrative review of a proposed 

termination of a day care home's agreement for cause, pursuant to Sec. 

226.6(l)(1), a copy of the sponsoring organization's administrative 

review procedures. The sponsoring organization's supplemental serious 

deficiency and administrative review procedures must comply with 

paragraph (l) of this section and Sec. 226.6(l);

    (7) A copy of their outside employment policy. The policy must 

restrict other employment by employees that interferes with an 

employee's performance of Program-related duties and responsibilities, 

including outside employment that constitutes a real or apparent 

conflict of interest; and

    (8) For sponsoring organizations of day care homes, the name, 

mailing address, and date of birth of each provider.

    (c) Each sponsoring organization shall accept final administrative 

and financial responsibility for food service operations in all child 

care and adult day care facilities under its jurisdiction.

    (d) Each sponsoring organization must provide adequate supervisory 

and operational personnel for the effective management and monitoring of 

the program at all facilities it sponsors. Each sponsoring organization 

must employ monitoring staff sufficient to meet the requirements of 

paragraph (b)(1) of this section. At a minimum, Program assistance must 

include:

    (1) Pre-approval visits to each child care and adult day care 

facility for which application is made to discuss Program benefits and 

verify that the proposed food service does not exceed the capability of 

the child care facility;

    (2) Training on Program duties and responsibilities to key staff 

from all sponsored facilities prior to the beginning of Program 

operations. At a minimum, such training must include instruction, 

appropriate to the level of staff experience and duties, on the 

Program's meal patterns, meal counts, claims submission and review 

procedures, recordkeeping requirements, and reimbursement system. 

Attendance by key staff, as defined by the State agency, is mandatory;

    (3) Additional mandatory training sessions for key staff from all 

sponsored child care and adult day care facilities not less frequently 

than annually. At a minimum, such training must include instruction, 

appropriate to the level of staff experience and duties, on the 

Program's meal patterns, meal counts, claims submission and review 

procedures, recordkeeping requirements, and reimbursement system. 

Attendance by key staff, as defined by the State agency, is mandatory;

    (4)(i) Review elements. Reviews that assess whether the facility has 

corrected problems noted on the previous review(s), a reconciliation of 

the facility's meal counts with enrollment and attendance records for a 

five-day period, as specified in paragraph (d)(4)(ii) of this section, 

and an assessment of the facility's compliance with the Program 

requirements pertaining to:

    (A) The meal pattern;

    (B) Licensing or approval;

    (C) Attendance at training;

    (D) Meal counts;



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    (E) Menu and meal records; and

    (F) The annual updating and content of enrollment forms (if the 

facility is required to have enrollment forms on file, as specified in 

Sec. 226.15(e)(2) and 226.15(e)(3)).

    (ii) Reconciliation of meal counts. Reviews must examine the meal 

counts recorded by the facility for five consecutive days during the 

current and/or prior claiming period. For each day examined, reviewers 

must use enrollment and/or attendance records to determine the number of 

children in care during each meal service and attempt to reconcile those 

numbers to the numbers of breakfasts, lunches, suppers, and/or snacks 

recorded in the facility's meal count for that day. Based on that 

comparison, reviewers must determine whether the meal counts were 

accurate. If there is a discrepancy between the number of children 

enrolled or in attendance on the day of review and prior meal counting 

patterns, the reviewer must attempt to reconcile the difference and 

determine whether the establishment of an overclaim is necessary.

    (iii) Frequency and type of required facility reviews. Sponsoring 

organizations must review each facility three times each year, except as 

described in paragraph (d)(4)(iv) of this section. In addition:

    (A) At least two of the three reviews must be unannounced;

    (B) At least one unannounced review must include observation of a 

meal service;

    (C) At least one review must be made during each new facility's 

first four weeks of Program operations; and

    (D) Not more than six months may elapse between reviews.

    (iv) Averaging of required reviews. If a sponsoring organization 

conducts two unannounced reviews of a facility in a year and finds no 

serious deficiencies (as described in paragraph (l)(2) of this section, 

regardless of the type of facility), the sponsoring organization may 

choose not to conduct a third review of the facility that year, provided 

that the sponsoring organization conducts an average of three reviews of 

all of its facilities that year. When the sponsoring organization uses 

this averaging provision, and a specific facility receives two reviews 

in one review year, its first review in the next review year must occur 

no more than nine months after the previous review. Sponsoring 

organizations may not review a sponsored facility fewer than three times 

per year if the facility has submitted a block claim during the year.

