Streamlining Program Requirements and Improving Integrity in the Summer Food Service Program (SFSP)

DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210, 215, 220, 225, and 226

RIN 0584-AE72

Streamlining Program Requirements and Improving Integrity in the Summer Food Service Program (SFSP)

AGENCY:

Food and Nutrition Service (FNS), USDA.

ACTION:

Final rule.

SUMMARY:

This rulemaking amends the Summer Food Service Program (SFSP) regulations to strengthen program integrity by clarifying, simplifying, and streamlining program administration to facilitate compliance with program requirements. Through this final rule, USDA is codifying changes to the regulations that will streamline requirements among Child Nutrition Programs, simplify the application process, enhance monitoring requirements, offer more clarity on existing requirements, and provide more discretion at the State agency level to manage program operations.

Effective date:

This rule is effective October 1, 2022.

Compliance date:

Compliance with the provisions of this rule must begin May 1, 2023.

FOR FURTHER INFORMATION CONTACT:

Anne Fiala, 703-305-2590,

anne.fiala@usda.gov.

SUPPLEMENTARY INFORMATION:

I. Background

II. Public Comments

III. Section-by-Section Discussion of the Regulatory Provisions

A. Reorganization of Section 225.6

B. Streamlining Program Requirements

i. Application Procedures for New Sponsors

ii. Demonstration of Financial and Administrative Capability

iii. Clarifying Performance Standards for Evaluating Sponsor Viability, Capability, and Accountability

C. Facilitating Compliance With Program Monitoring Requirements

i. First Week Site Visits

ii. Establishing the Initial Maximum Approved Level of Meals for Sites of Vended Sponsors

iii. Statistical Monitoring Procedures, Site Selection, and Meal Claim Validation for Site Reviews

D. Providing a Customer-Service Friendly Meal Service

i. Meal Service Times

ii. Off-Site Consumption of Food Items

iii. Offer Versus Serve

E. Clarification of Program Requirements

i. Reimbursement Claims for Meals Served Away From Approved Locations

ii. Timeline for Reimbursements to Sponsors

iii. Requirements for Media Release

iv. Annual Verification of Tax-Exempt Status

F. Important Definitions in the SFSP

i. Self-Preparation Versus Vended Sites

ii. Eligibility for Closed Enrolled Sites

iii. Roles and Responsibilities of Site Supervisors

iv. Unaffiliated Sites

v. Unanticipated School Closure

vi. Nonprofit Food Service, Nonprofit Food Service Account, Net Cash Resources

G. Miscellaneous

i. Authority To Waive Statute and Regulations

ii. Duration of Eligibility

iii. Methods of Providing Training

iv. Meal Preparation Facility Reviews

v. Technical Changes

IV. Procedural Matters

I. Background

The Summer Food Service Program (SFSP) is authorized under section 13 of the Richard B. Russell National School Lunch Act (NSLA), 42 U.S.C. 1761. Its primary purpose is to provide free, nutritious meals to children from low-income areas during periods when schools are not in session.

USDA published the proposed rule

Streamlining Program Requirements and Improving Integrity in the Summer Food Service Program (SFSP)

on January 23, 2020 (85 FR 4064) in order to streamline requirements for program operators and enhance the customer experience for participating children and their families. Although this final rule primarily affects the SFSP, it also makes changes to the regulations related to waiver authority for the National School Lunch Program (NSLP), School Breakfast Program (SBP), Special Milk Program, Fresh Fruit and Vegetable Program, and the Child and Adult Care Food Program (CACFP). This rulemaking is the culmination of many years of stakeholder and community engagement, which informed the development of these policies.

Many of the provisions codified through this final rule are currently allowed as program flexibilities and have been shown to improve program administration and enhance service delivery for participating children and their families. These flexibilities were previously indicated through policy memoranda and will now have the full force and effect of law. In addition, this rule will codify key aspects of four nationwide waivers that were available in the past but have been rescinded in response to an audit by the USDA Office of the Inspector General (OIG), entitled “

FNS Controls Over the Summer Food Service Program”

(27601-0004-41). This report led USDA to determine that offering waivers under 42 U.S.C. 1760(l) on a nationwide basis is not supported by the statute. However, beginning in 2019, USDA allowed States and sponsors to request, on an individual basis, four of the rescinded waivers: first week site visits, meal service times, offer versus serve, and eligibility for closed enrolled sites. Such individual waivers are authorized under section 12(l) of the NSLA, which provides USDA authority to waive certain provisions of the Child Nutrition Programs if a waiver would facilitate the ability of the State or eligible service provider to carry out the purpose of the affected program while also meeting public notice and federal cost requirements. States and eligible service providers were approved for more than 230 individual section 12(l) waivers under this authority for summer 2019, related primarily to the four rescinded waivers. In March 2020, Congress passed the Families First Coronavirus Response Act (FFCRA) (Pub. L. 116-127), which authorized USDA to establish nationwide waivers for all States for the purposes of providing meals under the Child Nutrition Programs with appropriate safety measures with respect to the novel coronavirus (COVID-19) pandemic. Under section 2202(a) of this authority, USDA issued nationwide waivers for first week site visits, meal service times, offer versus serve, and eligibility for closed enrolled sites. Therefore, States and eligible service providers did not need to request these same waivers under section 12(l) of the NSLP on an individual basis in summers 2020 or 2021. Prior to issuance of the nationwide waivers under section 2202(a) of FFCRA, USDA received 189 requests for individual waivers under section 12(l) of the NSLP related to the four rescinded waivers for summer 2020. The large number of individual waiver requests received from States and sponsors related to the rescinded waivers demonstrates the value of the policies allowed through the waivers, and the benefit of codifying key aspects of the waivers so that these policies are available to all States and sponsors without the need to request a waiver. Through the process of evaluating waiver requests and outcomes for summer 2019, USDA gained valuable insight into challenges and best practices of using the waivers, which informed changes in this final rule to provisions impacted by the waivers. As a result, this final rule codifies, with modifications that will promote better program integrity, the four most requested SFSP waivers.

Codifying existing flexibilities and key aspects of the four rescinded nationwide waivers will facilitate sponsor and site participation, decrease paperwork burdens on State agencies and sponsors, and provide certainty that these options will continue to be available. The following table, entitled

FNS Policy Memoranda Addressed in This Rule,

details USDA policy memoranda that are discussed in this rule, the specific provision(s) from each memorandum that is discussed, the status of the impacted waiver or flexibility, and the section of the rule in which it is addressed.

This final rule also codifies additional provisions to streamline program administration, enhance monitoring requirements, and provide needed clarity on existing provisions. In their totality, these changes will improve the customer experience, and facilitate the ability of States and sponsors to implement the program with fidelity.

BILLING CODE 3410-30-P

ER19SE22.000

ER19SE22.001

BILLING CODE 3410-30-C

II. Public Comments

USDA received 163 comments during a 90-day comment period, which was originally 60-days, then extended another 30 days to April 22, 2020. Commenters were generally representative of SFSP stakeholders and offered a diversity of viewpoints. Of the comments received, 16 responses were associated with five form letter campaigns, 16 responses were non-germane or duplicates, and 131 responses were unique. One hundred of the 131 unique comments were substantive and supported by detailed reasoning and explanations for the commenters' positions.

These comments represented 59 individuals and commenters who remained anonymous, 29 State agencies (47 total comments), 12 advocacy or nonprofit organizations, nine sponsoring organizations, seven food banks, six school districts, three nutritionists, two professional associations, and one Federal elected official. A few State agencies submitted multiple comments, some of which were unique and are counted as individual submissions, and some of which were the same or virtually the same and are considered to be form letters for the purpose of this comment analysis. FNS received comments from four additional form letter campaigns comprised of 12 total comments from sponsors, food banks, and general advocacy or nonprofit organizations. Comments associated with these four campaigns were detailed and provided explanations for their responses and recommendations.

Nearly two-thirds of all comments were generally supportive of this rulemaking and many commenters offered substantive and detailed recommendations. The provisions that garnered the most comments were: first week site visits (67), off-site consumption of food items (63), offer versus serve (62), eligibility for closed enrolled sites (52), meal service times (47), and clarifying performance standards for evaluating sponsor viability, capability, and accountability (40).

Except for a small number of non-germane responses, the comments are posted at

http://www.regulations.gov

under docket ID FNS-2019-0034-0001,

Streamlining Program Requirements and Improving Integrity in the Summer Food Service Program.

III. Section-by-Section Discussion of the Regulatory Provisions

A. Reorganization of Section 225.6

USDA proposed to reorganize and streamline § 225.6. This proposal would not change any existing requirements; rather, it would more clearly present current requirements for sponsor and site applications by reorganizing § 225.6(c),

Content of sponsor application.

