§226.6. State agency administrative responsibilities. — Inbound Citations

(15) The responsibility of the day care home to notify their sponsoring organization in advance whenever they are planning to be out of their home during the meal service period. The agreement must also state that, if this procedure is not followed and an unannounced review is conducted when the children are not present in the day care home, claims for meals that would have been served during the unannounced review will be disallowed;

(b) Each new institution must submit to the State agency an application with all information required for its approval, as set forth in §§ 226.6(b)(1) and 226.6(f). This information must demonstrate that a new institution has the administrative and financial capability to operate the Program, as described in the performance standards set forth in § 226.6(b)(1)(xviii). Renewing institutions must annually certify that they are capable of operating the Program, as set forth in § 226.6(b)(2).

(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 §§ 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 §§ 226.6(b) and 226.6(f), the application must include:

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(2) An application for participation, or renewal materials, for each facility accompanied by all necessary supporting documentation;

(3) Timely information concerning the eligibility status of facilities (such as licensing/approval actions);

(4) For sponsoring organizations applying for initial participation, 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 § 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 § 226.6(l);

(7) 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;

(8) For sponsoring organizations of day care homes, the name, mailing address, and date of birth of each provider; and

(b) Each new institution must submit to the State agency an application with all information required for its approval, as set forth in §§ 226.6(b)(1) and 226.6(f). This information must demonstrate that a new institution has the administrative and financial capability to operate the Program, as described in the performance standards set forth in § 226.6(b)(1)(xviii). Renewing institutions must annually certify that they are capable of operating the Program, as set forth in § 226.6(b)(2).

(v) Other information required as a condition of eligibility in the CACFP must be submitted with an application for participation in accordance with § 226.6(b)(1).

(b) Each State agency must establish application review procedures, as described in paragraph (b)(1) of this section, to determine the eligibility of new institutions and facilities for which applications are submitted by sponsoring organizations. Each State agency must establish procedures for the review of renewal information, as described in paragraph (b)(2) of this section, to determine the continued eligibility of renewing institutions. The State agency must enter into written agreements with institutions, as described in paragraph (b)(4) of this section.

(1) Each State agency must establish application procedures to determine the eligibility of new institutions under this part. At a minimum, such procedures must require that institutions submit information to the State agency in accordance with paragraph (f) of this section. For new private nonprofit and proprietary child care institutions, such procedures must also include a pre-approval visit by the State agency to confirm the information in the institution's application and to further assess its ability to manage the Program. The State agency must establish factors, consistent with § 226.16(b)(1), that it will consider in determining whether a new sponsoring organization has sufficient staff to perform required monitoring responsibilities at all of its sponsored facilities. As part of the review of the sponsoring organization's management plan, the State agency must determine the appropriate level of staffing for each sponsoring organization, consistent with the staffing range of monitors set forth at § 226.16(b)(1) and the factors it has established. The State agency must ensure that each new sponsoring organization applying for participation after July 29, 2002 meets this requirement. In addition, the State agency's application review procedures must ensure that the following information is included in a new institution's application:

(i) Centers must submit current information on the number of enrolled participants who are eligible for free, reduced-price and paid meals;

(ii) Sponsoring organizations of day care homes must submit current information on:

(A) The total number of children enrolled in all homes in the sponsorship;

(B) An assurance that day care home providers' own children whose meals are claimed for reimbursement in the Program are eligible for free or reduced-price meals;

(C) The total number of tier I and tier II day care homes that it sponsors;

(D) The total number of children enrolled in tier I day care homes;

(E) The total number of children enrolled in tier II day care homes; and

(F) The total number of children in tier II day care homes that have been identified as eligible for free or reduced-price meals;

(iii) Institutions must submit their nondiscrimination policy statement and a media release, unless the State agency has issued a Statewide media release on behalf of all institutions;

(iv) Sponsoring organizations must submit a complete management plan that includes:

(A) Detailed information on the organization's management and administrative structure;

(B) A list or description of the staff assigned to Program monitoring, in accordance with the requirements set forth at § 226.16(b)(1);

(C) An administrative budget that includes projected CACFP administrative earnings and expenses;

(D) The procedures to be used by the organization to administer the Program in, and disburse payments to, the child care facilities under its sponsorship; and

(E) For sponsoring organizations of family day care homes, a description of the system for making tier I day care home determinations, and a description of the system of notifying tier II day care homes of their options for reimbursement;

(v) An institution must submit a budget that the State agency must review in accordance with § 226.7(g);

(vi) All centers and family day care homes must document that they meet Program licensing/approval requirements;

(vii) All private nonprofit institutions must document their tax-exempt status;

(viii) Institutions (independent at-risk afterschool care centers and sponsoring organizations of at-risk afterschool care centers) must submit documentation sufficient to determine that each at-risk afterschool care center meets the program eligibility requirements in § 226.17a(a), and sponsoring organizations must submit documentation that each sponsored at-risk afterschool care center meets the area eligibility requirements in § 226.17a(i).

(ix) Institutions must document that each for-profit center for which application is made meets the definition of a For-profit center, as set forth at § 226.2;

(x) Institutions must state their preference to receive commodities or cash-in-lieu of commodities;

(A) The State agency must develop criteria for determining whether a new sponsoring organization's participation will help ensure the delivery of benefits to otherwise unserved facilities or participants, and must disseminate these criteria to new sponsoring organizations when they request information about applying to the Program; and

(B) The new sponsoring organization must submit documentation that its participation will help ensure the delivery of benefits to otherwise unserved facilities or participants in accordance with the State agency's criteria;

(xii) If an institution or one of its principals is on the National disqualified list and submits an application, the State agency may not approve the application. If a sponsoring organization submits an application on behalf of a facility, and either the facility or any of its principals is on the National disqualified list, the State agency may not approve the application. In accordance with paragraph (k)(3)(vii) of this section, in this circumstance, the State agency's refusal to consider the application is not subject to administrative review.

(A) A State agency is prohibited from approving an institution's application if, during the past seven years, the institution or any of its principals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements. However, this prohibition does not apply if the institution or the principal has been fully reinstated in, or determined eligible for, that program, including the payment of any debts owed;

(B) Institutions must submit:

(1) A statement listing the publicly funded programs in which the institution and its principals have participated in the past seven years; and

(2) A certification that, during the past seven years, neither the institution nor any of its principals have been declared ineligible to participate in any other publicly funded program by reason of violating that program's requirements; or

(3) In lieu of the certification, documentation that the institution or the principal previously declared ineligible was later fully reinstated in, or determined eligible for, the program, including the payment of any debts owed; and

(C) If the State agency has reason to believe that the institution or its principals were determined ineligible to participate in another publicly funded program by reason of violating that program's requirements, the State agency must follow up with the entity administering the publicly funded program to gather sufficient evidence to determine whether the institution or its principals were, in fact, determined ineligible;

(A) A State agency is prohibited from approving an institution's application if the institution or any of its principals 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; and

(B) Institutions must submit a certification that neither the institution nor any of its principals 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;

(xv) Institutions must submit a certification that all information on the application is true and correct, along with the names, mailing addresses, and dates of birth of the institution's executive director and chair of the board of directors or the owner, in the case of a for-profit center that does not have an executive director or is not required to have a board of directors. In addition, the institution's Federal Employer Identification Number (FEIN) or the Unique Entity Identifier (UEI) must be provided;

(xvi) Sponsoring organizations must submit an 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. Sponsoring organizations that are participating on July 29, 2002, must submit an outside employment policy not later than September 27, 2002. The policy will be effective unless disapproved by the State agency;

(xvii) Sponsoring organizations applying for initial participation on or after June 20, 2000, must submit a bond, if such bond is required by State law, regulation, or policy. If the State agency requires a bond for sponsoring organizations pursuant to State law, regulation, or policy, the State agency must submit a copy of that requirement and a list of sponsoring organizations posting a bond to the appropriate FNSRO on an annual basis; and

(xviii) Each new institution must submit information sufficient to document that it is financially viable, is administratively capable of operating the Program in accordance with this part, and has internal controls in effect to ensure accountability. To document this, any new institution must demonstrate in its application that it is capable of operating in conformance with the following performance standards. The State agency must only approve the applications of those new institutions that meet these performance standards, and must deny the applications of those new institutions that do not meet the standards. In ensuring compliance with these performance standards, the State agency should use its discretion in determining whether the institution's application, in conjunction with its past performance in CACFP, establishes to the State agency's satisfaction that the institution meets the performance standards.

(A) The new institution must be financially viable. Program funds must be expended and accounted for in accordance with the requirements of this part, FNS Instruction 796-2 (“Financial Management in the Child and Adult Care Food Program”), and 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415. To demonstrate financial viability, the new institution must document that it meets the following criteria:

(1) Description of need/recruitment. A new sponsoring organization must demonstrate in its management plan that its participation will help ensure the delivery of Program benefits to otherwise unserved facilities or participants, in accordance with criteria developed by the State agency pursuant to paragraph (b)(1)(x) of this section. A new sponsoring organization must demonstrate that it will use appropriate practices for recruiting facilities, consistent with paragraph (p) of this section and any State agency requirements;

(2) Fiscal resources and financial history. A new institution must demonstrate that it has adequate financial resources to operate the CACFP on a daily basis, has adequate sources of funds to continue to pay employees and suppliers during periods of temporary interruptions in Program payments and/or to pay debts when fiscal claims have been assessed against the institution, and can document financial viability (for example, through audits, financial statements, etc.); and

(3) Budgets. Costs in the institution's budget must be necessary, reasonable, allowable, and appropriately documented;

(B) The new institution must be administratively capable. Appropriate and effective management practices must be in effect to ensure that the Program operates in accordance with this part. To demonstrate administrative capability, the new institution must document that it meets the following criteria:

(1) Has an adequate number and type of qualified staff to ensure the operation of the Program in accordance with this part;

(2) If a sponsoring organization, documents in its management plan that it employs staff sufficient to meet the ratio of monitors to facilities, taking into account the factors that the State agency will consider in determining a sponsoring organization's staffing needs, as set forth in § 226.16(b)(1); and

(3) If a sponsoring organization, has Program policies and procedures in writing that assign Program responsibilities and duties, and ensure compliance with civil rights requirements; and

(C) The new institution must have internal controls and other management systems in effect to ensure fiscal accountability and to ensure that the Program will operate in accordance with the requirements of this part. To demonstrate Program accountability, the new institution must document that it meets the following criteria:

(1) Governing board of directors. Has adequate oversight of the Program by an independent governing board of directors as defined at § 226.2;

(2) Fiscal accountability. Has a financial system with management controls specified in writing. For new sponsoring organizations, these written operational policies must assure:

(i) Fiscal integrity and accountability for all funds and property received, held, and disbursed;

(ii) The integrity and accountability of all expenses incurred;

(iii) That claims will be processed accurately, and in a timely manner;

(iv) That funds and property are properly safeguarded and used, and expenses incurred, for authorized Program purposes; and

(v) That a system of safeguards and controls is in place to prevent and detect improper financial activities by employees;

(3) Recordkeeping. Maintains appropriate records to document compliance with Program requirements, including budgets, accounting records, approved budget amendments, and, if a sponsoring organization, management plans and appropriate records on facility operations;

(4) Sponsoring organization operations. If a new sponsoring organization, documents in its management plan that it will:

(i) Provide adequate and regular training of sponsoring organization staff and sponsored facilities in accordance with §§ 226.15(e)(12) and (e)(14) and 226.16(d)(2) and (d)(3);

(ii) Perform monitoring in accordance with § 226.16(d)(4), to ensure that sponsored facilities accountably and appropriately operate the Program;

(iii) If a sponsor of family day care homes, accurately classify day care homes as tier I or tier II in accordance with § 226.15(f); and

(iv) Have a system in place to ensure that administrative costs funded from Program reimbursements do not exceed regulatory limits set forth at §§ 226.12(a) and 226.16(b)(1); and

(5) Meal service and other operational requirements. Independent centers and facilities will follow practices that result in the operation of the Program in accordance with the meal service, recordkeeping, and other operational requirements of this part. These practices must be documented in the independent center's application or in the sponsoring organization's management plan and must demonstrate that independent centers or sponsored facilities will:

(i) Provide meals that meet the meal patterns set forth in § 226.20;

(ii) Comply with licensure or approval requirements set forth in paragraph (d) of this section;

(iii) Have a food service that complies with applicable State and local health and sanitation requirements;

(iv) Comply with civil rights requirements;

(v) Maintain complete and appropriate records on file; and

(vi) Claim reimbursement only for eligible meals.

