[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: 7CFR226.7]



[Page 203-205]

 

                          TITLE 7--AGRICULTURE

 

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

 

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

 

                    Subpart C_State Agency Provisions

 

Sec. 226.7  State agency responsibilities for financial management.



    (a) This section prescribes standards of financial management 

systems in administering Program funds by the State agency and 

institutions.

    (b) Each State agency shall maintain an acceptable financial 

management system, adhere to financial management standards and 

otherwise carry out financial management policies as delineated in the 

Uniform Federal Assistance Regulations, at 7 CFR part 3015. State 

agencies or FNSRO's, where applicable, shall also have a system in place 

for monitoring and reviewing the institutions' documentation of their 

nonprofit status to ensure that all Program reimbursement funds are 

used: (1)



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Solely for the conduct of the food service operation; or (2) to improve 

such food service operations, principally for the benefit of the 

participants.

    (c) Management evaluations and audits. State agencies shall provide 

FNS with full opportunity to conduct management evaluations (including 

visits to institutions and facilities) of all operations of the State 

agency under the Program and shall provide OIG with full opportunity to 

conduct audits (including visits to institutions and facilities) of all 

operations of the State agency under the Program. Within 60 calendar 

days of receipt of each management evaluation report, the State agency 

shall submit to FNSRO a written plan for correcting serious 

deficiencies, including specific timeframes for accomplishing corrective 

actions and initiating follow-up efforts. If a State agency makes a 

showing of good cause, however, FNS may allow more than 60 days in which 

to submit a plan. Each State agency shall make available its records, 

including records of the receipt and expenditure of funds, upon request 

by FNS or OIG. OIG shall also have the right to make audits of the 

records and operation of any institution.

    (d) Reports. Each State agency shall submit to FNS the final Report 

of the Child and Adult Care Food Program (FNS 44) for each month which 

shall be limited to claims submitted in accordance with Sec. 226.10(e) 

and which shall be postmarked and/or submitted no later than 90 days 

following the last day of the month covered by the report. States shall 

not receive Program funds for any month for which the final report is 

not submitted within this time limit unless FNS grants an exception. 

Upward adjustments to a State agency's report shall not be made after 90 

days from the month covered by the report unless authorized by FNS. 

Downward adjustments shall always be made, without FNS authorization, 

regardless of when it is determined that such adjustments are necessary. 

Adjustments shall be reported to FNS in accordance with procedures 

established by FNS. Each State agency shall also submit to FNS a 

quarterly Financial Status Report (SF-269) on the use of Program funds. 

Such reports shall be postmarked and/or submitted no later than 30 days 

after the end of each fiscal year quarter. Obligations shall be reported 

only for the fiscal year in which they occur. A final Financial Status 

Report for each fiscal year shall be postmarked and/or submitted to FNS 

within 120 days after the end of the fiscal year. FNS shall not be 

responsible for reimbursing unpaid Program obligations reported later 

than 120 days after the close of the fiscal year in which they were 

incurred.

    (e) Annual plan. Each State shall submit to the Secretary for 

approval by August 15 of each year an annual plan for the use of State 

administrative expense funds, including a staff formula for State 

personnel.

    (f) Rate assignment. Each State agency shall require institutions 

(other than sponsoring organizations for day care homes) to submit, not 

less frequently than annually, information necessary to assign rates of 

reimbursement as outlined in Sec. 226.9.

    (g) Budget approval. The State agency must review institution 

budgets and must limit allowable administrative claims by each 

sponsoring organization to the administrative costs approved in its 

budget. The budget must demonstrate the institution's ability to manage 

Program funds in accordance with this part, FNS Instruction 796-2 

(``Financial Management in the Child and Adult Care Food Program''), 

parts 3015, 3016, and 3019 of this title, and applicable Office of 

Management and Budget circulars. Sponsoring organizations must submit an 

administrative budget to the State agency annually, and independent 

centers must submit budgets as frequently as required by the State 

agency. Budget levels may be adjusted to reflect changes in Program 

activities. For sponsoring organizations of centers, the State agency is 

prohibited from approving the sponsoring organization's administrative 

budget, or any amendments to the budget, if the administrative budget 

shows the Program will be charged for administrative costs in excess of 

15 percent of the meal reimbursements estimated to be earned during the 

budget year. However, the State agency may waive this limit if the 

sponsoring organization provides justification that it



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requires Program funds in excess of 15 percent to pay its administrative 

costs and if the State agency is convinced that the institution will 

have adequate funding to provide meals meeting the requirements of Sec. 

226.20. The State agency must document all waiver approvals and denials 

in writing, and must provide a copy of all such letters to the 

appropriate FNSRO.

    (h) Start-up and expansion payments. Each State agency shall 

establish procedures for evaluating requests for start-up and expansion 

payments, issuing these payments to eligible sponsoring organizations, 

and monitoring the use of these payments.

    (i) Advance payments. Each State agency shall establish procedures 

for issuing advance payments by the first day of each month and 

comparing these payments with earned reimbursement on a monthly basis. 

The State agency shall maintain on file a statement of the State's law 

and policy governing the use of interest earned on advanced funds by 

sponsors, institutions, child care facilities and adult day care 

facilities.

    (j) Recovery of overpayments. Each State agency shall establish 

procedures to recover outstanding start-up, expansion and advance 

payments from institutions which, in the opinion of the State agency, 

will not be able to earn these payments.

    (k) Claims processing. Each State agency shall establish procedures 

for institutions to properly submit claims for reimbursement. Such 

procedures must include State agency edit checks, including but not 

limited to ensuring that payments are made only for approved meal types 

and that the number of meals for which reimbursement is provided does 

not exceed the product of the total enrollment times operating days 

times approved meal types. All valid claims shall be paid within 45 

calendar days of receipt. Within 15 calendar days of receipt of any 

incomplete or incorrect claim which must be revised for payment, the 

State agency shall notify the institution as to why and how such claim 

must be revised. If the State agency disallows partial or full payment 

for a claim for reimbursement, it shall notify the institution which 

submitted the claim of its right to appeal under Sec. 226.6(k). State 

agencies may permit disallowances to be appealed separately from claims 

for reimbursement.

    (l) Participation controls. The State agency may establish control 

procedures to ensure that payment is not made for meals served to 

participants attending in excess of the authorized capacity of each 

independent center, adult day care facility or child care facility.

    (m) Financial management system. Each State agency shall establish a 

financial management system in accordance with the Uniform Federal 

Assistance Regulations, 7 CFR part 3015, and FNS guidance to identify 

allowable Program costs and establish standards for institutional 

recordkeeping and reporting. These standards shall (1) prohibit claiming 

reimbursement for meals provided by a participant's family, except as 

authorized by Sec. 226.18(e) and (2) allow the cost of meals served to 

adults who perform necessary food service labor under the Program, 

except in day care homes. The State agency shall provide guidance on 

financial management requirements to each institution.



[47 FR 36527, Aug. 20, 1982, as amended at 48 FR 21530, May 13, 1983; 

Amdt. 5, 49 FR 18988, May 4, 1984; 50 FR 8580, Mar. 4, 1985; 50 FR 

26975, July 1, 1985; 53 FR 52589, Dec. 28, 1988; Amdt. 22, 55 FR 1378, 

Jan. 14, 1990; 63 FR 9728, Feb. 26, 1998; 67 FR 43490, June 27, 2002; 69 

FR 53542, Sept. 1, 2004]