The provisions found in current § 225.6(c)(2) would move to a new paragraph (g) and the provisions in current § 225.6(c)(4) would move to a new paragraph (f). In addition, § 225.6(d) through (i) would be reordered to make space for a new paragraph (d), related to performance standards for determining financial and administrative capability, and a new paragraph (e), related to sponsor submission of a management plan. These new sections are described in more detail in the next section of this preamble. The table below provides an outline of the proposed revisions:

Current outline

Proposed outline

a. General Responsibilities

a. General responsibilities.

b. Approval of sponsor applications

b. Approval of sponsor applications.

c. Content of sponsor application

c. Content of sponsor application.

1. Application forms

1. Application form.

2. Requirements for new sponsors, new sites, and, as determined by the State agency, sponsors and sites which have experienced significant operational problems in the prior year

2. Application requirements for new sponsors and sponsors that have experienced significant operational problems in the prior year.

3. Application requirements for experienced sponsors.

3. Requirements for experienced sponsors and experienced sites

4. Application requirements for school food authorities and Child and Adult Care Food Program institutions.

d. Performance standards.

1. Performance standard 1.

2. Performance standard 2.

3. Performance standard 3.

e. Management plan.

4. Free meal policy statement

f. Free meal policy statement.

5. Hearing procedures statement

1. Nondiscrimination statement.

2. Hearing procedures statement.

g. Site information sheets.

1. New sites.

2. Experienced sites.

d. Approval of sites

h. Approval of sites.

e. State-sponsor agreement

i. State-sponsor agreement.

f. Special account

j. Special account.

g. Food service management company registration

k. Food service management company registration.

h. Monitoring of food service management company procurements

l. Monitoring of food service management company procurements.

i. Meal pattern exceptions

m. Meal pattern exceptions.

Public Comments

USDA received one comment on this provision. The commenter expressed support for the proposed changes and suggested that USDA further divide the information in § 225.6 into shorter sections that are easier to use.

USDA Response

USDA appreciates the comment and agrees that various portions of § 225.6 could benefit from further reorganization. However, USDA prefers to propose any additional significant organizational changes to the regulations through notice and comment rule making and receive public comments before finalizing such changes. For that reason, USDA will codify this provision as proposed.

B. Streamlining Program Requirements

i. Application Procedures for New Sponsors

All sponsors are required to submit an annual application to participate in the SFSP. In accordance with current § 225.6(c), new applicants and sponsors that have experienced significant operational problems in the previous year must submit detailed information sufficient to demonstrate their ability to successfully operate the SFSP in compliance with program requirements and with integrity. This includes, but is not limited to, information on sites, arrangements for meeting health and safety standards, and a program budget. Experienced sponsors that have operated the SFSP in a prior year without significant operation problems may use a streamlined application process described in current § 225.6(c)(3). To reduce duplicative work, these sponsors submit updates on the types of information that are most likely to change from year to year.

Sponsors that have successfully operated other Child Nutrition Programs are likely to perform well in the operation of the SFSP. For example, school food authorities (SFA), which are the governing bodies that have the legal authority to operate the school meal programs in one or more schools, and CACFP institutions, which have agreements with a State agency to assume final administrative and financial responsibility for CACFP operations, have already demonstrated their ability to operate a food service and comply with State and Federal nutrition program requirements. In order to encourage participation of sponsors with Child Nutrition Program experience, USDA extended flexibilities through policy memoranda which allow SFAs operating the NSLP or SBP, and CACFP institutions in good standing to use the application procedures for experienced sponsors in certain circumstances (SFSP 05-2012,

Simplifying Application Procedures in the Summer Food Service Program,

October 31, 2011 and SFSP 04-2013,

Summer Feeding Options for School Food Authorities,

November 23, 2012).

The aforementioned flexibilities apply to SFAs and CACFP institutions in good standing that are applying for the SFSP for the first time and will serve meals at the same sites where they provide meal services through the NSLP, SBP, or CACFP during the school year. Such institutions are allowed to follow the application requirements for experienced sponsors found in current § 225.6(c)(3). The institution must also provide site information that is necessary for the State agency to evaluate each proposed site, including whether it is rural or non-rural, self-preparation or vended, and certification from a migrant organization if it will primarily serve the children of migrant families.

In accordance with these memoranda, an SFA or CACFP institution may be considered `in good standing' if it has been reviewed by the State agency in the last 12 months and had no major findings or program violations, or completed and implemented all corrective actions from the last compliance review. In addition, an SFA or CACFP institution may be considered in good standing if it has not been found to be seriously deficient by the State agency in the past two years and has never been terminated from another Child Nutrition Program.

USDA proposed to codify the flexibilities currently extended through policy guidance and proposed to allow State agencies the discretion to determine whether or not to implement this streamlined application process.

Public Comments

USDA received 31 comments about application procedures for new sponsors, including three form letter copies. Of these, 24 were supportive, three offered partial support, none were opposed, and four were mixed. Proponents of this provision included all types of commenters, many of whom stated that offering the streamlined process is a proven strategy to reduce administrative burden and encourage participation among operators of other Child Nutrition Programs. Two State agencies and a general advocacy organization noted the importance of maintaining State agency discretion to request additional documentation if the State has reason to conduct a more thorough review of an application. A few other State agencies had suggestions or questions related to making a determination of `good standing' for an applicant. These commenters suggested additional criteria to consider when making this determination, such as debts owed to the State agency, contractual arrangements for purchasing meals, and where the sponsor is in the serious deficiency process for the CACFP. One State agency pointed out that sponsors are not reviewed annually and so they may not have major findings or program violations recorded in the last 12 months as the proposed rule recommended. A State agency noted that this flexibility is only for sites at which the sponsor offers meal service during the school year and stated that this arrangement is often not the case. Another commenter stated that it would be burdensome for some States to make changes to their current automated application system.

USDA Response

This final rule codifies as proposed the flexibility for SFAs operating the NSLP or SBP and CACFP institutions in

good standing applying to the SFSP as new sponsors to use the application procedures for experienced sponsors in certain circumstances. However, USDA recognizes that States are in the best position to determine how and when to implement this flexibility. Therefore, States are encouraged to request additional evidence of administrative capability or require submission of a new sponsor application if they have reason to believe that a new SFA or CACFP sponsor may have difficulty operating the SFSP. States may also consider additional factors when determining if a sponsor applicant is `in good standing.' The rule allows the State agency the latitude to use its discretion in this way.

With regard to determining if an applicant is in good standing in the NSLP, SBP, or CACFP, the proposed rule included standards found in existing policy guidance. However, USDA agrees with the commenter who pointed out that not all sponsors are reviewed annually, and it is not appropriate to say that they should, within the last 12 months, have no major findings or program violations. Instead, USDA suggests that an SFA or CACFP institution is considered to be in `good standing' if it has been reviewed by the State agency and had no major program violations or has completed and implemented all corrective actions from the last compliance review. The same commenters asked for clarification on determining good standing for an applicant that has been found seriously deficient in the CACFP. A CACFP institution applicant in good standing should have completed and implemented all corrective actions outlined in its serious deficiency corrective action plan, if applicable. In addition, State agencies should carefully consider the capabilities of any sponsor that has been found seriously deficient when reviewing application materials. USDA understands that providing further clarification to determine good standing for program operators across all Child Nutrition Programs would benefit States and program operators. The Department intends to address this issue through a separate rulemaking that will allow the public to comment specifically on proposals related to determining good standing for Child Nutrition Program operators.

This flexibility has long been limited to SFAs and CACFP institutions applying to operate the SFSP at the same sites where they provide meal services during the school year. A commenter noted that this is not the arrangement in all cases, which USDA interprets to mean that some SFAs and CACFP institutions operate the SFSP at sites where they do not provide a meal service during the school year. Although SFAs and CACFP institutions may serve additional sites during the summer, this provision is limited to existing sites for which a new SFA or CACFP sponsor has demonstrated that they have the resources and capability to provide a meal service. After a year of operating the SFSP at their existing sites, an SFA or CACFP sponsor will be considered `experienced' and can apply using the experienced application procedures for all of its sites, including those at which they will only offer a summer meal service through the SFSP. Alternatively, the new SFA or CACFP institution could apply to serve additional sites using the application process for new sponsors.

Accordingly, USDA will codify as proposed in § 225.6(c)(4) the flexibilities extended through policy guidance for NSLP and SBP SFAs and CACFP institutions to use application procedures for experienced sponsors.

ii. Demonstration of Financial and Administrative Capability

SFSP sponsors must have the financial and administrative capacity to support program operations and be able to accept full financial responsibly for all of their meal sites. The ability to meet these requirements is assessed through the application process, during which the State agency may consider budget submissions, financial records, documentation of organizational structure, menu planning, or other indicators of financial and administrative capability.