(2) Each State agency must establish annual information submission procedures to confirm the continued eligibility of renewing institutions under this part. Renewing institutions must not be required to submit a free and reduced-price policy statement or a nondiscrimination statement unless they make substantive changes to either statement. In addition, the State agency's review procedures must ensure that institutions annually submit information or certify that certain information is still true based on the requirements of this section. For information that must be certified, any new changes made in the past year and not previously reported to the State agency must be updated in the annual renewal information submission. Any additional information submitted in the renewal must be certified by the institution to be true.

(i) This paragraph (b)(2) contains the information that must be certified. The State agency must ensure that renewing independent centers certify the following to be true:

(A) The institution and its principals are not currently on the National disqualified list, per paragraph (b)(1)(xii) of this section;

(B) A list of any publicly funded programs that the sponsoring organization and its principals have participated in, in the past 7 years, is current, per paragraph (b)(1)(xiii)(B) of this section;

(C) The institution and its principals have not been determined ineligible for any other publicly funded programs due to violation of that program's requirements, in the past 7 years, per paragraphs (b)(1)(xiii)(B) and (C) of this section;

(D) No principals have been convicted of any activity that occurred during the past 7 years and that indicated a lack of business integrity, per paragraph (b)(1)(xiv)(B) of this section;

(E) The names, mailing addresses, and dates of birth of all current principals have been submitted to the State agency, per paragraph (b)(1)(xv) of this section;

(F) The institution is currently compliant with the required performance standards of financial viability and management, administrative capability, and program accountability, per paragraph (b)(1)(xviii) of this section; and

(ii) The State agency must ensure that renewing sponsoring organizations certify the following to be true:

(A) All of the requirements under paragraph (b)(2)(i) of this section are certified to be true;

(B) The management plan on file with the State agency is complete and up to date, per paragraph (b)(1)(iv) of this section;

(C) No sponsored facility or principal of a sponsored facility is currently on the National disqualified list, per paragraph (b)(1)(xii) of this section;

(D) The outside employment policy most recently submitted to the State agency remains current and in effect, per paragraph (b)(1)(xvi) of this section;

(E) Licensing or approval status of each sponsored child care center, adult day care center, or day care home is up-to-date;

(F) The list of the sponsoring organization's facilities on file with the State agency is up-to-date; and

(G) All facilities under the sponsoring organization's oversight have adhered to Program training requirements.

(iii) The State agency's review of information that must be submitted, certified or updated annually is as follows:

(A) The State agency must ensure that renewing sponsoring organizations certify that the sponsoring organization has reviewed the current management plan on file with the State agency and that it is complete and up to date. If the management plan has changed, the sponsoring organization must submit updates to the management plan that meet the requirements of § 226.16(b)(1). The State agency must establish factors, consistent with § 226.16(b)(1), that it will consider in determining whether a renewing sponsoring organization has sufficient staff to perform required monitoring responsibilities at all of its sponsored facilities. As part of its management plan review, the State agency must determine the appropriate level of staffing for the sponsoring organization, consistent with the staffing range of monitors set forth at § 226.6(b)(1) and the factors the State agency has established.

(B) The State agency must ensure that renewing sponsoring organizations submit an administrative budget for the upcoming year with sufficiently detailed information concerning projected CACFP administrative earnings and expenses, as well as other non-Program funds to be used in Program administration. The State agency must be able to determine the allowability, necessity, and reasonableness of all proposed expenditures, and to assess the sponsoring organization's capability to manage Program funds. The administrative budget must demonstrate that the sponsoring organization will expend and account for funds in accordance with regulatory requirements, FNS Instruction 796-2 (Financial Management in the Child and Adult Care Food Program), 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, and applicable Office of Management and Budget circulars. The administrative budget submitted by a sponsoring organization of centers must demonstrate that the administrative costs to be charged to the Program do not exceed 15 percent of the meal reimbursements estimated or actually earned during the budget year, unless the State agency grants a waiver, as described in § 226.7(g). For sponsoring organizations of day care homes seeking to carry over administrative funds, as described in § 226.12(a)(3), the budget must include an estimate of requested administrative fund carryover amounts and a description of proposed purpose for which those funds would be obligated or expended.

(C) The State agency must ensure that renewing institutions certify that neither the institution nor its principals are on the National disqualified list. The State agency must also ensure that renewing sponsoring organizations certify that no sponsored facility or facility principal is on the National disqualified list.

(D) A State agency is prohibited from approving a renewing institution or facility's application if, during the past 7 years, the institution, facility, responsible principals, or responsible individuals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements. However, this prohibition does not apply if the institution, facility, responsible principals, or responsible individuals have been fully reinstated in or determined eligible for that program, including the payment of any debts owed. The State agency must follow up with the entity administering the publicly funded program to gather sufficient evidence to determine whether the institution or its principals were, in fact, determined ineligible.

(E) The State agency must ensure that renewing institutions certify that the institution's principals have not been convicted of any activity that occurred during the past 7 years and that indicates a lack of business integrity, as defined in paragraph (c)(1)(ii)(A) of this section.

(F) The State agency must ensure that renewing institutions submit a certification attesting to the validity of the following information: full legal name and any names previously used, mailing address, and dates of birth of the institution's executive director and chair of the board of directors or the owner, in the case of a for-profit center that does not have an executive director or is not required to have a board of directors. In addition, the institution's Federal Employer Identification Number (FEIN) or the Unique Entity Identifier (UEI) must be provided.

(G) The State agency must ensure that renewing sponsoring organizations certify that the outside employment policy most recently submitted to the State agency remains current and in effect or the sponsoring organization must submit an updated outside employment policy at the time of renewal. 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.

(H) The State agency must ensure that each renewing institution certifies that it is still in compliance with the performance standards described in paragraph (b)(1)(xviii) of this section, meaning it is financially viable, is administratively capable of operating the Program in accordance with this part, and has internal controls in effect to ensure accountability.

(I) The State agency must ensure that each independent center certifies that its licensing or approval status is up-to-date and that it continues to meet the licensing requirements described in paragraphs (d) and (e) of this section. Sponsoring organizations must certify that the licensing or approval status of their facilities is up-to-date and that they continue to meet the licensing requirements described in paragraphs (d) and (e) of this section. If the independent center or facility has a new license not previously on file with the State agency, a copy must be submitted, unless the State agency has other means of confirming the licensing or approval status of any independent center or facility providing care.

(J) The State agency must ensure that each sponsoring organization certifies that the list of all of their applicant day care homes, child care centers, outside-school-hours-care centers, at-risk afterschool care centers, emergency shelters, and adult day care centers on file with the State agency is up-to-date.

(K) The State agency must ensure that renewing sponsoring organizations certify that all facilities under their oversight have adhered to the training requirements set forth in Program regulations.

(iv) Institutions must provide information to the State agency as specified in paragraphs (f)(3), (f)(4), and (f)(7) of this section.

(i) Any new institution applying for participation in the Program must be notified in writing of approval or disapproval by the State agency, within 30 calendar days of the State agency's receipt of a complete application. Whenever possible, State agencies should provide assistance to institutions that have submitted an incomplete application. Any disapproved applicant institution must be notified of the reasons for its disapproval and its right to appeal, as described in paragraph (k) of this section. Any disapproved applicant day care home or unaffiliated center must be notified of the reasons for its disapproval and its right to appeal, as described in paragraph (l) of this section.

(ii) Any renewing institution must be provided written notification indicating whether it has completely and sufficiently met all renewal information requirements within 30 days of the submission of renewal information. Whenever possible, State agencies should provide assistance to institutions whose information is incomplete.

(i) The State agency must require each institution that has been approved for participation in the Program to enter into a permanent agreement governing the rights and responsibilities of each party. The existence of a valid permanent agreement, however, does not eliminate the need for an institution to comply with the annual information submission requirements and related provisions at paragraphs (b) and (f) of this section.

(ii) The existence of a valid permanent agreement does not limit the State agency's ability to terminate the agreement, as provided under paragraph (c)(3) of this section. The State agency must terminate the institution's agreement whenever an institution's participation in the Program ends. The State agency must terminate the agreement for cause based on violations by the institution, facility, responsible principals, or responsible individuals, as described in paragraph (c) of this section. The State agency or institution may terminate the agreement at its convenience for considerations unrelated to the institution's performance of Program responsibilities under the agreement. However, any action initiated by the State agency to terminate an agreement for its convenience requires prior consultation with FNS. Termination for convenience does not result in ineligibility for any program authorized under this part or parts 210, 215, 220, or 225 of this chapter.

(iii) The Program agreement must include the following requirements:

(A) The responsibility of the institution to accept final financial and administrative management of a proper, efficient, and effective food service, and comply with all requirements under this part.

(B) The responsibility of the institution to comply with all requirements of title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, and the Department's regulations concerning nondiscrimination (parts 15, 15a and 15b of this title), including requirements for racial and ethnic participation data collection, public notification of the nondiscrimination policy, and reviews to assure compliance with the nondiscrimination policy, to the end that no person may, on the grounds of race, color, national origin, sex, age, or disability, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under, the Program.

(C) The right of the State agency, the Department, and other State or Federal officials to make announced or unannounced reviews of their operations during the institution's normal hours of child or adult care operations, and that anyone making such reviews must show photo identification that demonstrates that they are employees of one of these entities.

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(i) As described in § 226.15(f), tiering determinations are valid for five years if based on school data. The State agency must ensure that the most recent available data is used if the determination of a day care home's eligibility as a tier I day care home is made using school data. The State agency must not routinely require annual redeterminations of the tiering status of tier I day care homes based on updated school data. However, a sponsoring organization, the State agency, or FNS may change the determination if information becomes available indicating that a day care home is no longer in a qualified area.

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(b) Each new institution must submit to the State agency an application with all information required for its approval, as set forth in §§ 226.6(b)(1) and 226.6(f). This information must demonstrate that a new institution has the administrative and financial capability to operate the Program, as described in the performance standards set forth in § 226.6(b)(1)(xviii). Renewing institutions must annually certify that they are capable of operating the Program, as set forth in § 226.6(b)(2).

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(b) Each new institution must submit to the State agency an application with all information required for its approval, as set forth in §§ 226.6(b)(1) and 226.6(f). This information must demonstrate that a new institution has the administrative and financial capability to operate the Program, as described in the performance standards set forth in § 226.6(b)(1)(xviii). Renewing institutions must annually certify that they are capable of operating the Program, as set forth in § 226.6(b)(2).

(b) Each State agency must establish application review procedures, as described in paragraph (b)(1) of this section, to determine the eligibility of new institutions and facilities for which applications are submitted by sponsoring organizations. Each State agency must establish procedures for the review of renewal information, as described in paragraph (b)(2) of this section, to determine the continued eligibility of renewing institutions. The State agency must enter into written agreements with institutions, as described in paragraph (b)(4) of this section.