    (v) Follow-up reviews. If, in conducting a facility review, a 

sponsoring organization detects one or more serious deficiency, the next 

review of that facility must be unannounced. Serious deficiencies are 

those described at paragraph (l)(2) of this section, regardless of the 

type of facility.

    (vi) Notification of unannounced reviews. Sponsoring organizations 

of centers must provide each center with written notification of the 

right of the sponsoring organization, the State agency, the Department, 

and other State and Federal officials to make announced or unannounced 

reviews of its operations during the center's normal hours of operation, 

and must also notify sponsored centers that anyone making such reviews 

must show photo identification that demonstrates that they are employees 

of one of these entities. For sponsored centers participating on July 

29, 2002, the sponsoring organization was to have provided this notice 

no later than August 29, 2002. For sponsored centers that are approved 

after July 29, 2002, the sponsoring organization must provide the notice 

before meal service under the Program begins. Sponsoring organizations 

must provide day care homes notification of unannounced visits in 

accordance with Sec. 226.18(b)(1).

    (vii) Other requirements pertaining to unannounced reviews. 

Unannounced reviews must be made only during the facility's normal hours 

of operation, and monitors making such reviews must show photo 

identification that demonstrates that they are employees of the 

sponsoring organization, the State agency, the Department, or other 

State and Federal agencies authorized to audit or investigate Program 

operations.

    (viii) Imminent threat to health or safety. Sponsoring organizations 

that discover in a facility conduct or conditions that pose an imminent 

threat to the health or safety of participating



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children or the public, must immediately notify the appropriate State or 

local licensing or health authorities and take action that is consistent 

with the recommendations and requirements of those authorities.

    (5) For sponsoring organizations, as part of their monitoring of 

facilities, compliance with the household contact requirements 

established pursuant to Sec. 226.6(m)(5) of this part.

    (e) Each sponsoring organization shall comply with the recordkeeping 

requirements established in Sec. Sec. 226.10(d) and 226.15(e) and any 

recordkeeping requirements established by the State agency in order to 

justify the administrative payments made in accordance with Sec. 

226.12(a). Failure to maintain such records shall be grounds for the 

denial of reimbursement.

    (f) The State agency may require a sponsoring organization to enter 

into separate agreements for the administration of separate types of 

facilities (child care centers, day care homes, adult day care centers, 

and outside-school-hours care centers).

    (g) Each sponsoring organization electing to receive advance 

payments of program funds for day care homes shall disburse the full 

amount of such payments within five working days of receipt from the 

State agency. If the sponsor requests the full operating advance to 

which it is entitled, the advances to day care homes shall be the full 

amount which the sponsor expects the home to earn based on the number of 

meals projected to be served to enrolled children during the period 

covered by the advance multiplied by the applicable payment rate as 

specified in Sec. 226.13(c). If a sponsor elects to receive only a part 

of the operating advance to which it is entitled, or if the full 

operating advance is insufficient to provide a full advance to each 

home, the advance shall be disbursed to its homes in a manner and an 

amount the sponsor deems appropriate. Each sponsor shall disburse any 

reimbursement payments for food service due to each day care home within 

five working days of receipt from the State agency. Such payment shall 

be based on the number of meals served to enrolled children at each day 

care home, less any payments advanced to such home. However, the 

sponsoring organization may withhold from Program payments to each home 

an amount equal to food service operating costs incurred by the 

sponsoring organization in behalf of the home and with the home 

provider's written consent. If payments from the State agency are not 

sufficient to provide all day care homes under the sponsoring 

organization's jurisdiction with advance payments and reimbursement 

payments, available monies shall be used to provide all due 

reimbursement payments before advances are disbursed.

    (h) Sponsoring organizations shall make payments of program funds to 

child care centers, adult day care centers or outside-school-hours care 

centers within five working days of receipt from the State agency, on 

the basis of the management plan approved by the State agency, and may 

not exceed the Program costs documented at each facility during any 

fiscal year; except in those States where the State agency has chosen 

the option to implement a meals times rates payment system. In those 

States which implement this optional method of reimbursement, such 

disbursements may not exceed the rates times the number of meals 

documented at each facility during any fiscal year.

    (i) Disbursements of advance payments may be withheld from child and 

adult day care facilities which fail to submit reports required by Sec. 