NSLP and SBP SFAs and CACFP institutions already undergo a rigorous application process to participate in the NSLP, SBP, and the CACFP, and have demonstrated that they have the financial and organizational viability, capability, and accountability necessary to operate a Child Nutrition Program. USDA extended several flexibilities to these sponsors when they participate in the SFSP through policy memoranda (SFSP 05-2012,

Simplifying Application Procedures in the Summer Food Service Program,

October 31, 2011, and SFSP 04-2013,

Summer Feeding Options for School Food Authorities,

November 23, 2012). This guidance provided that SFAs and CACFP institutions in good standing applying to participate in the SFSP are not required to submit further evidence of financial and administrative capability, as required in § 225.14(c)(1). However, if the State agency has reason to believe that operation of the SFSP would pose significant challenges for an SFA or CACFP institution, the State agency may request additional evidence of financial and administrative capacity sufficient to ensure that the sponsor has the ability and resources for successful administration of the SFSP. USDA proposed to codify these flexibilities in a revised § 225.14(c)(1).

In some States, the SFSP, school meals programs, and the CACFP are operated by different State agencies. USDA proposed that, in these situations, State agencies must develop an information sharing process so that information on the financial and administrative capability of sponsors will be shared across State agencies to protect the integrity of the SFSP. State agencies would be required to share relevant sponsor information, including, but not limited to:

• Demonstration of fiscal resources and financial history;

• Budget documents;

• Demonstration of appropriate and effective management practices; and

• Demonstration of adequate internal controls and other management systems in effect to ensure fiscal accountability.

USDA requested specific comments on the proposed information sharing requirement, including:

• Would the sharing of information help improve the integrity of the program?

• Would developing an information sharing process create undue burden on State agencies?

• What are the potential costs of developing an information sharing process?

Public Comments

USDA received 34 comments on this provision, including three form letter copies. Commenters were primarily State agencies, but also included a general advocacy organization, industry associations, sponsors, and individuals. Of those who commented on the proposal to not require additional evidence of financial and administrative capability for certain sponsors, 19 commenters were supportive, none were opposed, and 15 were mixed, including those who commented only on the specific requests for comment. Of those who commented on State agency information sharing requirements, six were supportive, two were opposed, and five were mixed. Eleven commenters, including three form letter copies, also provided information in response to the request for specific comments.

With regard to not requiring additional evidence of financial and administrative capability for certain sponsors, proponents and those with mixed feedback voiced that this provision would reduce administrative

burden and improve efficiency without compromising program integrity. It would also encourage participation by sponsors that have a proven track record of successfully operating other Child Nutrition Programs. However, some State agencies said that States should have the discretion to apply this flexibility as they deem most appropriate. For example, requesting additional documentation if needed to determine a sponsor's capability to operate the Program, or applying additional scrutiny based on sponsor characteristics, such as their method of procuring meals. One State agency commenter worried that it would not be able to accept the good standing determination of another State agency unless their protocols were aligned. A State agency also raised similar issues regarding determining good standing as were addressed in section III. B. i. of this final rule. Another commenter wanted to know how this provision would fit with the proposal to require submission of a management plan demonstrating sponsor viability, capability, and accountability found in section III. B. iii. of this final rule.

With regard to a State agency information sharing requirement, proponents said that the proposal would reduce burden at the State agency and sponsor level, and would spur States to improve existing informal information sharing relationships. Opponents expressed concern that establishing an information sharing process could be burdensome, costly, or unnecessary in States where the various Child Nutrition agencies already communicate effectively.

Eight State agencies responded to the requests for specific comments. In general, these State agencies said sharing information across agencies would improve integrity, although developing an information sharing process could be costly or burdensome depending on the requirements. Many of those who expressed concern about the costs cited development or modification of State information technology (IT) systems as a driver of the costs.

USDA Response

This final rule codifies as proposed the flexibility outlined in guidance that SFAs and CACFP institutions in good standing applying to operate the SFSP do not have to provide further evidence of financial and administrative capabilities. The final rule will also clarify that these sponsor applicants are not required to submit a management plan unless requested by the State agency. In addition, the final rule will codify as proposed the requirement that State agencies develop an information sharing process if programs are administered by separate agencies within the State.

USDA appreciates the comment that inquired about how this provision would fit with the requirement found in section III. B. iii. of this rule for sponsors to submit a management plan demonstrating financial and administrative capability. It was not intended that NSLP and SBP SFAs and CACFP institutions in good standing would be required to submit a management plan because they have already demonstrated the qualifications to be addressed in the management plan through their operation of another Child Nutrition Program. Accordingly, this final rule will revise the regulations to clarify that submission of a management plan is not required for these applicants unless requested by the State agency. Although SFAs and CACFP institutions have already demonstrated their financial and administrative capability through successful operation of another Child Nutrition Program, USDA agrees with commenters who expressed that States should have the discretion to require more documentation, including a management plan, if needed to evaluate an applicant's ability and resources to operate the Program if the State agency has reason to believe that this would pose significant challenges for the applicant.

Similar to the response provided in section III. B. i. of this final rule, USDA suggests that an SFA or CACFP institution is considered to be in `good standing' if it has been reviewed by the State agency and had no major program violations, or has completed and implemented all corrective actions from the last compliance review, including actions outlined in its serious deficiency corrective action plan, if applicable. State agencies should carefully consider the capabilities of any applicant that has been found seriously deficient when reviewing application materials. As previously noted, USDA recognizes the benefit of providing more clarity to determine good standing for Child Nutrition Program operators and will solicit public comments on this specific issue in a separate rulemaking.

USDA will codify as proposed the requirement for States to share information on the financial and administrative capability of sponsors. USDA does not intend for this provision to require States to invest in new IT systems or modify existing IT systems. Information can be shared through any method that is mutually agreed upon by the participating agencies. For example, the SFSP State agency may have an agreement with a school meals or CACFP State agency to share the outcome of reviews, corrective actions, or other monitoring activities upon request. In developing this information sharing process, State agencies can clarify what information each agency uses to determine good standing and how it can best be applied for this purpose. This type of arrangement would require no more investment than establishing a contact with partnering State agencies.

Accordingly, this final rule amends regulations found at § 225.14(c)(1) to include the flexibility outlined in guidance that SFAs and CACFP institutions in good standing applying to operate the SFSP do not have to provide further evidence of financial and administrative capabilities. This rule also amends the regulations to clarify that SFAs and CACFP institutions are not required to submit a management plan unless requested by the State agency. In addition, this final rule adds a requirement that State agencies develop an information sharing process if programs are administered by separate agencies within the State.

iii. Clarifying Performance Standards for Evaluating Sponsor Viability, Capability, and Accountability

Current regulations at § 225.14(c)(1) require any organization applying to be an SFSP sponsor to demonstrate financial and administrative capability for program operations and accept final financial and administrative responsibility for total program operations at all sites at which it proposes to conduct a food service. However, the regulations do not provide metrics or methods for evaluating an applicant's potential to be viable, capable, and accountable for operating the SFSP with program integrity. USDA has provided technical assistance to States to aid in this process and has received requests from State agencies to provide additional clarity on the requirements in § 225.14(c)(1).

USDA proposed to add a new § 225.6(d) with performance standards for organizations applying to participate as SFSP sponsors that correspond to standards currently in place at § 226.6 for organizations applying to participate as CACFP sponsors. These standards are not new requirements; they are intended to clarify existing SFSP requirements and provide support and guidance to State agencies when evaluating sponsor applications.

Although this proposal would require some State agencies to modify their process for evaluating applications, the

intended effect of these changes is to provide clarity sought by States, streamline requirements across programs, and increase program integrity by supporting the ability of State agencies to more efficiently and consistently evaluate an applicant sponsor's financial and administrative capability. While there are operational and monitoring differences between the SFSP and the CACFP, the standards set forth in § 226.6 are intended to help State agencies identify whether an organization is able to meet the basic requirements for operating a Child Nutrition Program. In addition, the rule proposed that sponsors must demonstrate compliance with these performance standards as part of their management plan (§ 225.6(c)(2)(i) and new § 225.6(e)).

The proposed standards addressed: (1) financial viability and financial management, (2) administrative capability, and (3) internal controls and management systems that ensure program accountability. The proposed regulations included criteria for assessing each performance standard.

Finally, USDA proposed to amend § 225.14(a) and (c)(1) and (4) to reference application requirements, performance standards, and the management plan, respectively, in the reorganized § 225.6.