(1) Each State agency must establish application procedures to determine the eligibility of new institutions under this part. At a minimum, such procedures must require that institutions submit information to the State agency in accordance with paragraph (f) of this section. For new private nonprofit and proprietary child care institutions, such procedures must also include a pre-approval visit by the State agency to confirm the information in the institution's application and to further assess its ability to manage the Program. The State agency must establish factors, consistent with § 226.16(b)(1), that it will consider in determining whether a new sponsoring organization has sufficient staff to perform required monitoring responsibilities at all of its sponsored facilities. As part of the review of the sponsoring organization's management plan, the State agency must determine the appropriate level of staffing for each sponsoring organization, consistent with the staffing range of monitors set forth at § 226.16(b)(1) and the factors it has established. The State agency must ensure that each new sponsoring organization applying for participation after July 29, 2002 meets this requirement. In addition, the State agency's application review procedures must ensure that the following information is included in a new institution's application:

(i) Centers must submit current information on the number of enrolled participants who are eligible for free, reduced-price and paid meals;

(ii) Sponsoring organizations of day care homes must submit current information on:

(A) The total number of children enrolled in all homes in the sponsorship;

(B) An assurance that day care home providers' own children whose meals are claimed for reimbursement in the Program are eligible for free or reduced-price meals;

(C) The total number of tier I and tier II day care homes that it sponsors;

(D) The total number of children enrolled in tier I day care homes;

(E) The total number of children enrolled in tier II day care homes; and

(F) The total number of children in tier II day care homes that have been identified as eligible for free or reduced-price meals;

(iii) Institutions must submit their nondiscrimination policy statement and a media release, unless the State agency has issued a Statewide media release on behalf of all institutions;

(iv) Sponsoring organizations must submit a complete management plan that includes:

(A) Detailed information on the organization's management and administrative structure;

(B) A list or description of the staff assigned to Program monitoring, in accordance with the requirements set forth at § 226.16(b)(1);

(C) An administrative budget that includes projected CACFP administrative earnings and expenses;

(D) The procedures to be used by the organization to administer the Program in, and disburse payments to, the child care facilities under its sponsorship; and

(E) For sponsoring organizations of family day care homes, a description of the system for making tier I day care home determinations, and a description of the system of notifying tier II day care homes of their options for reimbursement;

(v) An institution must submit a budget that the State agency must review in accordance with § 226.7(g);

(vi) All centers and family day care homes must document that they meet Program licensing/approval requirements;

(vii) All private nonprofit institutions must document their tax-exempt status;

(viii) Institutions (independent at-risk afterschool care centers and sponsoring organizations of at-risk afterschool care centers) must submit documentation sufficient to determine that each at-risk afterschool care center meets the program eligibility requirements in § 226.17a(a), and sponsoring organizations must submit documentation that each sponsored at-risk afterschool care center meets the area eligibility requirements in § 226.17a(i).

(ix) Institutions must document that each for-profit center for which application is made meets the definition of a For-profit center, as set forth at § 226.2;

(x) Institutions must state their preference to receive commodities or cash-in-lieu of commodities;

(A) The State agency must develop criteria for determining whether a new sponsoring organization's participation will help ensure the delivery of benefits to otherwise unserved facilities or participants, and must disseminate these criteria to new sponsoring organizations when they request information about applying to the Program; and

(B) The new sponsoring organization must submit documentation that its participation will help ensure the delivery of benefits to otherwise unserved facilities or participants in accordance with the State agency's criteria;

(xii) If an institution or one of its principals is on the National disqualified list and submits an application, the State agency may not approve the application. If a sponsoring organization submits an application on behalf of a facility, and either the facility or any of its principals is on the National disqualified list, the State agency may not approve the application. In accordance with paragraph (k)(3)(vii) of this section, in this circumstance, the State agency's refusal to consider the application is not subject to administrative review.

(A) A State agency is prohibited from approving an institution's application if, during the past seven years, the institution or any of its principals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements. However, this prohibition does not apply if the institution or the principal has been fully reinstated in, or determined eligible for, that program, including the payment of any debts owed;

(B) Institutions must submit:

(1) A statement listing the publicly funded programs in which the institution and its principals have participated in the past seven years; and

(2) A certification that, during the past seven years, neither the institution nor any of its principals have been declared ineligible to participate in any other publicly funded program by reason of violating that program's requirements; or

(3) In lieu of the certification, documentation that the institution or the principal previously declared ineligible was later fully reinstated in, or determined eligible for, the program, including the payment of any debts owed; and

(C) If the State agency has reason to believe that the institution or its principals were determined ineligible to participate in another publicly funded program by reason of violating that program's requirements, the State agency must follow up with the entity administering the publicly funded program to gather sufficient evidence to determine whether the institution or its principals were, in fact, determined ineligible;

(A) A State agency is prohibited from approving an institution's application if the institution or any of its principals 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; and

(B) Institutions must submit a certification that neither the institution nor any of its principals 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;

(xv) Institutions must submit a certification that all information on the application is true and correct, along with the names, mailing addresses, and dates of birth of the institution's executive director and chair of the board of directors or the owner, in the case of a for-profit center that does not have an executive director or is not required to have a board of directors. In addition, the institution's Federal Employer Identification Number (FEIN) or the Unique Entity Identifier (UEI) must be provided;

(xvi) Sponsoring organizations must submit an 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. Sponsoring organizations that are participating on July 29, 2002, must submit an outside employment policy not later than September 27, 2002. The policy will be effective unless disapproved by the State agency;

(xvii) Sponsoring organizations applying for initial participation on or after June 20, 2000, must submit a bond, if such bond is required by State law, regulation, or policy. If the State agency requires a bond for sponsoring organizations pursuant to State law, regulation, or policy, the State agency must submit a copy of that requirement and a list of sponsoring organizations posting a bond to the appropriate FNSRO on an annual basis; and

(xviii) Each new institution must submit information sufficient to document that it is financially viable, is administratively capable of operating the Program in accordance with this part, and has internal controls in effect to ensure accountability. To document this, any new institution must demonstrate in its application that it is capable of operating in conformance with the following performance standards. The State agency must only approve the applications of those new institutions that meet these performance standards, and must deny the applications of those new institutions that do not meet the standards. In ensuring compliance with these performance standards, the State agency should use its discretion in determining whether the institution's application, in conjunction with its past performance in CACFP, establishes to the State agency's satisfaction that the institution meets the performance standards.

(A) The new institution must be financially viable. Program funds must be expended and accounted for in accordance with the requirements of this part, FNS Instruction 796-2 (“Financial Management in the Child and Adult Care Food Program”), and 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415. To demonstrate financial viability, the new institution must document that it meets the following criteria:

(1) Description of need/recruitment. A new sponsoring organization must demonstrate in its management plan that its participation will help ensure the delivery of Program benefits to otherwise unserved facilities or participants, in accordance with criteria developed by the State agency pursuant to paragraph (b)(1)(x) of this section. A new sponsoring organization must demonstrate that it will use appropriate practices for recruiting facilities, consistent with paragraph (p) of this section and any State agency requirements;

(2) Fiscal resources and financial history. A new institution must demonstrate that it has adequate financial resources to operate the CACFP on a daily basis, has adequate sources of funds to continue to pay employees and suppliers during periods of temporary interruptions in Program payments and/or to pay debts when fiscal claims have been assessed against the institution, and can document financial viability (for example, through audits, financial statements, etc.); and

(3) Budgets. Costs in the institution's budget must be necessary, reasonable, allowable, and appropriately documented;

(B) The new institution must be administratively capable. Appropriate and effective management practices must be in effect to ensure that the Program operates in accordance with this part. To demonstrate administrative capability, the new institution must document that it meets the following criteria:

(1) Has an adequate number and type of qualified staff to ensure the operation of the Program in accordance with this part;

(2) If a sponsoring organization, documents in its management plan that it employs staff sufficient to meet the ratio of monitors to facilities, taking into account the factors that the State agency will consider in determining a sponsoring organization's staffing needs, as set forth in § 226.16(b)(1); and

(3) If a sponsoring organization, has Program policies and procedures in writing that assign Program responsibilities and duties, and ensure compliance with civil rights requirements; and

(C) The new institution must have internal controls and other management systems in effect to ensure fiscal accountability and to ensure that the Program will operate in accordance with the requirements of this part. To demonstrate Program accountability, the new institution must document that it meets the following criteria:

(1) Governing board of directors. Has adequate oversight of the Program by an independent governing board of directors as defined at § 226.2;

(2) Fiscal accountability. Has a financial system with management controls specified in writing. For new sponsoring organizations, these written operational policies must assure:

(i) Fiscal integrity and accountability for all funds and property received, held, and disbursed;

(ii) The integrity and accountability of all expenses incurred;

(iii) That claims will be processed accurately, and in a timely manner;

(iv) That funds and property are properly safeguarded and used, and expenses incurred, for authorized Program purposes; and

(v) That a system of safeguards and controls is in place to prevent and detect improper financial activities by employees;

(3) Recordkeeping. Maintains appropriate records to document compliance with Program requirements, including budgets, accounting records, approved budget amendments, and, if a sponsoring organization, management plans and appropriate records on facility operations;

(4) Sponsoring organization operations. If a new sponsoring organization, documents in its management plan that it will:

(i) Provide adequate and regular training of sponsoring organization staff and sponsored facilities in accordance with §§ 226.15(e)(12) and (e)(14) and 226.16(d)(2) and (d)(3);

(ii) Perform monitoring in accordance with § 226.16(d)(4), to ensure that sponsored facilities accountably and appropriately operate the Program;

(iii) If a sponsor of family day care homes, accurately classify day care homes as tier I or tier II in accordance with § 226.15(f); and

(iv) Have a system in place to ensure that administrative costs funded from Program reimbursements do not exceed regulatory limits set forth at §§ 226.12(a) and 226.16(b)(1); and

(5) Meal service and other operational requirements. Independent centers and facilities will follow practices that result in the operation of the Program in accordance with the meal service, recordkeeping, and other operational requirements of this part. These practices must be documented in the independent center's application or in the sponsoring organization's management plan and must demonstrate that independent centers or sponsored facilities will:

(i) Provide meals that meet the meal patterns set forth in § 226.20;

(ii) Comply with licensure or approval requirements set forth in paragraph (d) of this section;

(iii) Have a food service that complies with applicable State and local health and sanitation requirements;

(iv) Comply with civil rights requirements;

(v) Maintain complete and appropriate records on file; and

(vi) Claim reimbursement only for eligible meals.

(2) Each State agency must establish annual information submission procedures to confirm the continued eligibility of renewing institutions under this part. Renewing institutions must not be required to submit a free and reduced-price policy statement or a nondiscrimination statement unless they make substantive changes to either statement. In addition, the State agency's review procedures must ensure that institutions annually submit information or certify that certain information is still true based on the requirements of this section. For information that must be certified, any new changes made in the past year and not previously reported to the State agency must be updated in the annual renewal information submission. Any additional information submitted in the renewal must be certified by the institution to be true.

(i) This paragraph (b)(2) contains the information that must be certified. The State agency must ensure that renewing independent centers certify the following to be true:

(A) The institution and its principals are not currently on the National disqualified list, per paragraph (b)(1)(xii) of this section;

(B) A list of any publicly funded programs that the sponsoring organization and its principals have participated in, in the past 7 years, is current, per paragraph (b)(1)(xiii)(B) of this section;

(C) The institution and its principals have not been determined ineligible for any other publicly funded programs due to violation of that program's requirements, in the past 7 years, per paragraphs (b)(1)(xiii)(B) and (C) of this section;

(D) No principals have been convicted of any activity that occurred during the past 7 years and that indicated a lack of business integrity, per paragraph (b)(1)(xiv)(B) of this section;

(E) The names, mailing addresses, and dates of birth of all current principals have been submitted to the State agency, per paragraph (b)(1)(xv) of this section;

(F) The institution is currently compliant with the required performance standards of financial viability and management, administrative capability, and program accountability, per paragraph (b)(1)(xviii) of this section; and

(ii) The State agency must ensure that renewing sponsoring organizations certify the following to be true:

(A) All of the requirements under paragraph (b)(2)(i) of this section are certified to be true;

(B) The management plan on file with the State agency is complete and up to date, per paragraph (b)(1)(iv) of this section;

(C) No sponsored facility or principal of a sponsored facility is currently on the National disqualified list, per paragraph (b)(1)(xii) of this section;

(D) The outside employment policy most recently submitted to the State agency remains current and in effect, per paragraph (b)(1)(xvi) of this section;

(E) Licensing or approval status of each sponsored child care center, adult day care center, or day care home is up-to-date;

(F) The list of the sponsoring organization's facilities on file with the State agency is up-to-date; and

(G) All facilities under the sponsoring organization's oversight have adhered to Program training requirements.

(iii) The State agency's review of information that must be submitted, certified or updated annually is as follows:

(A) The State agency must ensure that renewing sponsoring organizations certify that the sponsoring organization has reviewed the current management plan on file with the State agency and that it is complete and up to date. If the management plan has changed, the sponsoring organization must submit updates to the management plan that meet the requirements of § 226.16(b)(1). The State agency must establish factors, consistent with § 226.16(b)(1), that it will consider in determining whether a renewing sponsoring organization has sufficient staff to perform required monitoring responsibilities at all of its sponsored facilities. As part of its management plan review, the State agency must determine the appropriate level of staffing for the sponsoring organization, consistent with the staffing range of monitors set forth at § 226.6(b)(1) and the factors the State agency has established.