226.15(e).

    (j) A for-profit organization shall be eligible to serve as a 

sponsoring organization for for-profit centers which have the same legal 

identity as the organization, but shall not be eligible to sponsor for-

profit centers which are legally distinct from the organization, day 

care homes, or public or private nonprofit centers.

    (k) Before sponsoring organizations expend administrative funds to 

assist family day care homes in becoming licensed, they shall obtain the 

following information from each such home: a completed free and reduced 

price application which documents that the provider meets the Program's 

income standards; evidence of its application for licensing and official 

documentation of the defects that are impeding its licensing approval; 

and a completed



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CACFP application. These funding requests are limited to $300 per home 

and are only available to each home once.

    (l) Termination of agreements for cause--(1) General. The sponsoring 

organization must initiate action to terminate the agreement of a day 

care home for cause if the sponsoring organization determines the day 

care home has committed one or more serious deficiency listed in 

paragraph (l)(2) of this section.

    (2) List of serious deficiencies for day care homes. Serious 

deficiencies for day care homes are:

    (i) Submission of false information on the application;

    (ii) Submission of false claims for reimbursement;

    (iii) Simultaneous participation under more than one sponsoring 

organization;

    (iv) Non-compliance with the Program meal pattern;

    (v) Failure to keep required records;

    (vi) Conduct or conditions that threaten the health or safety of a 

child(ren) in care, or the public health or safety;

    (vii) A determination that the day care home has been convicted of 

any activity that occurred during the past seven years and that 

indicated a lack of business integrity. A lack of business integrity 

includes fraud, antitrust violations, embezzlement, theft, forgery, 

bribery, falsification or destruction of records, making false 

statements, receiving stolen property, making false claims, obstruction 

of justice, or any other activity indicating a lack of business 

integrity as defined by the State agency, or the concealment of such a 

conviction;

    (viii) Failure to participate in training; or

    (ix) Any other circumstance related to non-performance under the 

sponsoring organization-day care home agreement, as specified by the 

sponsoring organization or the State agency.

    (3) Serious deficiency notification procedures. If the sponsoring 

organization determines that a day care home has committed one or more 

serious deficiency listed in paragraph (l)(2) of this section, the 

sponsoring organization must use the following procedures to provide the 

day care home notice of the serious deficiency(ies) and offer it an 

opportunity to take corrective action. However, if the serious 

deficiency(ies) constitutes an imminent threat to the health or safety 

of participants, or the day care home has engaged in activities that 

threaten the public health or safety, the sponsoring organization must 

follow the procedures in paragraph (l)(4) of this section instead of 

those in this paragraph (l)(3).

    (i) Notice of serious deficiency. The sponsoring organization must 

notify the day care home that it has been found to be seriously 

deficient. The sponsoring organization must provide a copy of the 

serious deficiency notice to the State agency. The notice must specify:

    (A) The serious deficiency(ies);

    (B) The actions to be taken by the day care home to correct the 

serious deficiency(ies);

    (C) The time allotted to correct the serious deficiency(ies) (as 

soon as possible, but not to exceed 30 days);

    (D) That the serious deficiency determination is not subject to 

administrative review.

    (E) That failure to fully and permanently correct the serious 

deficiency(ies) within the allotted time will result in the 

institution's proposed termination of the day care home's agreement and 

the proposed disqualification of the day care home and its principals; 

and

    (F) That the day care home's voluntary termination of its agreement 

with the institution after having been notified that it is seriously 

deficient will still result in the day care home's formal termination by 

the State institution and placement of the day care home and its 

principals on the National disqualified list.

    (ii) Successful corrective action. If the day care home corrects the 

serious deficiency(ies) within the allotted time and to the sponsoring 

organization's satisfaction, the sponsoring organization must notify the 

day care home that it has rescinded its determination of serious 

deficiency. The sponsoring organization must also provide a copy of the 

notice to the State agency.

    (iii) Proposed termination of agreement and proposed 

disqualification. If timely



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corrective action is not taken to fully and permanently correct the 

serious deficiency(ies) cited, the sponsoring organization must issue a 

notice proposing to terminate the day care home's agreement for cause. 