Public Comments

USDA received 40 comments on this provision, including 10 form letter copies. Of those who commented on the proposed performance standard, 19 were supportive, two offered partial support, three opposed, and 15 shared mixed feedback. Of those who commented on the proposed requirement for submission of a management plan demonstrating compliance with the performance standards, three were supportive and one comment was mixed.

Proponents and those who offered partial support for the performance standards were State agencies and one individual. These commenters appreciated that this change would create consistency across Child Nutrition Programs and provide State agencies and sponsors with objective standards for assessing a sponsor's potential to be viable, capable, and accountable for operating the SFSP with program integrity. Some commenters said that this would strengthen program integrity and result in more capable sponsors that stick with the Program over the long term. A few State agencies indicated that they already use the proposed standards or suggested that the proposal be strengthened. One State agency recommended that USDA further align SFSP requirements with other integrity measures used in the CACFP such as disqualification of individuals and organizations.

Opponents and several commenters with mixed feedback included State agencies and general advocacy organizations, a few sponsors, and an industry association. These commenters suggested that the SFSP is sufficiently different from the CACFP that USDA should develop unique performance standards for the SFSP. However, commenters did not provide specific suggestions for performance standards that would be suited for the SFSP. These commenters noted that the SFSP operates in a short timeframe and sponsors include small organizations with less administrative capacity than CACFP sponsors, such as faith-based organizations and local youth program providers. Some commenters expressed concern that increasing administrative burden would deter smaller organizations and private nonprofits from participating as sponsors, and would require additional paperwork and systems changes for State agencies.

Several commenters suggested that the requirements in this provision be waived or streamlined in certain circumstances, such as for SFAs and CACFP institutions, or experienced sponsors in good standing. A few commenters inquired about the frequency with which management plans must be submitted or updated, and some suggested that the State should have the discretion to determine how often to re-verify information provided in a sponsor's management plan.

Several commenters requested training and technical support from USDA to aid in implementation, and a few suggested allowing at least two years between publication of this rule and the effective date for this requirement. One State agency noted that they would need to make changes to their IT systems to accommodate this change.

USDA Response

This final rule codifies the performance standards as proposed and provides a streamlined option for experienced sponsors to comply with this requirement.

USDA understands the concerns of commenters who suggested that the proposed performance standards could be a deterrent to smaller sponsors. The addition of specific performance standards will improve program integrity by providing a consistent benchmark for determining financial and administrative capability; for this reason, the standards will be codified as proposed. However, USDA has determined that the process for sponsors to demonstrate financial and administrative capability can be streamlined without negatively impacting program integrity. Therefore, the final rule will allow experienced sponsors that have not demonstrated significant operational problems in the prior year to submit a simplified management plan. The simplified plan must include a certification that any information previously submitted to the State as part of a sponsor's management plan is current, or that the sponsor has submitted any changes or updates to the State. This certification must be submitted annually with the sponsor's application and must address all required elements of each performance standard. However, a full management plan must be submitted at least once every three years to ensure that State agencies periodically conduct a full review and assessment of a sponsor's financial and administrative capability. The State agency may require submission of a full plan more frequently if it determines that more information is needed to evaluate the sponsor's capabilities. New sponsors and those that have experienced significant operational problems in the prior year must submit a full management plan that thoroughly addresses all three performance standards.

In addition, another group of sponsors is largely exempt from the requirements in this provision. As discussed in section III. B. ii., under this final rule, SFAs and CACFP institutions in good standing applying to operate the SFSP do not have to provide further evidence of financial and administrative capabilities and are not required to submit a management plan unless requested by the State agency. These sponsors have already demonstrated their financial and administrative capability through operation of another Child Nutrition Program, and it is not necessary for them to duplicate that effort in order to participate in the SFSP.

USDA sees the value of finding more options to streamline requirements across Child Nutrition Programs, as suggested by a State agency that recommended the SFSP adopt more CACFP requirements related to disqualification of individuals and organizations. However, adding such requirements to the SFSP is beyond the scope of this rulemaking. In response to commenters who requested a year or more to implement these provisions,

this final rule will go into effect on October 1, 2022, which should provide sufficient time to update current systems in advance of May 1, 2023, when compliance with the provisions of this rule is required. As previously noted, this rulemaking is clarifying existing SFSP requirements, so States should already have systems in place to evaluate an applicant's potential to be viable, capable, and accountable for operating the SFSP. In addition, SFAs and CACFP institutions in good standing are not required to submit management plans, which will limit the number of plans that States must review.

Accordingly, this rule adds performance standards for determining sponsor financial viability, administrative capability, and program accountability in a new § 225.6(d) against which State agencies must evaluate an applicant sponsor's financial and administrative capabilities and clarifies the circumstances under which a full or simplified plan is required. This rule also requires in § 225.6(c)(2)(i) and (c)(3)(i) and the new § 225.6(e) the submission of a management plan demonstrating compliance with the performance standards in the new § 225.6(d) and describes the requirements for the full and simplified plans. Finally, this rule amends § 225.14(a) and (c)(1) and (4) to reference application requirements, performance standards, and the management plan, respectively, in the reorganized § 225.6.

C. Facilitating Compliance With Program Monitoring Requirements

i. First Week Site Visits

Section 225.15(d)(2) of the current regulations requires sponsors to visit each of their sites at least once during the first week of program operation. However, in response to consistent feedback from State agencies and sponsors that some sponsors lack sufficient resources to conduct monitoring visits during the first week of operation at all site locations, USDA issued policy guidance to waive the requirement in its entirety for:

• Sponsors in good standing in the NSLP or CACFP (SFSP 04-2013,

Summer Feeding Options for School Food Authorities,

November 23, 2012, and SFSP 06-2014,

Available Flexibilities for CACFP At-Risk Sponsors and Centers Transitioning to SFSP,

November 12, 2013, respectively); and

• Sites that had operated successfully the previous summer (or other most recent period of operation) and had no serious deficiency findings (SFSP 12-2011,

Waiver of Site Monitoring Requirements in the Summer Food Service Program,

April 5, 2011).

However, the nationwide waivers noted above were rescinded in 2018, as discussed in the background section of this final rule. Beginning in summer 2019, State agencies and sponsors were permitted to request a waiver of these regulations on an individual basis. Between 2019 and 2020, 38 States requested individual waivers related to first week site visits. Through implementation of these individual waivers and waivers provided on a nationwide basis through policy memoranda prior to 2019, USDA learned that waiving the first week site visit requirement eased the burden for the sponsors and sites that met the requirements of the waiver. However, USDA also determined that site visits during the first weeks of operation are an important monitoring tool that can help ensure effective and compliant program operations. Therefore, USDA proposed amending current requirements to provide flexibility in the timeframe during which first monitoring visits must take place for larger sponsors while still requiring an early visit for all sites. The proposed rule:

• Creates a tiered framework in which sponsors responsible for the management of 10 or fewer sites are required to conduct the first site monitoring visit within the first week of operations, and sponsors responsible for the management of more than 10 sites are required to conduct the first site monitoring visit within the first two weeks of program operations.

• Requires that, if a site operates for one week or less, the site visit will be conducted during the period of operation.

• Allows sponsors to conduct a first monitoring visit and a food service review at the same time.

Public Comments

In total, USDA received 67 comments on the proposed changes to first week site visit requirements. The summary below discusses these commenters' responses to the proposed tiered framework, proposed changes to the timing of first monitoring visits, including the food service review, and the specific requests for comment, respectively.

Tiered Framework for the First Monitoring Visit

USDA received 66 comments addressing the proposed tiered framework for the first monitoring visit requirement. Of these, nine were supportive, six were opposed, and six were mixed. The remaining 45 comments, including 10 form letters, supported amending current regulations, but voiced concerns over the tiered framework's ability to alleviate the problems it was designed to address. Multiple respondents suggested alternative formulations to the tiered framework; however, the majority of those comments requested a return to the flexibilities provided under the rescinded nationwide waivers. Commenters in support of reinstating previous policy guidance cited it as an effective monitoring approach that was responsive to the challenges that many sponsors faced in meeting the first week site visit requirement. Commenters also wrote that the previous policy guidance allowed sponsors to better target their monitoring resources to sites in greatest need of the monitoring.

In general, respondents who expressed concerns with or opposition to the tiered framework maintained that sponsors will still struggle to meet the requirements under the proposed rule. Multiple commenters wrote that the number of sites a sponsor manages is not always an indicator of their ability to administer the program, and that both small and large sponsors have similar difficulties in fulfilling these requirements. The logistical and administrative challenges commenters listed to visiting all sites in the given timeframe included: insufficient staff, time, and resources to conduct site visits; the inability to visit multiple sites with meal services occurring at the same time; sites operating fewer than seven days per week; and large distances between sites, particularly in rural areas. Several commenters wrote that sponsors may choose to support fewer sites if they cannot meet the proposed monitoring requirements.