(B) The State agency must ensure that renewing sponsoring organizations submit an administrative budget for the upcoming year with sufficiently detailed information concerning projected CACFP administrative earnings and expenses, as well as other non-Program funds to be used in Program administration. The State agency must be able to determine the allowability, necessity, and reasonableness of all proposed expenditures, and to assess the sponsoring organization's capability to manage Program funds. The administrative budget must demonstrate that the sponsoring organization will expend and account for funds in accordance with regulatory requirements, FNS Instruction 796-2 (Financial Management in the Child and Adult Care Food Program), 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, and applicable Office of Management and Budget circulars. The administrative budget submitted by a sponsoring organization of centers must demonstrate that the administrative costs to be charged to the Program do not exceed 15 percent of the meal reimbursements estimated or actually earned during the budget year, unless the State agency grants a waiver, as described in § 226.7(g). For sponsoring organizations of day care homes seeking to carry over administrative funds, as described in § 226.12(a)(3), the budget must include an estimate of requested administrative fund carryover amounts and a description of proposed purpose for which those funds would be obligated or expended.

(C) The State agency must ensure that renewing institutions certify that neither the institution nor its principals are on the National disqualified list. The State agency must also ensure that renewing sponsoring organizations certify that no sponsored facility or facility principal is on the National disqualified list.

(D) A State agency is prohibited from approving a renewing institution or facility's application if, during the past 7 years, the institution, facility, responsible principals, or responsible individuals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements. However, this prohibition does not apply if the institution, facility, responsible principals, or responsible individuals have been fully reinstated in or determined eligible for that program, including the payment of any debts owed. The State agency must follow up with the entity administering the publicly funded program to gather sufficient evidence to determine whether the institution or its principals were, in fact, determined ineligible.

(E) The State agency must ensure that renewing institutions certify that the institution's principals have not been convicted of any activity that occurred during the past 7 years and that indicates a lack of business integrity, as defined in paragraph (c)(1)(ii)(A) of this section.

(F) The State agency must ensure that renewing institutions submit a certification attesting to the validity of the following information: full legal name and any names previously used, mailing address, and dates of birth of the institution's executive director and chair of the board of directors or the owner, in the case of a for-profit center that does not have an executive director or is not required to have a board of directors. In addition, the institution's Federal Employer Identification Number (FEIN) or the Unique Entity Identifier (UEI) must be provided.

(G) The State agency must ensure that renewing sponsoring organizations certify that the outside employment policy most recently submitted to the State agency remains current and in effect or the sponsoring organization must submit an updated outside employment policy at the time of renewal. 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.

(H) The State agency must ensure that each renewing institution certifies that it is still in compliance with the performance standards described in paragraph (b)(1)(xviii) of this section, meaning it is financially viable, is administratively capable of operating the Program in accordance with this part, and has internal controls in effect to ensure accountability.

(I) The State agency must ensure that each independent center certifies that its licensing or approval status is up-to-date and that it continues to meet the licensing requirements described in paragraphs (d) and (e) of this section. Sponsoring organizations must certify that the licensing or approval status of their facilities is up-to-date and that they continue to meet the licensing requirements described in paragraphs (d) and (e) of this section. If the independent center or facility has a new license not previously on file with the State agency, a copy must be submitted, unless the State agency has other means of confirming the licensing or approval status of any independent center or facility providing care.

(J) The State agency must ensure that each sponsoring organization certifies that the list of all of their applicant day care homes, child care centers, outside-school-hours-care centers, at-risk afterschool care centers, emergency shelters, and adult day care centers on file with the State agency is up-to-date.

(K) The State agency must ensure that renewing sponsoring organizations certify that all facilities under their oversight have adhered to the training requirements set forth in Program regulations.

(iv) Institutions must provide information to the State agency as specified in paragraphs (f)(3), (f)(4), and (f)(7) of this section.

(i) Any new institution applying for participation in the Program must be notified in writing of approval or disapproval by the State agency, within 30 calendar days of the State agency's receipt of a complete application. Whenever possible, State agencies should provide assistance to institutions that have submitted an incomplete application. Any disapproved applicant institution must be notified of the reasons for its disapproval and its right to appeal, as described in paragraph (k) of this section. Any disapproved applicant day care home or unaffiliated center must be notified of the reasons for its disapproval and its right to appeal, as described in paragraph (l) of this section.

(ii) Any renewing institution must be provided written notification indicating whether it has completely and sufficiently met all renewal information requirements within 30 days of the submission of renewal information. Whenever possible, State agencies should provide assistance to institutions whose information is incomplete.

(i) The State agency must require each institution that has been approved for participation in the Program to enter into a permanent agreement governing the rights and responsibilities of each party. The existence of a valid permanent agreement, however, does not eliminate the need for an institution to comply with the annual information submission requirements and related provisions at paragraphs (b) and (f) of this section.

(ii) The existence of a valid permanent agreement does not limit the State agency's ability to terminate the agreement, as provided under paragraph (c)(3) of this section. The State agency must terminate the institution's agreement whenever an institution's participation in the Program ends. The State agency must terminate the agreement for cause based on violations by the institution, facility, responsible principals, or responsible individuals, as described in paragraph (c) of this section. The State agency or institution may terminate the agreement at its convenience for considerations unrelated to the institution's performance of Program responsibilities under the agreement. However, any action initiated by the State agency to terminate an agreement for its convenience requires prior consultation with FNS. Termination for convenience does not result in ineligibility for any program authorized under this part or parts 210, 215, 220, or 225 of this chapter.

(iii) The Program agreement must include the following requirements:

(A) The responsibility of the institution to accept final financial and administrative management of a proper, efficient, and effective food service, and comply with all requirements under this part.

(B) The responsibility of the institution to comply with all requirements of title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, and the Department's regulations concerning nondiscrimination (parts 15, 15a and 15b of this title), including requirements for racial and ethnic participation data collection, public notification of the nondiscrimination policy, and reviews to assure compliance with the nondiscrimination policy, to the end that no person may, on the grounds of race, color, national origin, sex, age, or disability, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under, the Program.

(C) The right of the State agency, the Department, and other State or Federal officials to make announced or unannounced reviews of their operations during the institution's normal hours of child or adult care operations, and that anyone making such reviews must show photo identification that demonstrates that they are employees of one of these entities.

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(g) To continue participating in the Program, independent at-risk afterschool care centers must comply with the annual information submission requirements, as described in §§ 226.6(b)(2)(i) and (f)(3)(ii). Sponsoring organizations of at-risk afterschool care centers must comply with the annual information submission requirements, as described in in § 226.6(b)(2)(ii), and provide area eligibility data, as described in § 226.15(g).

(g) To continue participating in the Program, independent at-risk afterschool care centers must comply with the annual information submission requirements, as described in §§ 226.6(b)(2)(i) and (f)(3)(ii). Sponsoring organizations of at-risk afterschool care centers must comply with the annual information submission requirements, as described in in § 226.6(b)(2)(ii), and provide area eligibility data, as described in § 226.15(g).

(b) Each new institution must submit to the State agency an application with all information required for its approval, as set forth in §§ 226.6(b)(1) and 226.6(f). This information must demonstrate that a new institution has the administrative and financial capability to operate the Program, as described in the performance standards set forth in § 226.6(b)(1)(xviii). Renewing institutions must annually certify that they are capable of operating the Program, as set forth in § 226.6(b)(2).

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(g) To continue participating in the Program, independent at-risk afterschool care centers must comply with the annual information submission requirements, as described in §§ 226.6(b)(2)(i) and (f)(3)(ii). Sponsoring organizations of at-risk afterschool care centers must comply with the annual information submission requirements, as described in in § 226.6(b)(2)(ii), and provide area eligibility data, as described in § 226.15(g).

(b) Each State agency must establish application review procedures, as described in paragraph (b)(1) of this section, to determine the eligibility of new institutions and facilities for which applications are submitted by sponsoring organizations. Each State agency must establish procedures for the review of renewal information, as described in paragraph (b)(2) of this section, to determine the continued eligibility of renewing institutions. The State agency must enter into written agreements with institutions, as described in paragraph (b)(4) of this section.

(1) Each State agency must establish application procedures to determine the eligibility of new institutions under this part. At a minimum, such procedures must require that institutions submit information to the State agency in accordance with paragraph (f) of this section. For new private nonprofit and proprietary child care institutions, such procedures must also include a pre-approval visit by the State agency to confirm the information in the institution's application and to further assess its ability to manage the Program. The State agency must establish factors, consistent with § 226.16(b)(1), that it will consider in determining whether a new sponsoring organization has sufficient staff to perform required monitoring responsibilities at all of its sponsored facilities. As part of the review of the sponsoring organization's management plan, the State agency must determine the appropriate level of staffing for each sponsoring organization, consistent with the staffing range of monitors set forth at § 226.16(b)(1) and the factors it has established. The State agency must ensure that each new sponsoring organization applying for participation after July 29, 2002 meets this requirement. In addition, the State agency's application review procedures must ensure that the following information is included in a new institution's application:

(i) Centers must submit current information on the number of enrolled participants who are eligible for free, reduced-price and paid meals;

(ii) Sponsoring organizations of day care homes must submit current information on:

(A) The total number of children enrolled in all homes in the sponsorship;

(B) An assurance that day care home providers' own children whose meals are claimed for reimbursement in the Program are eligible for free or reduced-price meals;

(C) The total number of tier I and tier II day care homes that it sponsors;

(D) The total number of children enrolled in tier I day care homes;

(E) The total number of children enrolled in tier II day care homes; and

(F) The total number of children in tier II day care homes that have been identified as eligible for free or reduced-price meals;

(iii) Institutions must submit their nondiscrimination policy statement and a media release, unless the State agency has issued a Statewide media release on behalf of all institutions;

(iv) Sponsoring organizations must submit a complete management plan that includes:

(A) Detailed information on the organization's management and administrative structure;

(B) A list or description of the staff assigned to Program monitoring, in accordance with the requirements set forth at § 226.16(b)(1);

(C) An administrative budget that includes projected CACFP administrative earnings and expenses;

(D) The procedures to be used by the organization to administer the Program in, and disburse payments to, the child care facilities under its sponsorship; and

(E) For sponsoring organizations of family day care homes, a description of the system for making tier I day care home determinations, and a description of the system of notifying tier II day care homes of their options for reimbursement;

(v) An institution must submit a budget that the State agency must review in accordance with § 226.7(g);

(vi) All centers and family day care homes must document that they meet Program licensing/approval requirements;

(vii) All private nonprofit institutions must document their tax-exempt status;

(viii) Institutions (independent at-risk afterschool care centers and sponsoring organizations of at-risk afterschool care centers) must submit documentation sufficient to determine that each at-risk afterschool care center meets the program eligibility requirements in § 226.17a(a), and sponsoring organizations must submit documentation that each sponsored at-risk afterschool care center meets the area eligibility requirements in § 226.17a(i).

(ix) Institutions must document that each for-profit center for which application is made meets the definition of a For-profit center, as set forth at § 226.2;

(x) Institutions must state their preference to receive commodities or cash-in-lieu of commodities;

(A) The State agency must develop criteria for determining whether a new sponsoring organization's participation will help ensure the delivery of benefits to otherwise unserved facilities or participants, and must disseminate these criteria to new sponsoring organizations when they request information about applying to the Program; and

(B) The new sponsoring organization must submit documentation that its participation will help ensure the delivery of benefits to otherwise unserved facilities or participants in accordance with the State agency's criteria;

(xii) If an institution or one of its principals is on the National disqualified list and submits an application, the State agency may not approve the application. If a sponsoring organization submits an application on behalf of a facility, and either the facility or any of its principals is on the National disqualified list, the State agency may not approve the application. In accordance with paragraph (k)(3)(vii) of this section, in this circumstance, the State agency's refusal to consider the application is not subject to administrative review.

