[Code of Federal Regulations]
[Title 7, Volume 4]
[Revised as of January 1, 2007]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR226.16]

[Page 219-225]
 
                          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

[[Page 220]]

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 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;

[[Page 221]]

    (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;
    (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).

[[Page 222]]

    (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 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, 
emergency shelters, 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, emergency shelters, 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

[[Page 223]]

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 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

[[Page 224]]

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 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:

[[Page 225]]

    (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 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; 71 FR 5, Jan. 3, 2006]