Proponents of the tiered framework were appreciative of the flexibility in the timeframe afforded to larger sponsors, stating that the additional time to conduct the visit recognizes the administrative difficulties for larger sponsors, and allows larger sponsors greater flexibility in ensuring compliance and managing their resources.

Concurrent First Monitoring Visit and Food Service Review

USDA received 38 comments about the proposed change to allow the food service review to occur at the same time as the first monitoring visit. Of these, 18 were supportive, 12 provided partial support, six were opposed, and two were mixed. The 12 comments (including form letters) that provided

partial support expressed concern over the time constraints for first monitoring visits if sponsors are required to visit all sites. The commenters stated that the proposed change was a positive step for program administration; however, the timeframe for the first monitoring visit may not provide sponsors an adequate amount of time to conduct a full review early in operations if required to visit all sites.

Opponents of the proposed change wrote that it would increase the program's administrative burden without providing any benefit to oversight of operations, stating it is only a duplication of paperwork and recordkeeping. However, proponents of the proposal stated that it would provide more flexibility for sponsors to manage resources.

Finally, USDA received four comments specifically addressing the provision, which requires that, if a site operates for a week or less, the site visit must be conducted during the period of operation. One comment was in support, and the remaining comments were mixed. Two of the mixed comments requested that the first monitoring visit be eliminated for sites that operate for a week or less. One commenter wrote that the food service review is sufficient to ensure program integrity, while another commenter reasoned there is no opportunity for follow up and technical assistance given the short period of operation, particularly those sites that operate for only one day.

Specific Requests for Comments

USDA asked respondents to the proposed rule to address how the tiers would affect sponsors of different sizes and that operate under varying conditions. Specifically, USDA requested comments on the:

• Number of sites that sponsors manage;

• Number of staff available to conduct site visits;

• Logistics of conducting site visits;

• Time and resources necessary, as well as any other factors, that impact the ability of sponsors to fulfill this requirement;

• Proposed tiers and whether they provide sufficient flexibilities for sponsors; and

• Benefits of requiring first monitoring visits at all sites versus those sites that are new to the program or experienced operational or administrative difficulties in the past.

Eight State agencies provided specific feedback on all or some of the request for comments. The feedback to these specific comments varied among respondents. Overall, comments indicated there is a large variation in the number of sites a sponsor manages, and the number of staff available to conduct site visits. One State agency wrote that a sponsor may have up to 64 sites, while another said a sponsor may have up to 250 sites. Likewise, the average number of sites that sponsors have also varied. Several commenters wrote that typically one or two monitoring staff conduct site visits, but numbers as high as ten were also cited. Another State agency wrote that the number of staff available to conduct site visits is proportional to the number of sites the sponsor manages.

Respondents agreed that conducting a site visit takes a significant amount of time, taking into consideration that site visits also include travel, follow up, and technical assistance. Limited time, in addition to minimal staff, funding, and resources, were all given as factors that impact the ability of sponsors to conduct site visits and fulfill these monitoring requirements within the given timeframe. Commenters also wrote that sponsors often resort to rushing through site visits or staggering their sites' dates of operation to meet these requirements.

Commenters cited multiple benefits to requiring site visits for all sites. Requiring sponsors to monitor their sites helps ensure that sites are following program requirements, allows sponsors to identify and correct site issues early, and fosters open communication between sponsors and sites. A State agency wrote that visiting all sites would ensure that a well-run site continues to maintain standards, but added that the monitoring resources would be better spent on sites with operational issues.

Submissions were generally split on whether the tiered framework provided sufficient flexibility for sponsors. A State agency wrote that the tiered framework does not provide an adequate amount of flexibility and will remove the sponsor's ability to address sites with the most risk. Two State agencies wrote that there are sites that have successfully operated the program for years, and few, if any, of these sites, or sites managed by experienced sponsors, have any findings in the first week site visit. A State agency wrote that new sites or sites that experience operational or administrative difficulties require more technical assistance and training. Requiring site visits for only those sites empowers sponsors to determine where to focus monitoring resources.

USDA Response

This final rule revises the changes to first week site visit requirements in response to the comments received on the proposed rule. As a result, this final rule requires that sponsors must conduct a site visit in the first two weeks of operation for all new sites and sites that had operational problems in the prior year. State agencies may require a site visit during the first two weeks of program operations for any or all other sites in the State, at their discretion. In addition, each State agency must establish criteria for what constitutes operational problems in order to help sponsors determine which of their returning sites are required to receive a site visit during first two weeks of program operations. Operational problems may include, but are not limited to, deficiencies related to:

• Meal preparation;

• Meal service (components);

• Food safety issues; and

• Verification of meal counts at point of service.

Through the process of requesting individual waivers authorized under section 12(l) of the NSLA for summers 2019 and 2020, many State agencies expressed the need for significant flexibilities related to first week site visit requirements, which was echoed in a majority of the comments received for this rulemaking. In developing this final rule, USDA revised its initial proposal in a way that balances program integrity and administrative flexibilities. USDA recognizes the concerns of State agencies, sponsors, and other respondents about whether the proposed changes would provide a manageable monitoring schedule that ensures compliance with program requirements for all sponsors and sites. The proposed tiered framework was based on currently available data from studies conducted by USDA, which showed that over 80 percent of sponsors operate 10 sites or fewer. However, given the number of varying conditions under which sponsors operate the program, USDA agrees with respondents that the number of sites a sponsor manages is not always indicative of its ability to fulfill this requirement. The changes under the proposed rule only provided flexibility in the timeframe for larger sponsors and were not sufficiently responsive to the needs of smaller sponsors that face logistical challenges with completing monitoring requirements within the first week of operations. In response, the final rule extends the flexibility in the timeframe to conduct site visits to all sponsors in

an effort to alleviate the logistical challenges and other factors that impact the ability of sponsors to meet this requirement.

USDA learned through many years of implementing the nationwide waiver of first week site visit requirements that this flexibility eased the burden for sponsors in good standing in the NSLP, SBP, or CACFP, and sites that had operated successfully the previous summer. While experienced multi-program sponsors in good standing have demonstrated that they can operate Child Nutrition Programs successfully and with integrity, site visits facilitate good sponsor management and ensure that site supervisors and staff are receiving the technical assistance needed to operate the SFSP in compliance with all program requirements, particularly among new sites and sites with prior operational problems. Therefore, this final rulemaking codifies a risk-based approach that incorporates a modification to the flexibilities previously provided by the nationwide waiver. This approach allows sponsors to prioritize monitoring resources and technical assistance to sites most at risk of operational issues while reducing the administrative burden of operating the SFSP.

Furthermore, in an effort to be responsive to the need for significant flexibilities without compromising program integrity, this final rulemaking codifies the State agency's discretion to require a site visit during the first two weeks of program operations for any or all sites under any sponsor the State agency deems necessary. The rule also requires that sponsors must follow criteria established by the State agency to identify sites with operational problems that require a site visit during the first two weeks of operation. Commenters emphasized concerns about the administrative burden associated with visiting all sites and noted that monitoring resources would be better spent on sites at higher risk of operational problems. Accordingly, USDA believes that establishing criteria in advance will reduce this concern and improve regulatory certainty by providing sponsors notice of relevant criteria for determining which of their returning sites are required to receive a site visit so that they can plan how best to use their monitoring resources. In addition, these changes empower State agencies to set the appropriate level of monitoring that balances administrative flexibility with consideration of sponsor operations and capability. For example, State agencies may require a site visit for sites that have significant staff turnover, had findings on prior monitoring reviews, are under a sponsor that has had significant issues, or exhibit anything else of concern to the State agency. By permitting State agencies to set a responsive and manageable monitoring schedule in the State, sponsors may be encouraged to take on additional sites, thereby increasing program access without compromising integrity.

Sponsors are still required to conduct a full review of food service operations at each site within the first four weeks of operation, and thereafter, maintain a reasonable level of site monitoring. Consistent with the proposed rule, this final rule allows the food service review to occur at the same time as the site visit during the first two weeks of operation. This option provides sponsors with the opportunity to manage their resources in a way that best suits their program operations. Combining reviews allows sponsors to focus resources on site reviews where more aspects of the site and meal service can be assessed. In addition, given the nature of the program and the short duration under which many sites operate, a full review earlier in the start of program operations would be most effective at identifying and promptly addressing all operational issues that may arise, thereby protecting program integrity. A few comments point to concerns that combining reviews only results in a duplication of paperwork and recordkeeping. While § 225.15(d)(3) requires that sponsors complete a monitoring form developed by the State agency during the conduct of these reviews, this rulemaking gives State agencies the discretion to use their resources in the most efficient way, and State agencies have the option to streamline systems and documentation as they deem appropriate.