(A) A State agency is prohibited from approving an institution's application if, during the past seven years, the institution or any of its principals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements. However, this prohibition does not apply if the institution or the principal has been fully reinstated in, or determined eligible for, that program, including the payment of any debts owed;

(B) Institutions must submit:

(1) A statement listing the publicly funded programs in which the institution and its principals have participated in the past seven years; and

(2) A certification that, during the past seven years, neither the institution nor any of its principals have been declared ineligible to participate in any other publicly funded program by reason of violating that program's requirements; or

(3) In lieu of the certification, documentation that the institution or the principal previously declared ineligible was later fully reinstated in, or determined eligible for, the program, including the payment of any debts owed; and

(C) If the State agency has reason to believe that the institution or its principals were determined ineligible to participate in another publicly funded program by reason of violating that program's requirements, the State agency must follow up with the entity administering the publicly funded program to gather sufficient evidence to determine whether the institution or its principals were, in fact, determined ineligible;

(A) A State agency is prohibited from approving an institution's application if the institution or any of its principals 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; and

(B) Institutions must submit a certification that neither the institution nor any of its principals 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;

(xv) Institutions must submit a certification that all information on the application is true and correct, along with the names, mailing addresses, and dates of birth of the institution's executive director and chair of the board of directors or the owner, in the case of a for-profit center that does not have an executive director or is not required to have a board of directors. In addition, the institution's Federal Employer Identification Number (FEIN) or the Unique Entity Identifier (UEI) must be provided;

(xvi) Sponsoring organizations must submit an 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. Sponsoring organizations that are participating on July 29, 2002, must submit an outside employment policy not later than September 27, 2002. The policy will be effective unless disapproved by the State agency;

(xvii) Sponsoring organizations applying for initial participation on or after June 20, 2000, must submit a bond, if such bond is required by State law, regulation, or policy. If the State agency requires a bond for sponsoring organizations pursuant to State law, regulation, or policy, the State agency must submit a copy of that requirement and a list of sponsoring organizations posting a bond to the appropriate FNSRO on an annual basis; and

(xviii) Each new institution must submit information sufficient to document that it is financially viable, is administratively capable of operating the Program in accordance with this part, and has internal controls in effect to ensure accountability. To document this, any new institution must demonstrate in its application that it is capable of operating in conformance with the following performance standards. The State agency must only approve the applications of those new institutions that meet these performance standards, and must deny the applications of those new institutions that do not meet the standards. In ensuring compliance with these performance standards, the State agency should use its discretion in determining whether the institution's application, in conjunction with its past performance in CACFP, establishes to the State agency's satisfaction that the institution meets the performance standards.

(A) The new institution must be financially viable. Program funds must be expended and accounted for in accordance with the requirements of this part, FNS Instruction 796-2 (“Financial Management in the Child and Adult Care Food Program”), and 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415. To demonstrate financial viability, the new institution must document that it meets the following criteria:

(1) Description of need/recruitment. A new sponsoring organization must demonstrate in its management plan that its participation will help ensure the delivery of Program benefits to otherwise unserved facilities or participants, in accordance with criteria developed by the State agency pursuant to paragraph (b)(1)(x) of this section. A new sponsoring organization must demonstrate that it will use appropriate practices for recruiting facilities, consistent with paragraph (p) of this section and any State agency requirements;

(2) Fiscal resources and financial history. A new institution must demonstrate that it has adequate financial resources to operate the CACFP on a daily basis, has adequate sources of funds to continue to pay employees and suppliers during periods of temporary interruptions in Program payments and/or to pay debts when fiscal claims have been assessed against the institution, and can document financial viability (for example, through audits, financial statements, etc.); and

(3) Budgets. Costs in the institution's budget must be necessary, reasonable, allowable, and appropriately documented;

(B) The new institution must be administratively capable. Appropriate and effective management practices must be in effect to ensure that the Program operates in accordance with this part. To demonstrate administrative capability, the new institution must document that it meets the following criteria:

(1) Has an adequate number and type of qualified staff to ensure the operation of the Program in accordance with this part;

(2) If a sponsoring organization, documents in its management plan that it employs staff sufficient to meet the ratio of monitors to facilities, taking into account the factors that the State agency will consider in determining a sponsoring organization's staffing needs, as set forth in § 226.16(b)(1); and

(3) If a sponsoring organization, has Program policies and procedures in writing that assign Program responsibilities and duties, and ensure compliance with civil rights requirements; and

(C) The new institution must have internal controls and other management systems in effect to ensure fiscal accountability and to ensure that the Program will operate in accordance with the requirements of this part. To demonstrate Program accountability, the new institution must document that it meets the following criteria:

(1) Governing board of directors. Has adequate oversight of the Program by an independent governing board of directors as defined at § 226.2;

(2) Fiscal accountability. Has a financial system with management controls specified in writing. For new sponsoring organizations, these written operational policies must assure:

(i) Fiscal integrity and accountability for all funds and property received, held, and disbursed;

(ii) The integrity and accountability of all expenses incurred;

(iii) That claims will be processed accurately, and in a timely manner;

(iv) That funds and property are properly safeguarded and used, and expenses incurred, for authorized Program purposes; and

(v) That a system of safeguards and controls is in place to prevent and detect improper financial activities by employees;

(3) Recordkeeping. Maintains appropriate records to document compliance with Program requirements, including budgets, accounting records, approved budget amendments, and, if a sponsoring organization, management plans and appropriate records on facility operations;

(4) Sponsoring organization operations. If a new sponsoring organization, documents in its management plan that it will:

(i) Provide adequate and regular training of sponsoring organization staff and sponsored facilities in accordance with §§ 226.15(e)(12) and (e)(14) and 226.16(d)(2) and (d)(3);

(ii) Perform monitoring in accordance with § 226.16(d)(4), to ensure that sponsored facilities accountably and appropriately operate the Program;

(iii) If a sponsor of family day care homes, accurately classify day care homes as tier I or tier II in accordance with § 226.15(f); and

(iv) Have a system in place to ensure that administrative costs funded from Program reimbursements do not exceed regulatory limits set forth at §§ 226.12(a) and 226.16(b)(1); and

(5) Meal service and other operational requirements. Independent centers and facilities will follow practices that result in the operation of the Program in accordance with the meal service, recordkeeping, and other operational requirements of this part. These practices must be documented in the independent center's application or in the sponsoring organization's management plan and must demonstrate that independent centers or sponsored facilities will:

(i) Provide meals that meet the meal patterns set forth in § 226.20;

(ii) Comply with licensure or approval requirements set forth in paragraph (d) of this section;

(iii) Have a food service that complies with applicable State and local health and sanitation requirements;

(iv) Comply with civil rights requirements;

(v) Maintain complete and appropriate records on file; and

(vi) Claim reimbursement only for eligible meals.

(2) Each State agency must establish annual information submission procedures to confirm the continued eligibility of renewing institutions under this part. Renewing institutions must not be required to submit a free and reduced-price policy statement or a nondiscrimination statement unless they make substantive changes to either statement. In addition, the State agency's review procedures must ensure that institutions annually submit information or certify that certain information is still true based on the requirements of this section. For information that must be certified, any new changes made in the past year and not previously reported to the State agency must be updated in the annual renewal information submission. Any additional information submitted in the renewal must be certified by the institution to be true.

(i) This paragraph (b)(2) contains the information that must be certified. The State agency must ensure that renewing independent centers certify the following to be true:

(A) The institution and its principals are not currently on the National disqualified list, per paragraph (b)(1)(xii) of this section;

(B) A list of any publicly funded programs that the sponsoring organization and its principals have participated in, in the past 7 years, is current, per paragraph (b)(1)(xiii)(B) of this section;

(C) The institution and its principals have not been determined ineligible for any other publicly funded programs due to violation of that program's requirements, in the past 7 years, per paragraphs (b)(1)(xiii)(B) and (C) of this section;

(D) No principals have been convicted of any activity that occurred during the past 7 years and that indicated a lack of business integrity, per paragraph (b)(1)(xiv)(B) of this section;

(E) The names, mailing addresses, and dates of birth of all current principals have been submitted to the State agency, per paragraph (b)(1)(xv) of this section;

(F) The institution is currently compliant with the required performance standards of financial viability and management, administrative capability, and program accountability, per paragraph (b)(1)(xviii) of this section; and

(ii) The State agency must ensure that renewing sponsoring organizations certify the following to be true:

(A) All of the requirements under paragraph (b)(2)(i) of this section are certified to be true;

(B) The management plan on file with the State agency is complete and up to date, per paragraph (b)(1)(iv) of this section;

(C) No sponsored facility or principal of a sponsored facility is currently on the National disqualified list, per paragraph (b)(1)(xii) of this section;

(D) The outside employment policy most recently submitted to the State agency remains current and in effect, per paragraph (b)(1)(xvi) of this section;

(E) Licensing or approval status of each sponsored child care center, adult day care center, or day care home is up-to-date;

(F) The list of the sponsoring organization's facilities on file with the State agency is up-to-date; and

(G) All facilities under the sponsoring organization's oversight have adhered to Program training requirements.

(iii) The State agency's review of information that must be submitted, certified or updated annually is as follows:

(A) The State agency must ensure that renewing sponsoring organizations certify that the sponsoring organization has reviewed the current management plan on file with the State agency and that it is complete and up to date. If the management plan has changed, the sponsoring organization must submit updates to the management plan that meet the requirements of § 226.16(b)(1). The State agency must establish factors, consistent with § 226.16(b)(1), that it will consider in determining whether a renewing sponsoring organization has sufficient staff to perform required monitoring responsibilities at all of its sponsored facilities. As part of its management plan review, the State agency must determine the appropriate level of staffing for the sponsoring organization, consistent with the staffing range of monitors set forth at § 226.6(b)(1) and the factors the State agency has established.

(B) The State agency must ensure that renewing sponsoring organizations submit an administrative budget for the upcoming year with sufficiently detailed information concerning projected CACFP administrative earnings and expenses, as well as other non-Program funds to be used in Program administration. The State agency must be able to determine the allowability, necessity, and reasonableness of all proposed expenditures, and to assess the sponsoring organization's capability to manage Program funds. The administrative budget must demonstrate that the sponsoring organization will expend and account for funds in accordance with regulatory requirements, FNS Instruction 796-2 (Financial Management in the Child and Adult Care Food Program), 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, and applicable Office of Management and Budget circulars. The administrative budget submitted by a sponsoring organization of centers must demonstrate that the administrative costs to be charged to the Program do not exceed 15 percent of the meal reimbursements estimated or actually earned during the budget year, unless the State agency grants a waiver, as described in § 226.7(g). For sponsoring organizations of day care homes seeking to carry over administrative funds, as described in § 226.12(a)(3), the budget must include an estimate of requested administrative fund carryover amounts and a description of proposed purpose for which those funds would be obligated or expended.

(C) The State agency must ensure that renewing institutions certify that neither the institution nor its principals are on the National disqualified list. The State agency must also ensure that renewing sponsoring organizations certify that no sponsored facility or facility principal is on the National disqualified list.

(D) A State agency is prohibited from approving a renewing institution or facility's application if, during the past 7 years, the institution, facility, responsible principals, or responsible individuals have been declared ineligible for any other publicly funded program by reason of violating that program's requirements. However, this prohibition does not apply if the institution, facility, responsible principals, or responsible individuals have been fully reinstated in or determined eligible for that program, including the payment of any debts owed. The State agency must follow up with the entity administering the publicly funded program to gather sufficient evidence to determine whether the institution or its principals were, in fact, determined ineligible.

(E) The State agency must ensure that renewing institutions certify that the institution's principals have not been convicted of any activity that occurred during the past 7 years and that indicates a lack of business integrity, as defined in paragraph (c)(1)(ii)(A) of this section.

(F) The State agency must ensure that renewing institutions submit a certification attesting to the validity of the following information: full legal name and any names previously used, mailing address, and dates of birth of the institution's executive director and chair of the board of directors or the owner, in the case of a for-profit center that does not have an executive director or is not required to have a board of directors. In addition, the institution's Federal Employer Identification Number (FEIN) or the Unique Entity Identifier (UEI) must be provided.

(G) The State agency must ensure that renewing sponsoring organizations certify that the outside employment policy most recently submitted to the State agency remains current and in effect or the sponsoring organization must submit an updated outside employment policy at the time of renewal. 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.

(H) The State agency must ensure that each renewing institution certifies that it is still in compliance with the performance standards described in paragraph (b)(1)(xviii) of this section, meaning it is financially viable, is administratively capable of operating the Program in accordance with this part, and has internal controls in effect to ensure accountability.

