[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: 7CFR250.15]



[Page 461-464]

 

                          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 462]]



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 463]]



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 464]]



    (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]