The notice must explain the day care home's opportunity for an 

administrative review of the proposed termination in accordance with 

Sec. 226.6(l). The sponsoring organization must provide a copy of the 

notice to the State agency. The notice must:

    (A) Inform the day care home that it may continue to participate and 

receive Program reimbursement for eligible meals served until its 

administrative review is concluded;

    (B) Inform the day care home that termination of the day care home's 

agreement will result in the day care home's termination for cause and 

disqualification; and

    (C) State that if the day care home seeks to voluntarily terminate 

its agreement after receiving the notice of intent to terminate, the day 

care home will still be placed on the National disqualified list.

    (iv) Program payments. The sponsoring organization must continue to 

pay any claims for reimbursement for eligible meals served until the 

serious deficiency(ies) is corrected or the day care home's agreement is 

terminated, including the period of any administrative review.

    (v) Agreement termination and disqualification. The sponsoring 

organization must immediately terminate the day care home's agreement 

and disqualify the day care home when the administrative review official 

upholds the sponsoring organization's proposed termination and proposed 

disqualification, or when the day care home's opportunity to request an 

administrative review expires. At the same time the notice is issued, 

the sponsoring organization must provide a copy of the termination and 

disqualification letter to the State agency.

    (4) Suspension of participation for day care homes.

    (i) General. If State or local health or licensing officials have 

cited a day care home for serious health or safety violations, the 

sponsoring organization must immediately suspend the home's CACFP 

participation prior to any formal action to revoke the home's licensure 

or approval. If the sponsoring organization determines that there is an 

imminent threat to the health or safety of participants at a day care 

home, or that the day care home has engaged in activities that threaten 

the public health or safety, and the licensing agency cannot make an 

immediate onsite visit, the sponsoring organization must immediately 

notify the appropriate State or local licensing and health authorities 

and take action that is consistent with the recommendations and 

requirements of those authorities. An imminent threat to the health or 

safety of participants and engaging in activities that threaten the 

public health or safety constitute serious deficiencies; however, the 

sponsoring organization must use the procedures in this paragraph (l)(4) 

(and not the procedures in paragraph (l)(3) of this section) to provide 

the day care home notice of the suspension of participation, serious 

deficiency, and proposed termination of the day care home's agreement.

    (ii) Notice of suspension, serious deficiency, and proposed 

termination. The sponsoring organization must notify the day care home 

that its participation has been suspended, that the day care home has 

been determined seriously deficient, and that the sponsoring 

organization proposes to terminate the day care home's agreement for 

cause, and must provide a copy of the notice to the State agency. The 

notice must:

    (A) Specify the serious deficiency(ies) found and the day care 

home's opportunity for an administrative review of the proposed 

termination in accordance with Sec. 226.6(l);

    (B) State that participation (including all Program payments) will 

remain suspended until the administrative review is concluded;

    (C) Inform the day care home that if the administrative review 

official overturns the suspension, the day care home may claim 

reimbursement for eligible meals served during the suspension;

    (D) Inform the day care home that termination of the day care home's 

agreement will result in the placement



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of the day care home on the National disqualified list; and

    (E) State that if the day care home seeks to voluntarily terminate 

its agreement after receiving the notice of proposed termination, the 

day care home will still be terminated for cause and disqualified.

    (iii) Agreement termination and disqualification. The sponsoring 

organization must immediately terminate the day care home's agreement 

and disqualify the day care home when the administrative review official 

upholds the sponsoring organization's proposed termination, or when the 

day care home's opportunity to request an administrative review expires.

    (iv) Program payments. A sponsoring organization is prohibited from 

making any Program payments to a day care home that has been suspended 

until any administrative review of the proposed termination is 

completed. If the suspended day care home prevails in the administrative 

review of the proposed termination, the sponsoring organization must 

reimburse the day care home for eligible meals served during the 

suspension period.

    (m) Sponsoring organizations of family day care homes must not make 

payments to employees or contractors solely on the basis of the number 

of homes recruited. However, such employees or contractors may be paid 

or evaluated on the basis of recruitment activities accomplished.



[47 FR 36527, Aug. 20, 1982; 47 FR 46072, Oct. 15, 1982, as amended at 

48 FR 21530, May 13, 1983; 50 FR 8580, Mar. 4, 1985; 50 FR 26975, July 

1, 1985; 53 FR 52591, Dec. 28, 1988; 63 FR 9729, Feb. 26, 1998; 64 FR 

72260, Dec. 27, 1999; 67 FR 43490, June 27, 2002; 69 FR 53544, Sept. 1, 

2004]