Under this final rule, in cases where the site operates for seven calendar days or fewer, the site visit must be conducted during the period of operation, as applicable. USDA acknowledges the challenges of conducting site visits for sites that operate for a short duration. However, monitoring is an effective tool for program management, and direct observation of certain operational activities is necessary to ensure compliance with program requirements.

With this final rule, USDA establishes minimum monitoring requirements while empowering State agencies to determine the appropriate level of monitoring that balances administrative flexibility and program integrity. If follow up is required, additional visits may be necessary to verify whether corrective action has been implemented. Even for sites that are not required to receive a site visit during the first two weeks of program operations under this final rule, as a best practice, USDA encourages sponsors to maintain a partnership that fosters open communication with all sites in order to identify and correct issues early and share best practices from sites that are operating successfully and within program requirements.

Accordingly, this rule amends § 225.15(d)(2) of the regulations to require a site visit during the first two weeks of program operations for all new sites, sites with operational problems in the prior year, and any site for which the State agency determines a visit is needed. In addition, this rule adds a new § 225.7(o) which provides that State agencies must establish criteria for sponsors to use in determining which sites with operational problems noted in the prior year are required to receive a site visit during the first two weeks of program operations. This rule also amends § 225.15(d)(3) to allow sponsors to conduct the site visit and a food service review at the same time.

ii. Establishing the Initial Maximum Approved Level of Meals for Sites of Vended Sponsors

Current regulations at § 225.6(d) require that each site must have an approved level for the maximum number of children's meals which may be served under the Program. This limit, which is commonly known as a `site cap' is intended to encourage sponsors and State agencies to work closely together to develop reasonable estimates of anticipated site attendance. Site caps for sites that prepare their own meals may be no more than the number of children for which its facilities are adequate. Sponsors of vended sites determine the site cap using historical attendance, or another procedure developed by the State agency if no accurate record from prior years is available.

The process of determining the site caps provides State agencies and sponsors the opportunity to work together to assess a site's capacity and the needs of the community. Effective site caps prevent sites from purchasing or producing more meals than the site will serve or has the capacity to handle, and are an important tool for State agencies to monitor program management and determine if there is need for technical assistance or corrective action to ensure program integrity. In some cases, the capability of a site or the full needs of a community may be difficult to accurately assess before operations

begin, historical data needed to accurately forecast participation levels may be unavailable, or participation may change over the summer. If necessary, site caps can be adjusted based upon information collected during site reviews or other evidence presented to the State agency by the site's sponsor. Current requirements at § 225.11(e)(3) provide that State agencies must disallow payment on any meals served over the site cap at vended sites.

In recognition of the fact that site caps are sometimes revised to respond to conditions at the site, USDA issued policy guidance clarifying that sponsors may request an increase to an existing site cap at any time prior to the submission of the meal claim for reimbursement that includes meals served in excess of the site cap (SFSP 16-2015,

Site Caps in the Summer Food Service Program—Revised,

April 21, 2015). Under this guidance, State agencies have the discretion to approve such a request.

USDA proposed to amend § 225.6(h)(2)(iii) of the regulations, as redesignated through this rule, to clarify that sponsors of vended sites may request an adjustment to the maximum approved level of meal service at any time prior to submitting a claim for reimbursement. USDA also proposed to amend § 225.6(h)(2)(i), as redesignated through this rule, to clarify that State agencies may consider participation at other similar sites located in the area, documentation of programming taking place at the site, or statistics on the number of children residing in the area when determining the site cap.

Public Comments

USDA received 24 comments on this provision, including three form letter copies. Of those who commented specifically on the timing of a sponsor's request to adjust a site cap, 18 were supportive and two were opposed. Of those who commented specifically on the proposed guidance for determining the site cap for sites lacking accurate historic records, all six were supportive, one of whom offered additional recommendations.

Proponents of the proposal to allow an adjustment to the site cap at any time prior to submitting a claim for reimbursement were largely State agencies who appreciated that the change would allow sponsors to be responsive to the needs of their communities. Some offered suggestions to improve the process, such as providing advance notice of special events that could temporarily increase participation.

Two State agencies opposed this provision, saying that adjustments to the site cap should be approved by the State agency because site caps are an important tool for the State agency to monitor program integrity. One of these opponents said that sponsors should be aware of their site operations and able to update their site cap during the same month that the adjustment is needed. Four State agencies also questioned why self-prep sites are not subject to the same site cap rules as vended sites.

Proponents of the proposal to provide guidance for determining the site cap for sites lacking accurate records from prior years appreciated this guidance and said that it would be helpful because making such determinations can be difficult. One State agency requested the flexibility to allow the sponsor to initially self-certify their site cap and revise the caps after operations begin based on meal counts from the first week of meal service.

USDA Response

This final rule codifies the proposed changes with one clarification. This rulemaking adds criteria for establishing the site cap for sites with no accurate historical information in order to aid State agencies and sponsors in determining appropriate site caps. However, USDA did not intend for the criteria provided to be finite. The regulations are revised to make clear that States may consider other relevant information when determining the site cap for sites lacking accurate historical information.

The site cap should be based on the State agency and the sponsor's mutual understanding of the true capacity and capability of its sites, while allowing for potential participation growth. When done correctly, a site cap is a key tool to prevent sponsors and sites from purchasing or producing meals outside the capability of the site and the need of the community. This type of early planning is especially important for vended sites, which may enter into contracts to purchase meals before program operations begin. There is nothing to prevent a sponsor from requesting an adjustment to a site cap after operations begin. However, an initial site cap must still be established at the time that the sponsor's application is approved, in accordance with § 225.6(h)(2) of the regulations, as redesignated through this rule.

USDA agrees that State agencies should have discretion whether to approve a sponsor's request to adjust an established site cap; the current regulations and the policy memoranda that initially allowed this flexibility are clear on this point. This final regulation provides that sponsors may

request

a revision to a site cap, which requires approval, as opposed to notifying the State agency, which would not require approval.

With regard to site caps for self-preparation sites, current regulations require site caps for these sites to be based on the capacity of the site to prepare and distribute meals, and on the number of children for which their facilities are adequate. It is possible that the site's capacity to prepare meals and accommodate a meal service could change during the summer, but this is less likely to occur and poses less of a risk to program integrity than with a vended site. A self-preparation site should have a stronger basis for establishing a site cap—its own capacity—and should be able to correct production to meet demand in real time, as opposed to a vended sponsor that may already have contracted for food. As such, holding self-preparation sites to these requirements would be burdensome and would not have a significant impact on program integrity.

USDA understands the concerns of the commenter who said that sponsors should be required to request an adjustment to a site cap within the same month as the claim for which the cap must be adjusted. This final rule allows the flexibility for requests to be approved up until a claim is submitted for the impacted reimbursement period. However, the State agency may determine that it is in the best interest of the Program to require a sponsor to submit a request during the impacted month if, for example, the State has concerns about the sponsor's operations.

Accordingly, this final rule amends § 225.6(h)(2)(iii) of the regulations, as redesignated through this rule, to clarify that sponsors of vended sites may request an adjustment to the maximum approved level of meal service at any time prior to submitting a claim for reimbursement. This rule would also amend § 225.6(h)(2)(i), as redesignated through this rule, to include further guidance for determining the maximum approved level of meal service for sites lacking accurate records from prior years.

iii. Statistical Monitoring Procedures, Site Selection, and Meal Claim Validation for Site Reviews

Current regulations in § 225.7(d) provide requirements for how State agencies review sponsors to ensure their compliance with program requirements. This section includes the requirement that States conducting a sponsor review must review at least 10 percent of the

sponsor's sites or one site, whichever number is greater (current § 225.7(d)(2)(ii)(E)). Further, USDA guidance instructs State agencies to validate 100 percent of all meal claims from all sites under a sponsor that is being reviewed. USDA proposed three changes to these requirements, which are related to site selection criteria, the method for conducting meal claim validations, and the option for statistical monitoring. In addition, USDA proposed to renumber and rephrase portions of § 225.7 to make the regulations easier to understand.

Section 225.7(d)(8) allows State agencies the option to use statistical monitoring procedures in lieu of the site monitoring requirements found in § 225.7(d)(2). USDA is not aware of any States that currently use this option and has determined through research and feedback from State agencies that it is not possible to create standard statistical monitoring procedures that will meet the needs of the Program. Accordingly, USDA proposed to remove the provision in § 225.7(d)(8) that allows the use of statistical monitoring for site reviews.