(I) The State agency must ensure that each independent center certifies that its licensing or approval status is up-to-date and that it continues to meet the licensing requirements described in paragraphs (d) and (e) of this section. Sponsoring organizations must certify that the licensing or approval status of their facilities is up-to-date and that they continue to meet the licensing requirements described in paragraphs (d) and (e) of this section. If the independent center or facility has a new license not previously on file with the State agency, a copy must be submitted, unless the State agency has other means of confirming the licensing or approval status of any independent center or facility providing care.

(J) The State agency must ensure that each sponsoring organization certifies that the list of all of their applicant day care homes, child care centers, outside-school-hours-care centers, at-risk afterschool care centers, emergency shelters, and adult day care centers on file with the State agency is up-to-date.

(K) The State agency must ensure that renewing sponsoring organizations certify that all facilities under their oversight have adhered to the training requirements set forth in Program regulations.

(iv) Institutions must provide information to the State agency as specified in paragraphs (f)(3), (f)(4), and (f)(7) of this section.

(i) Any new institution applying for participation in the Program must be notified in writing of approval or disapproval by the State agency, within 30 calendar days of the State agency's receipt of a complete application. Whenever possible, State agencies should provide assistance to institutions that have submitted an incomplete application. Any disapproved applicant institution must be notified of the reasons for its disapproval and its right to appeal, as described in paragraph (k) of this section. Any disapproved applicant day care home or unaffiliated center must be notified of the reasons for its disapproval and its right to appeal, as described in paragraph (l) of this section.

(ii) Any renewing institution must be provided written notification indicating whether it has completely and sufficiently met all renewal information requirements within 30 days of the submission of renewal information. Whenever possible, State agencies should provide assistance to institutions whose information is incomplete.

(i) The State agency must require each institution that has been approved for participation in the Program to enter into a permanent agreement governing the rights and responsibilities of each party. The existence of a valid permanent agreement, however, does not eliminate the need for an institution to comply with the annual information submission requirements and related provisions at paragraphs (b) and (f) of this section.

(ii) The existence of a valid permanent agreement does not limit the State agency's ability to terminate the agreement, as provided under paragraph (c)(3) of this section. The State agency must terminate the institution's agreement whenever an institution's participation in the Program ends. The State agency must terminate the agreement for cause based on violations by the institution, facility, responsible principals, or responsible individuals, as described in paragraph (c) of this section. The State agency or institution may terminate the agreement at its convenience for considerations unrelated to the institution's performance of Program responsibilities under the agreement. However, any action initiated by the State agency to terminate an agreement for its convenience requires prior consultation with FNS. Termination for convenience does not result in ineligibility for any program authorized under this part or parts 210, 215, 220, or 225 of this chapter.

(iii) The Program agreement must include the following requirements:

(A) The responsibility of the institution to accept final financial and administrative management of a proper, efficient, and effective food service, and comply with all requirements under this part.

(B) The responsibility of the institution to comply with all requirements of title VI of the Civil Rights Act of 1964, title IX of the Education Amendments of 1972, section 504 of the Rehabilitation Act of 1973, the Age Discrimination Act of 1975, and the Department's regulations concerning nondiscrimination (parts 15, 15a and 15b of this title), including requirements for racial and ethnic participation data collection, public notification of the nondiscrimination policy, and reviews to assure compliance with the nondiscrimination policy, to the end that no person may, on the grounds of race, color, national origin, sex, age, or disability, be excluded from participation in, be denied the benefits of, or be otherwise subjected to discrimination under, the Program.

(C) The right of the State agency, the Department, and other State or Federal officials to make announced or unannounced reviews of their operations during the institution's normal hours of child or adult care operations, and that anyone making such reviews must show photo identification that demonstrates that they are employees of one of these entities.

(j) Each institution shall enter into a Program agreement with the State agency in accordance with § 226.6(b)(4).

(f) Independent child care centers must enter into a written permanent agreement with the State agency. The agreement must specify the rights and responsibilities of both parties as required by § 226.6(b)(4). At a minimum, the agreement must include the provisions set forth in paragraph (b) of this section.

(2) The State agency must enter into a permanent agreement with an institution approved to operate one or more at-risk afterschool care centers, as described in § 226.6(b)(4). The agreement must describe the approved afterschool care programs and list the approved centers. The agreement must also require the institution to comply with the applicable requirements of this part 226.

(i) Unaffiliated sponsored afterschool care centers must enter into a written permanent agreement with the sponsoring organization. The agreement must specify the rights and responsibilities of both parties. At a minimum, the agreement must include the applicable provisions set forth in this section.

(ii) Independent afterschool care centers must enter into a written permanent agreement with the State agency. The agreement must specify the rights and responsibilities of both parties as required by § 226.6(b)(4). At a minimum, the agreement must include the applicable provisions set forth in this section.

(e) Independent outside-school-hours care centers must enter into a written permanent agreement with the State agency. The agreement must specify the rights and responsibilities of both parties as required by § 226.6(b)(4). At a minimum, the agreement must include the provisions described in paragraph (b) of this section.

(e) Independent adult day care centers must enter into a written permanent agreement with the State agency. The agreement must specify the rights and responsibilities of both parties as required by § 226.6(b)(4). At a minimum, the agreement must include the provisions described in paragraph (b) of this section.

(iii) Organizations must meet the licensing/approval requirements in § 226.6(d)(1).

(1) In accordance with § 226.6(d)(1), if Federal, State or local licensing or approval is not otherwise required, outside-school-hours care centers must meet State or local health and safety standards. When State or local health and safety standards have not been established, State agencies are encouraged to work with appropriate State and local officials to create such standards. Meeting these standards will remain a precondition for any outside-school-hours care center's eligibility for CACFP nutrition benefits. In cases where Federal, State or local licensing or approval is required, outside-school-hours care centers that are complying with applicable procedures to renew licensing or approval may participate in the Program during the renewal process, unless the State agency has information that indicates the renewal will be denied.

(c) Administrative review official means the independent and impartial official who conducts the administrative review held in accordance with § 226.6(k).

Adult means, for the purposes of the collection of the last four digits of social security numbers as a condition of eligibility for free or reduced-price meals, any individual 21 years of age or older.

Adult day care center means any public or private nonprofit organization or any for-profit center (as defined in this section) which (a) is licensed or approved by Federal, State or local authorities to provide nonresidential adult day care services to functionally impaired adults (as defined in this section) or persons 60 years of age or older in a group setting outside their homes or a group living arrangement on a less than 24-hour basis and (b) provides for such care and services directly or under arrangements made by the agency or organization whereby the agency or organization maintains professional management responsibility for all such services. Such centers shall provide a structured, comprehensive program that provides a variety of health, social and related support services to enrolled adult participants through an individual plan of care.

Adult day care facility means a licensed or approved adult day care center under the auspices of a sponsoring organization.

Adult participant means a person enrolled in an adult day care center who is functionally impaired (as defined in this section) or 60 years of age or older.

Advanced payments means financial assistance made available to an institution for its Program costs prior to the month in which such costs will be incurred.

At-risk afterschool care center means a public or private nonprofit organization that is participating or is eligible to participate in the CACFP as an institution or as a sponsored facility and that provides nonresidential child care to children after school through an approved afterschool care program located in an eligible area. However, an Emergency shelter, as defined in this section, may participate as an at-risk afterschool care center without regard to location.

At-risk afterschool meal means a meal that meets the requirements described in § 226.20(b)(6) and/or (c)(1), (c)(2), or (c)(3), that is reimbursed at the appropriate free rate and is served by an At-risk afterschool care center as defined in this section, which is located in a State designated by law or selected by the Secretary as directed by law.

At-risk afterschool snack means a snack that meets the requirements described in § 226.20(b)(6) and/or (c)(4) that is reimbursed at the free rate for snacks and is served by an At-risk afterschool care center as defined in this section.

CACFP child care standards means the Child and Adult Care Food Program child care standards developed by the Department for alternate approval of child care centers, and day care homes by the State agency under the provisions of § 226.6(d)(3) and (4).

Center means a child care center, at-risk afterschool care center, an adult day care center, an emergency shelter, or an outside-school-hours care center.

Child care center means any public or private nonprofit institution or facility (except day care homes), or any for-profit center, as defined in this section, that is licensed or approved to provide nonresidential child care services to enrolled children, primarily of preschool age, including but not limited to day care centers, settlement houses, neighborhood centers, Head Start centers and organizations providing day care services for children with disabilities. Child care centers may participate in the Program as independent centers or under the auspices of a sponsoring organization.

Child care facility means a licensed or approved child care center, at-risk afterschool care center, day care home, emergency shelter, or outside-school-hours care center under the auspices of a sponsoring organization.

Children means:

(c) Administrative review official means the independent and impartial official who conducts the administrative review held in accordance with § 226.6(k).

Adult means, for the purposes of the collection of the last four digits of social security numbers as a condition of eligibility for free or reduced-price meals, any individual 21 years of age or older.

Adult day care center means any public or private nonprofit organization or any for-profit center (as defined in this section) which (a) is licensed or approved by Federal, State or local authorities to provide nonresidential adult day care services to functionally impaired adults (as defined in this section) or persons 60 years of age or older in a group setting outside their homes or a group living arrangement on a less than 24-hour basis and (b) provides for such care and services directly or under arrangements made by the agency or organization whereby the agency or organization maintains professional management responsibility for all such services. Such centers shall provide a structured, comprehensive program that provides a variety of health, social and related support services to enrolled adult participants through an individual plan of care.

Adult day care facility means a licensed or approved adult day care center under the auspices of a sponsoring organization.

Adult participant means a person enrolled in an adult day care center who is functionally impaired (as defined in this section) or 60 years of age or older.

Advanced payments means financial assistance made available to an institution for its Program costs prior to the month in which such costs will be incurred.

At-risk afterschool care center means a public or private nonprofit organization that is participating or is eligible to participate in the CACFP as an institution or as a sponsored facility and that provides nonresidential child care to children after school through an approved afterschool care program located in an eligible area. However, an Emergency shelter, as defined in this section, may participate as an at-risk afterschool care center without regard to location.

At-risk afterschool meal means a meal that meets the requirements described in § 226.20(b)(6) and/or (c)(1), (c)(2), or (c)(3), that is reimbursed at the appropriate free rate and is served by an At-risk afterschool care center as defined in this section, which is located in a State designated by law or selected by the Secretary as directed by law.

At-risk afterschool snack means a snack that meets the requirements described in § 226.20(b)(6) and/or (c)(4) that is reimbursed at the free rate for snacks and is served by an At-risk afterschool care center as defined in this section.

CACFP child care standards means the Child and Adult Care Food Program child care standards developed by the Department for alternate approval of child care centers, and day care homes by the State agency under the provisions of § 226.6(d)(3) and (4).

Center means a child care center, at-risk afterschool care center, an adult day care center, an emergency shelter, or an outside-school-hours care center.

Child care center means any public or private nonprofit institution or facility (except day care homes), or any for-profit center, as defined in this section, that is licensed or approved to provide nonresidential child care services to enrolled children, primarily of preschool age, including but not limited to day care centers, settlement houses, neighborhood centers, Head Start centers and organizations providing day care services for children with disabilities. Child care centers may participate in the Program as independent centers or under the auspices of a sponsoring organization.

Child care facility means a licensed or approved child care center, at-risk afterschool care center, day care home, emergency shelter, or outside-school-hours care center under the auspices of a sponsoring organization.

Children means:

(c) Administrative review official means the independent and impartial official who conducts the administrative review held in accordance with § 226.6(k).

Adult means, for the purposes of the collection of the last four digits of social security numbers as a condition of eligibility for free or reduced-price meals, any individual 21 years of age or older.

Adult day care center means any public or private nonprofit organization or any for-profit center (as defined in this section) which (a) is licensed or approved by Federal, State or local authorities to provide nonresidential adult day care services to functionally impaired adults (as defined in this section) or persons 60 years of age or older in a group setting outside their homes or a group living arrangement on a less than 24-hour basis and (b) provides for such care and services directly or under arrangements made by the agency or organization whereby the agency or organization maintains professional management responsibility for all such services. Such centers shall provide a structured, comprehensive program that provides a variety of health, social and related support services to enrolled adult participants through an individual plan of care.

Adult day care facility means a licensed or approved adult day care center under the auspices of a sponsoring organization.

Adult participant means a person enrolled in an adult day care center who is functionally impaired (as defined in this section) or 60 years of age or older.