USDA also proposed to provide guidance in § 225.7(e)(5), as redesignated in this rule, to assist State agencies and sponsors in selecting a sample of sites to review that will be generally reflective of the variety of all a sponsor's sites. Site characteristics that will be reflected in a sponsor's sample include:

• The maximum number of meals approved to serve under §§ 225.6(h)(1)(iii) and 225.6(h)(2), as redesignated through this rule;

• Method of obtaining meals (

i.e.,

self-preparation, vended meal service);

• Time since last review by the State agency;

• Site type (

i.e.,

open, closed enrolled, camp);

• Type of physical location (

e.g.,

school, outdoor area, community center);

• Rural designation (

i.e.,

rural, as defined in § 225.2, non-rural);

• Affiliation with the sponsor, as defined in § 225.2; and

• Additional criteria that the State agency finds relevant including, but not limited to: recommendations from the sponsoring organization, findings of other audits or reviews, or any indicators of potential error in daily meal counts (

e.g.,

identical or very similar claiming patterns, or large changes in meal counts).

Finally, USDA proposed a new, incremental approach for conducting meal claim validations as a part of the sponsor review in § 225.7(e)(6). This approach is intended to use State agency resources more efficiently and provide State agencies with a more targeted method for review. USDA requested specific comments on this process, including the anticipated impact on State agencies and burden, the accuracy of claim validations under this process, and the stepped increases and the percentage expanded at each step.

Rather than requiring that State agencies validate 100 percent of meal claims for all sites under the sponsor being reviewed, which may be burdensome for some State agencies, USDA proposed a multi-step approach to site-based meal claim validation. State agencies would initially validate a small sample of claims and would only be required to validate additional claims if they detect errors over the threshold. Included as part of the approach, USDA explained how State agencies should calculate the error percentage which would trigger the expanded validation sample.

Public Comments

USDA received 34 comments on these proposals. Of these comments, 13 were generally supportive, three offered partial or conditional support, three were opposed, and 15 had mixed opinions. Specific comments are addressed in the respective sections below.

Statistical Monitoring

USDA received 15 comments, including three form letter copies that addressed statistical monitoring procedures in lieu of site monitoring requirements. Of these comments, nine were supportive and six, including three form letters, were opposed.

Overall, proponents wholly supported the elimination of this provision and stated that they were not aware of the provision being used by State agencies. A commenter wrote that their agency had opted to review a minimum of 10% of each sponsor's sites or one site, whichever number is greater instead of using the statistical monitoring option.

Opponents of this provision included three unique comments and one form letter, all from one State agency. Commenters opposed these changes, writing that their State has used statistical monitoring for over 10 years and removing these requirements would hinder State agencies' ability to review sponsors in good standing through statistical monitoring. They further suggested that USDA provide guidance for how to develop and implement statistical monitoring procedures to provide State agencies this monitoring option.

Site Selection

USDA received 21 comments, including three form letter copies about site selection criteria. Of these, 16 were supportive of the proposal, two offered partial support, one was opposed, and two were mixed. Proponents supported the addition of site selection criteria as proposed to assist State agencies in selecting a sample of sites that would be reflective of the variety of a sponsor's sites when completing sponsor reviews. Two States offered partial support, agreeing in part to the characteristics put forth, but stated that some of the characteristics such as rural designation and sponsor affiliation are not as important as other indicators when selecting a site for review. These commenters stated that the proposed list of site selection criteria was a good-faith effort to compel States to incorporate diversity into their site review selection decisions. However, they further added that the most effective way to identify fraud would be to incorporate a review of questionable site claiming patterns, previous findings, and other irregularities in site claiming. These commenters also stated that it is a good idea to allow States the discretion to use additional site characteristics in their site selection decisions.

One commenter was opposed to this provision and stated that the provision would cause an additional burden on the State agency by creating additional labor and technology expenses. The commenter further stated that the site characteristics proposed are not information that State agencies are required to collect and are insignificant as indicators of risk to the Program. In addition, while neither expressing support nor opposition to the site selection criteria as proposed, one commenter stated that they were currently using a similar set of characteristics to determine which sites are selected for review. Another commenter stated that the list of site characteristics could be viewed as targeting certain sponsors or sites.

Meal Claim Validation

USDA received 33 comments, including three form letter copies, about the proposed meal claim validation methodology. Of these, 18 were supportive, three provided partial support, six were mixed or other, and six were in opposition. Overall, proponents supported the meal claim validation method, but requested training materials and tools to support the implementation of a new process.

Proponents that supported the meal claim validation methodology cited the

decrease in administrative burden in comparison to validating 100 percent of a sponsor's claim. Two States offered partial support, agreeing in part to the validation of meals based on reviewing a sample of sites as opposed to all sites, but stated the desire to add an additional step of validation all claims for 75 percent of the sponsor's sites.

Of the six commenters with mixed support or other comments, one commenter stated that the proposed methodology would not add additional burden as the State already completes a similar process during the sponsor review. One commenter stated that if minimal errors are initially identified in the process, the proposed methodology would provide accuracy for the review. A commenter also noted the desire to address errors discovered in the review without validating additional sites. In addition, one commenter noted that the error rate of five percent was too low and use of the step increases should be at the State's discretion. An additional comment stated that the stepped increases and percentages were appropriate.

Of the six commenters in opposition, three opposed the sampling approach and instead supported continuing to validate 100 percent of a sponsor's claim during the sponsor review. Two commenters in opposition stated that the multistep approach was complicated and unnecessary to determine integrity of a sponsor. The commenters were also opposed continuing to validate 100 percent of a sponsor's sites if issues were observed. One State agency noted that the proposed methodology would create additional labor and technology costs. One State agency referenced aligning the reviews in the SFSP to characteristics in the NSLP in order to reduce burden.

USDA Response

Statistical Monitoring

This final rule codifies as proposed the removal of the option for statistical monitoring in lieu of site monitoring requirements. Commenters overwhelmingly supported the removal of this option and USDA found through feedback from States agencies that this option is not being used by any State agency. USDA determined that the State agency opposed to the option's removal because they were using this method, was not in fact using statistical monitoring as outlined in § 225.7(d)(8).

Accordingly, this final rule removes the option at § 225.7(d)(8) for statistical monitoring in lieu of site monitoring requirements.

Site Selection

This final rule codifies the proposed site selection criteria with one change to specify that State agencies must develop criteria for site selection. USDA recognizes that State agencies are in the best position to identify which sponsors' sites to review based on a wide variety of characteristics. Although one State agency was opposed to this provision due to concerns over burden and costs, creating criteria for site selection will increase program integrity by ensuring States select a variety of sites to review. Therefore, USDA codifies the proposed approach to site selection which emphasizes identifying a variety of sites to be reviewed. In order to promote diversity among sites that are reviewed, States must create criteria for site selection using the site characteristics suggested by USDA as a guide. Additionally, State agencies may, in selecting sites for review, use additional criteria including, but not limited to, findings of other audits or reviews, or any indicators of potential error in daily meal counts (

e.g.,

identical, questionable, or very similar claiming patterns, or large changes in meal counts).

Accordingly, § 225.7(e)(5), as redesignated in this rule, includes site selection criteria.

Meal Claim Validation

This final rule codifies the proposed changes to meal claim validation requirements, and adds additional clarifications to confirm that State agencies have the discretion to exceed the minimum number of required claim validations, and to provide a chart to aid State agencies in complying with this provision.

Most commenters affirmed that USDA's proposal to initially validate a small sample of claims and expand the validation sample if errors over the threshold are detected would decrease administrative burden in comparison to requiring that State agencies validate 100 percent of meal claims for all sites under the sponsor being reviewed. While some State agencies stated that the proposed approach would increase their administrative burden when deficiencies are found, USDA believes it is in the best interest of program integrity to provide a standardized method to complete meal claim validations and decrease administrative burden for a majority of sponsor reviews.

Based on comments on the proposed rule, USDA is providing several clarifications. First, if the meal claim validation sample is expanded, it does not require the State agency to complete an additional review of the sites included in the expanded validation sample. The State agency may complete a more thorough review at their discretion.

Second, when expanding the sample size, the State agency is only required to validate the claims of the additional number of sites to reach 25, 50, and 100 percent of the sponsor's sites, and can count the sites reviewed in the initial sample toward the number of sites needed to be reviewed in the expanded sample. For example: A sponsor has 35 sites. The State agency is required by § 225.7(e)(4)(v) to review 10 percent of the sponsor's sites. The State agency calculates the sample size required for the initial validation by multiplying the total number of sites (35) by 10 percent (.10), which equates to 3.5; after rounding up, the number of sites required to be reviewed is 4. Step 1 of the meal claim validation process requires that the State agency validate all meals served by these 4 sites during the month of review. After step 1 of validation, it is determined that the percentage of error is over 5 percent. The State agency must now validate 25 percent of the sponsor's total sites. In order to satisfy this requirement, the State agency only needs to review the additional number of sites in the expanded sample. To determine the sample size required in the next step of validation, the State agency multiplies 35 by .25, which equates to 8.75. After rounding up, the number of sites to be reviewed is 9. To reach 25 percent of the total number of sites, or 9 sites, the State agency would only need to validate 5 additional sites (9 minus the 4 sites validated in step 1).