Advanced payments means financial assistance made available to an institution for its Program costs prior to the month in which such costs will be incurred.

At-risk afterschool care center means a public or private nonprofit organization that is participating or is eligible to participate in the CACFP as an institution or as a sponsored facility and that provides nonresidential child care to children after school through an approved afterschool care program located in an eligible area. However, an Emergency shelter, as defined in this section, may participate as an at-risk afterschool care center without regard to location.

At-risk afterschool meal means a meal that meets the requirements described in § 226.20(b)(6) and/or (c)(1), (c)(2), or (c)(3), that is reimbursed at the appropriate free rate and is served by an At-risk afterschool care center as defined in this section, which is located in a State designated by law or selected by the Secretary as directed by law.

At-risk afterschool snack means a snack that meets the requirements described in § 226.20(b)(6) and/or (c)(4) that is reimbursed at the free rate for snacks and is served by an At-risk afterschool care center as defined in this section.

CACFP child care standards means the Child and Adult Care Food Program child care standards developed by the Department for alternate approval of child care centers, and day care homes by the State agency under the provisions of § 226.6(d)(3) and (4).

Center means a child care center, at-risk afterschool care center, an adult day care center, an emergency shelter, or an outside-school-hours care center.

Child care center means any public or private nonprofit institution or facility (except day care homes), or any for-profit center, as defined in this section, that is licensed or approved to provide nonresidential child care services to enrolled children, primarily of preschool age, including but not limited to day care centers, settlement houses, neighborhood centers, Head Start centers and organizations providing day care services for children with disabilities. Child care centers may participate in the Program as independent centers or under the auspices of a sponsoring organization.

Child care facility means a licensed or approved child care center, at-risk afterschool care center, day care home, emergency shelter, or outside-school-hours care center under the auspices of a sponsoring organization.

Children means:

(b) Each new institution must submit to the State agency an application with all information required for its approval, as set forth in §§ 226.6(b)(1) and 226.6(f). This information must demonstrate that a new institution has the administrative and financial capability to operate the Program, as described in the performance standards set forth in § 226.6(b)(1)(xviii). Renewing institutions must annually certify that they are capable of operating the Program, as set forth in § 226.6(b)(2).

(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 §§ 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 §§ 226.6(b) and 226.6(f), the application must include:

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(2) An application for participation, or renewal materials, for each facility accompanied by all necessary supporting documentation;

(3) Timely information concerning the eligibility status of facilities (such as licensing/approval actions);

(4) For sponsoring organizations applying for initial participation, 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 § 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 § 226.6(l);

(7) 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;

(8) For sponsoring organizations of day care homes, the name, mailing address, and date of birth of each provider; and

(g) Sponsoring organizations of at-risk afterschool care centers must provide information, as required by the State agency, which permits the State agency to determine whether the centers they sponsor are located in eligible areas. Such information may include the most recent free and reduced-price school data available pursuant to § 226.6(f)(1)(ix) and attendance area information that it has obtained, or verified with the appropriate school officials to be current, within the last school year.

(B) The State agency must determine the area eligibility for each independent at-risk afterschool care center. The State agency must use the most recent data available, as described in § 226.6(f)(1)(ix)(A). The State agency must use attendance area information that it has obtained, or verified with the appropriate school officials to be current, within the last school year.

(1) The State agency must determine the eligibility of the afterschool care program for each sponsored afterschool care center based on the information submitted by the sponsoring organization in accordance with §§ 226.6(b)(1) and 226.15(g) and the requirements of this section. The State agency must determine the eligibility of the afterschool care programs of independent afterschool care centers based on the information submitted by the independent center in accordance with § 226.6(b)(1) and the requirements of this section. The State agency must determine the area eligibility of independent at-risk afterschool care centers in accordance with the requirements of § 226.6(f)(1)(ix)(B). An approved organization must enter into an agreement with the State agency as described in paragraph (f)(2) of this section.

(ii) Area eligibility determinations are valid for five years for at-risk afterschool care centers that are already participating in the Program. The State agency may determine the date in the fifth year when the next five-year cycle of area eligibility will begin. The State agency must redetermine the area eligibility for each independent at-risk afterschool care center in accordance with § 226.6(f)(1)(ix)(B). The State agency must redetermine the area eligibility of each sponsored at-risk afterschool care center based on the documentation submitted by the sponsoring organization in accordance with § 226.15(g). The State agency must not routinely require annual redeterminations of area eligibility based on updated school data during the five-year period, except in cases where the State agency has determined it is most efficient to incorporate area eligibility decisions into the three-year application cycle. However, a sponsoring organization, the State agency, or FNS may change the determination if information becomes available indicating that an at-risk afterschool care center is no longer area eligible.

(g) To continue participating in the Program, independent at-risk afterschool care centers must comply with the annual information submission requirements, as described in §§ 226.6(b)(2)(i) and (f)(3)(ii). Sponsoring organizations of at-risk afterschool care centers must comply with the annual information submission requirements, as described in in § 226.6(b)(2)(ii), and provide area eligibility data, as described in § 226.15(g).

(1) A sponsoring organization management plan and administrative budget, in accordance with §§ 226.6(b)(1)(iv), 226.6(b)(1)(v), 226.6(b)(2)(i), 226.6(f)(2)(i), and 226.7(g), which includes information sufficient to document the sponsoring organization's compliance with the performance standards set forth at § 226.6(b)(1)(xviii) 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 § 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 § 226.7(g)) or seek a waiver. Failure to do so will result in appropriate fiscal action in accordance with § 226.14(a).

(g) To continue participating in the Program, independent at-risk afterschool care centers must comply with the annual information submission requirements, as described in §§ 226.6(b)(2)(i) and (f)(3)(ii). Sponsoring organizations of at-risk afterschool care centers must comply with the annual information submission requirements, as described in in § 226.6(b)(2)(ii), and provide area eligibility data, as described in § 226.15(g).

(a) If a State agency elects to issue advance payments to all or some of the participating institutions in the State, it must provide such advances no later than the first day of each month to those eligible institutions electing to receive advances in accordance with § 226.6 (f)(3)(iv)(F). Advance payments shall equal the full level of claims estimated by the State agency to be submitted in accordance with paragraph (c) of this section, considering prior reimbursement claims and other information such as fluctuations in enrollment. The institution may decline to receive all or any part of the advance.

(b) The institution and the food service management company shall enter into a standard contract as required by § 226.6(i). However, public institutions may, with the approval of the State agency, use their customary form of contract if it incorporates the provisions of § 226.6(i).

(3) The State agency shall deny start-up and expansion payments to applicant sponsoring organizations which fail to meet the criteria of paragraph (b)(2) of this section or which have not been financially responsible in the operation of other programs funded by Federal, State, or local governments. The State agency shall notify the sponsoring organization of the reasons for denial and allow the sponsoring organization full opportunity to submit evidence on appeal as provided for in § 226.6(k). Any sponsoring organization applying for start-up or expansion funds shall be notified of approval or disapproval by the State agency in writing within 30 calendar days of filing a complete and correct application. If a sponsoring organization submits an incomplete application, the State agency shall notify the sponsoring organization within 15 calendar days of receipt of the application and shall provide technical assistance, if necessary, to the sponsoring organization for the purpose of completing its application.

(a) State agencies shall disallow any portion of a claim for reimbursement and recover any payment to an institution not properly payable under this part. State agencies may consider claims for reimbursement not properly payable if an institution does not comply with the recordkeeping requirements contained in this part. The State agency may permit institutions to pay overclaims over a period of one or more years. However, the State agency must assess interest beginning with the date stipulated in the State agency's demand letter, or 30 days after the date of the demand letter, whichever date is later. Further, when an institution requests and is granted an administrative review of the State agency's overpayment demand, the State agency is prohibited from taking action to collect or offset the overpayment until the administrative review is concluded. The State agency must maintain searchable records of funds recovery activities. If the State agency determines that a sponsoring organization of centers has spent more than 15 percent of its meal reimbursements for a budget year for administrative costs (or more than any higher limit established pursuant to a waiver granted under § 226.7(g)), the State agency must take appropriate fiscal action. In addition, except with approval from the appropriate FNSRO, State agencies shall consider claims for reimbursement not payable when an institution fails to comply with the recordkeeping requirements that pertain to records directly supporting claims for reimbursement. Records that directly support claims for reimbursement include, but are not limited to, daily meal counts, menu records, and enrollment and attendance records, as required by § 226.15(e). State agencies shall assert overclaims against any sponsoring organization of day care homes which misclassifies a day care home as a tier I day care home unless the misclassification is determined to be inadvertent under guidance issued by FNS. However, the State agency shall notify the institution of the reasons for any disallowance or demand for repayment, and allow the institution full opportunity to submit evidence on appeal as provided for in § 226.6(k). Miminum State agency collection procedures for unearned payments shall include:

(1) Written demand to the institution for the return of improper payments; (2) if, after 30 calendar days, the institution fails to remit full payment or agree to a satisfactory repayment schedule, a second written demand for the return of improper payments sent by certified mail return receipt requested; and (3) if, after 60 calendar days, the institution fails to remit full payment or agree to a satisfactory repayment schedule, the State agency shall refer the claim against the institution to appropriate State or Federal authorities for pursuit of legal remedies.

(a) An institution that has been given notice by the State agency of any action or proposed action that will affect their participation or reimbursement under the Program, in accordance with § 226.6(k);

(ii) Inform the institution that it may appeal the fine and advise the institution of the appeal procedures established under § 226.6(k);

(k) 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 § 226.6(k). State agencies may permit disallowances to be appealed separately from claims for reimbursement.

(h) State agencies are not required to provide a hearing to an institution for State actions taken on the basis of a Federal audit determination. If a State agency does not provide a hearing in such situations, FNS will provide a hearing, upon request, in accordance with procedures set forth in § 226.6(k).

(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 § 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 § 226.6(l);

(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 § 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 § 226.6(l);

(q) State agencies must monitor independent centers in accordance with § 226.6(m). Sponsoring organizations of at-risk afterschool care centers must monitor their centers in accordance with § 226.16(d)(4).

(h) State agencies shall conduct verification of eligibility for free and reduced-price meals on an annual basis, in accordance with the verification procedures outlined in paragraphs (h) (1) and (2) of this section. Verification may be conducted in accordance with Program assistance requirements of § 226.6(m); however, the performance of verification for individual institutions shall occur no less frequently than once every three years. Any State may, with the written approval of FNSRO, use alternative approaches in the conduct of verification, provided that the results achieved meet the requirements of this part. If the verification process discloses deficiencies with the determination of eligibility and/or application procedures which exceed maximum levels established by FNS, State agencies shall conduct follow-up reviews for the purpose of determining that corrective action has been taken by the institution. These reviews shall be conducted within one year of the date the verification process was completed. The verification effort shall be applied without regard to race, color, national origin, sex, age, or disability. State agencies shall maintain on file for review a description of the annual verification to be accomplished in order to demonstrate compliance with paragraphs (h) (1) and (2) of this section.

(1) Except for sponsoring organizations of family day care homes, State agency verification procedures for nonpricing programs shall consist of a review of all approved free and reduced price applications on file. For sponsoring organizations of family day care homes, State agency verification procedures shall consist of a review only of the approved free and reduced price applications (or other documentation, if vouchers or other documentation are used in lieu of free and reduced price applications) on file for those day care homes that are required to be reviewed when the sponsoring organization is reviewed, in accordance with the review requirements set forth in § 226.6(m). However, the State agency shall ensure that the day care homes selected for review are representative of the proportion of tier I, tier II, and tier II day care homes with a mix of income-eligible and non-income-eligible children in the sponsorship, and shall ensure that at least 10 percent of all free and reduced price applications (or other documentation, if applicable) on file for the sponsorship are verified. The review of applications shall ensure that:

(i) The application has been correctly and completely executed by the household;

(ii) The institution has correctly determined and classified the eligibility of enrolled participants for free or reduced price meals or, for family day care homes, for tier I or tier II reimbursement, based on the information included on the application submitted by the household;

(iii) The institution has accurately reported to the State agency the number of enrolled participants meeting the criteria for free or reduced price meal eligibility or, for day care homes, the number of participants meeting the criteria for tier I reimbursement, and the number of enrolled participants that do not meet the eligibility criteria for those meals; and

(iv) In addition, the State agency may conduct further verification of the information provided by the household on the approved application for program meal eligibility. If this effort is undertaken, the State agency shall conduct this further verification for nonpricing programs in accordance with the procedures described in paragraph (h)(2) of this section.

(i) For pricing programs, in addition to the verification procedures described in paragraph (h)(1) of this section, State agencies shall also conduct verification of the income information provided on the approved application for free and reduced price meals and, at State agency discretion, verification may also include confirmation of other information required on the application. However,

(A) If a SNAP, FDPIR or TANF case number is provided for a child, verification for such child shall include only confirmation that the child is included in a currently certified SNAP or FDPIR household or is a TANF recipient; or

(B) If a SNAP or FDPIR case number or SSI or Medicaid assistance identification number is provided for an adult, verification for such adult shall include only confirmation that the adult is included in a currently certified SNAP or FDPIR household or is currently certified to receive SSI or Medicaid benefits.

(ii) State agencies shall perform verification on a random sample of no less than 3 percent of the approved free and reduced price applications in an institution which is a pricing program.

(iii) Households shall be informed in writing that they have been selected for verification and they are required to submit the requested verification information to confirm their eligibility for free or reduced-price benefits by such date as determined by the State agency. Those households shall be informed of the type or types of information and/or documents acceptable to the State agency and the name and phone number of an official who can answer questions and assist the household in the verification effort.

(iv) Households of enrolled children selected for verification shall also be informed that if they are currently certified to participate in SNAP, FDPIR or TANF they may submit proof of that certification in lieu of income information. In those cases, such proof shall consist of a current “Notice of Eligibility” for SNAP, FDPIR or TANF benefits or equivalent official documentation issued by a SNAP, Indian Tribal Organization, or welfare office which shows that the children are members of households or assistance units currently certified to participate in SNAP, FDPIR or TANF. An identification card for any of these programs is not acceptable as verification unless it contains an expiration date. Households of enrolled adults selected for verification shall also be informed that if they are currently certified to participate in SNAP or FDPIR or SSI or Medicaid Programs, they may submit proof of that certification in lieu of income information. In those cases, such proof shall consist of:

(A) A current “Notice of Eligibility” for SNAP or FDPIR benefits or equivalent official documentation issued by a SNAP, Indian Tribal Organization, or welfare office which shows that the adult participant is a member of a household currently certified to participate in the SNAP Program or FDPIR. An identification card is not acceptable as verification unless it contains an expiration date; or

(B) Official documentation issued by an appropriate SSI or Medicaid office which shows that the adult participant currently receives SSI or Medicaid assistance. An identification card is not acceptable as verification unless it contains an expiration date. All households selected for verification shall be advised that failure to cooperate with verification efforts will result in a termination of benefits.

(v) Sources of information for verification may include written evidence, collateral contacts, and/or systems of records.

(A) Written evidence shall be used as the primary source of information for verification. Written evidence includes written confirmation of a household's circumstances, such as wage stubs, award letters, letters from employers, and, for enrolled children, current certification to participate in the SNAP, FDPIR or TANF Programs, or, for adult participants, current certification to participate in the SNAP, FDPIR, SSI or Medicaid Programs. Whenever written evidence is insufficient to confirm eligibility, the State agency may use collateral contacts.

(B) is a verbal confirmation of a household's circumstances by a person outside of the household. The collateral contact may be made in person or by phone and shall be authorized by the household. The verifying official may select a collateral contact if the household fails to designate one or designates one which is unacceptable to the verifying official. If the verifying official designates a collateral contact, the contact shall not be made without providing written or oral notice to the household. At the time of this notice, the household shall be informed that it may consent to the contact or provide acceptable verification in another form. The household shall be informed that its eligibility for free or reduced price meals shall be terminated if it refuses to choose one of these options. Termination shall be made in accordance with paragraph (h)(2)(vii) of this section. Collateral contacts could include employers, social service agencies, and migrant agencies.

(C) to which the State agency may have routine access are not considered collateral contacts. Information concerning income, family size, or SNAP/FDPIR/TANF certification for enrolled children, or SNAP/FDPIR/SSI/Medicaid certification for enrolled adults, which is maintained by other government agencies and to which a State agency can legally gain access may be used to confirm a household's eligibility for Program meal benefits. One possible source could be wage and benefit information maintained by the State unemployment agency, if that information is available. The use of any information derived from other agencies must be used with applicable safeguards concerning disclosure.

(vi) Verification by State agencies of receipt of SNAP, FDPIR, TANF, SSI or Medicaid benefits shall be limited to a review to determine that the period of eligibility is current. If the benefit period is found to have expired, or if the household's certification has been terminated, the household shall be required to document their income eligibility.

(vii) The State agency may work with the institution to verify the documentation submitted by the household on the application; however, the responsibility to complete the verification process may not be delegated to the institution.

(viii) If a household refuses to cooperate with efforts to verify, or the verification of income indicates that the household is ineligible to receive benefits or is eligible to receive reduced benefits, the State agency shall require the pricing program institution to terminate or adjust eligibility in accordance with the following procedures. Institution officials shall immediately notify families of the denial of benefits in accordance with paragraphs (e)(4) and (e)(5) of this section. Advance notification shall be provided to families which receive a reduction or termination of benefits 10 calendar days prior to the actual reduction or termination. The 10-day period shall begin the day the notice is transmitted to the family. The notice shall advise the household of: (A) The change; (B) the reasons for the change; (C) notification of the right to appeal the action and the date by which the appeal must be requested in order to avoid a reduction or termination of benefits; (D) instructions on how to appeal; and (E) the right to reapply at any time during the year. The reasons for ineligibility shall be properly documented and retained on file at the institution.

(ix) When a household disagrees with an adverse action which affects its benefits and requests a fair hearing, benefits shall be continued as follows while the household awaits the hearing:

(A) Households which have been approved for benefits and which are subject to a reduction or termination of benefits later in the same year shall receive continued benefits if they appeal the adverse action within the 10-day advance notice period; and

(B) Households which are denied benefits upon application shall not received benefits.

(3) State agencies shall inform institution officials of the results of the verification effort and the action which will be taken in response to the verification findings. This notification shall be made in accordance with the procedures outlined in § 226.14(a).

(4) If the verification results disclose that an institution has inaccurately classified or reported the number of participants eligible for free, reduced-price or paid meals, the State agency shall adjust institution rates of reimbursement retroactive to the month in which the incorrect eligibility figures were reported by the institution to the State agency.

(5) If the verification results disclose that a household has not reported accurate documentation on the application which would support continued eligibility for free or reduced-price meals, the State agency shall immediately adjust institution rates of reimbursement. However, this rate adjustment shall not become effective until the affected households have been notified in accordance with the procedures of paragraph (h)(2)(vi) of this section and any ensuing appeals have been heard as specified in paragraph (h)(2)(viii) of this section.

(6) Prior to approving an application for a day care home that qualifies as tier I day care home on the basis of the provider's household income, sponsoring organizations of day care homes shall conduct verification of such income in accordance with the procedures contained in paragraph (h)(2)(i) of this section. Sponsoring organizations of day care homes may verify the information on applications submitted by households of children enrolled in day care homes in accordance with the procedures contained in paragraph (h)(2)(i) of this section.

(i) The State agency or child care institution, as appropriate, may disclose aggregate information about children eligible for free and reduced price meals to any party without parental notification and consent when children cannot be identified through release of the aggregate data or by means of deduction. Additionally, the State agency or institution may disclose information that identifies children eligible for free and reduced price meals to the programs and the individuals specified in this paragraph (i) without parental/guardian consent. The State agency or child care institution that makes the free and reduced price meal eligibility determination is responsible for deciding whether to disclose program eligibility information.

(1) Only persons directly connected with the administration or enforcement of a program or activity listed in paragraphs (i)(2) or (i)(3) of this section may have access to children's free milk eligibility information, without parental consent. Persons considered directly connected with administration or enforcement of a program or activity listed in paragraphs (i)(2) or (i)(3) of this section are Federal, State, or local program operators responsible for the ongoing operation of the program or activity or persons responsible for program compliance. Program operators may include persons responsible for carrying out program requirements and monitoring, reviewing, auditing, or investigating the program. Program operators may include contractors, to the extent those persons have a need to know the information for program administration or enforcement. Contractors may include evaluators, auditors, and others with whom Federal or State agencies and program operators contract with to assist in the administration or enforcement of their program in their behalf.

(2) The State agency or child care institution, as appropriate, may disclose, without parental consent, only children's names and eligibility status (whether they are eligible for free meals or reduced price meals) to persons directly connected with the administration or enforcement of:

(i) A Federal education program;

(ii) A State health program or State education program administered by the State or local education agency;

(iii) A Federal, State, or local means-tested nutrition program with eligibility standards comparable to the National School Lunch Program (i.e., food assistance programs for households with incomes at or below 185 percent of the Federal poverty level); or

(iv) A third party contractor assisting in verification of eligibility efforts by contacting households who fail to respond to requests for verification of their eligibility.

(3) In addition to children's names and eligibility status, the State agency or child care institution, as appropriate, may disclose, without parental/guardian consent, all eligibility information obtained through the free and reduced price meal eligibility process (including all information on the application or obtained through direct certification) to:

(i) Persons directly connected with the administration or enforcement of programs authorized under the Richard B. Russell National School Lunch Act or the Child Nutrition Act of 1966. This means that all eligibility information obtained for the Child and Adult Care Food Program may be disclosed to persons directly connected with administering or enforcing regulations under the National School Lunch Program, Special Milk Program, School Breakfast Program, Summer Food Service Program, and the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) (Parts 210, 215, 220, 225 and 246, respectively, of this chapter);

(ii) The Comptroller General of the United States for purposes of audit and examination; and

(iii) Federal, State, and local law enforcement officials for the purpose of investigating any alleged violation of the programs listed in paragraphs (i)(2) and (i)(3) of this section.

(4) State agencies and child care institutions may use children's free milk eligibility information for administering or enforcing the Child and Adult Care Food Program. Additionally, any other Federal, State, or local agency charged with administering or enforcing the Child and Adult Care Food Program may use the information for that purpose. Individuals and programs to which children's free or reduced price meal eligibility information has been disclosed under this section may use the information only in the administration or enforcement of the receiving program. No further disclosure of the information may be made.

(1) Funds are available to each State agency in an amount equal to 1.5 percent of the Program funds used by the State during the second fiscal year preceding the fiscal year for which these funds are to be made available. These funds are for the expense of conducting audits under § 226.8 and Program monitoring under § 226.6(m).

(q) Following its reviews of institutions and facilities under §§ 226.6(m) and 226.23(h) conducted prior to July 1, 1988, the State agency shall report data on key elements of program operations on a form designated by FNS. These key elements include but are not limited to the program areas of meal requirements, determination of eligibility for free and reduced price meals, and the accuracy of reimbursement claims. These forms shall be submitted within 90 days of the completion of the data collection for the institutions except that, if the State has elected to conduct reviews of verification separate from its administrative reviews, the State shall retain data until all key elements have been reviewed and shall report all data for each institution on one form within 90 days of the completion of the data collection for all key elements for that institution. States shall ensure that all key element data for an institution is collected during a 12-month period.

(5) For sponsoring organizations, as part of their monitoring of facilities, compliance with the household contact requirements established pursuant to § 226.6(m)(5) of this part.

(4) Each State agency shall establish procedures to review information submitted by institutions for centers or homes for which licensing or approval is not available in order to establish eligibility for the Program. Licensing or approval is not available when (i) no Federal, State, or local licensing/approval standards have been established for child care centers, or day care homes; or (ii) no mechanism exists to determine compliance with licensing/approval standards. In these situations, independent centers, and sponsoring organizations on behalf of their facilities, may choose to demonstrate compliance with either CACFP child care standards, applicable State child care standards, or applicable local child care standards. State agencies shall provide information about applicable State child care standards and CACFP child care standards to institutions, but may require institutions electing to demonstrate compliance with applicable local child care standards to identify and submit these standards. The State agency may permit independent centers, and sponsoring organizations on behalf of their facilities, to submit self-certification forms, and may grant approval without first conducting a compliance review at the center or facility. But the State agency shall require submission of health/sanitation and fire/safety permits or certificates for all independent centers and facilities seeking alternate child care standards approval. Compliance with applicable child care standards are subject to review in accordance with § 226.6(o).