Third, the percentage of error is not a rolling average and is calculated based on the sample of sites included in each step of the validation. To ensure clarity, USDA has revised the explanation of how to calculate percentage error included in the proposed rule. USDA has also provided additional formulas to clarify how to calculate: the total meals claimed for the validation sample in each step, the individual meal count validation discrepancies for each site, total meal count validation discrepancy for the validation sample in each step, and the percentage of error. The clarifications below are meant to ensure all discrepancies in meal counting and claiming, whether an overclaim or underclaim, are equally accounted for in the percentage of error as both are signs of potential problems in the operation and administration of the Program.

To calculate the percentage error for each step, first determine the meal

counting and claiming discrepancy for each site validated by subtracting the total meals validated from the total meals claimed by the sponsor for each reviewed site. Then, determine the absolute value of each discrepancy. By using the absolute value, the numbers will be expressed as positive numbers. Add together all discrepancies from each site to calculate the total discrepancies for sites reviewed in the given step. Divide the total discrepancies by the total meals claimed by the sponsor for all reviewed sites within the validation sample for the given step and multiply by 100 to calculate the percentage of error in the given step. In determining the percentage of error, fractions must be rounded up (≥0.5) or down (<0.5) to the nearest whole number. Refer to the equations below for clarification.

BILLING CODE 3410-30-P

ER19SE22.002

ER19SE22.003

BILLING CODE 3410-30-C

Finally, USDA recognizes that States agencies have their own best practices to ensure integrity during the sponsor review and has included in this final rule that the codified methodology is the minimum requirement and that sampling steps can be forgone at any point to reach 100 percent validation of the sponsor's claim. This provides the flexibility requested by commenters to use the step increases or to continue validating the entirety of a sponsor's claim for reimbursement without utilizing a sampling methodology.

Accordingly, USDA is codifying in section 225.7(e)(6), as redesignated in this rule, a method for conducting meal claim validations along with a chart to explain the validation process. In addition, this final rule renumbers and rephrases portions of § 225.7 to make the regulations easier to understand.

D. Providing a Customer-Service Friendly Meal Service

i. Meal Service Times

Section 225.16(c) of the current regulations sets forth restrictions on when meals can be served in the SFSP. Three hours are required to elapse between the beginning of one meal service, including snacks, and the beginning of another, with the exception that four hours must elapse between the service of a lunch and supper when no snack is served between lunch and supper. Further, the regulations state that the service of supper cannot begin later than 7 p.m., unless the State agency has granted a waiver of this requirement due to extenuating circumstances; however, in no case may the service of supper extend beyond 8 p.m. The duration of the meal service is limited to two hours for lunch or supper

and one hour for all other meals. These restrictions do not apply to residential camps.

These strict requirements did not provide sufficient control at the State agency and sponsor level to allow for planned meal services that meet the needs of the community. Dating as far back as 1998, USDA has issued guidance that waives these requirements at certain sites where the requirements proved to create significant barriers to efficient program operations and good customer service for the communities served. USDA heard consistent feedback from stakeholders that the restrictions presented challenges to aligning meal services with access to public transportation and community services. Therefore, in 2011, USDA published guidance that waived the meal service time restrictions for all SFSP sites while still requiring sponsors to submit meal service times to the State agency for approval (originating guidance has since been superseded and incorporated into SFSP 06-2017,

Meal Service Requirements in the Summer Meal Programs, with Questions and Answers—Revised,

December 05, 2016). These waivers were rescinded in 2018, as discussed in the background section of this final rule. Between 2019 and 2020, 51 States requested an individual waiver under section 12(l) of the NSLA of meal time restrictions to allow them to continue implementation of what had previously been in effect through guidance. Of those that applied in 2019, 39 asserted that the waiver would result in improved program operations and, therefore, efficient use of resources. Because increased flexibility in setting meal times proved to be a useful tool for program operations, USDA proposed to remove existing meal service time restrictions, and add a requirement that a minimum of one hour must elapse between the end of a meal service and the beginning of another.

Sponsors have also expressed the need for flexibilities to conduct meal services in the event of an unforeseen circumstance, such as a delayed delivery. Therefore, USDA also proposed allowing a State agency to approve for reimbursement meals served outside of the approved meal service time if an unanticipated event, outside of the sponsor's control, occurs. The State agency may request documentation to support approval of meals claimed when unanticipated events occur.

In recent years, it has come to USDA's attention that some sponsors have served a meal, which meets the meal pattern requirements for breakfast, in the afternoon after a lunch service was provided and claimed this meal as a reimbursable “breakfast.” The SFSP is statutorily designed to support “programs providing food service similar to food service made available to children during the school year” under the NSLP and SBP (42 U.S.C. 1761(a)(1)(D)). Currently, regulations governing the SBP define breakfast as a meal which is served to children in the morning hours and must be served “at or close to the beginning of the child's day at school” (7 CFR 220.2). As such, the service of a reimbursable, three component meal, or “breakfast,” in the afternoon following the service of lunch is not supported by the statute. Therefore, USDA proposed that a meal otherwise meeting the requirements for a breakfast meal is not eligible for reimbursement as a breakfast if it is served after any lunch or supper has been served and claimed for reimbursement.

Finally, USDA proposed to amend § 225.16(c) to make it easier for users to locate and understand key information. Section 225.16(c)(1) will consolidate meal service time requirements currently referenced in other sections of part 225. This would specify that meal service times must be established by the sponsor for each site, be included in the sponsor's application, and be approved by the State agency. Current regulations at § 225.16(c)(6), which specifies that a sponsor may claim for reimbursement only the type(s) of meals for which it is approved to serve, will move to § 225.16(b). In addition, a reference to approved meal service times will be added to the State-sponsor agreement information in redesignated § 225.6(i)(7)(iv).

Public Comments

USDA received 47 comments about meal service times, including three form letter copies. Of these, 31 were supportive, 10 expressed partial support, and six comments had mixed or neutral opinions regarding the proposal.

Proponents stated that a one-hour time gap would support sponsors in providing meal services at times that better align with community needs, as opposed to four hours. Additionally, proponents asserted that the proposed change in meal service time requirements would help SFSP meal services to mirror NSLP meal service times, so that children eat at similar intervals throughout the year. These commenters also expressed support for the reimbursement of meals served outside of the approved meal times, and disapproval of serving a reimbursable breakfast after lunch has been served.

Proponents who partially supported the provision stated that a one-hour limit between a lunch and supper when no snack is served was still too restrictive. These commenters asserted that a time limit of 30 minutes or less would grant more flexibility to sponsors that offer a variety of summer activity programs during similar hours. Additionally, commenters requested clarification on what circumstances would constitute an “unanticipated event” for the purposes of serving meals outside of the approved meal service time. Further, one comment from a sponsor organization stated that USDA's clarifications on breakfast meal services would create limitations on their ability to serve meals because their site opens in the afternoon.

Mixed comments on the proposal expressed an opinion that was unclear based on a common reading of the language used in the comment. For example, some of these comments expressed disagreement with the rule, but requested actions that the provision proposed as a remedy. Other comments requested clarification on the meaning of “unanticipated event” and whether the requirement for one-hour to elapse between meals will apply to camps.

USDA Response

This final rule codifies changes to meal service times as proposed. The waiver of meal time restrictions has helped decrease administrative burden and provided more local level control to sponsors to plan the most effective meal services, thereby improving program operations and better serving the community. USDA seeks to balance these benefits with the maintenance of program purpose and integrity. The purpose of the SFSP is to provide children with meal services when school is not in session. Further, to uphold program integrity, meal services should be clearly distinguishable from each other to enable accurate claiming and recordkeeping. USDA has determined that it would be beneficial to SFSP participants and sponsors for the timing of meals that students have when school is not in session to more closely align with the meal service that students have when school is in session. USDA recognizes that some sponsors have found it useful to serve breakfast at unconventional hours. However, having summer meal services that mirror those held during the school year, such as holding breakfast service before lunch, reduces confusion in program operations and provides program participants with a consistent meal service experience year-round.

USDA also recognizes that State agencies would benefit from further examples of what may constitute an unanticipated event for the purposes of providing meals outside of the approved meal time. Examples of such events include, but are not limited to: delayed meal deliveries, inclement weather that delays the start of the meal service, delayed public transportation utilized by participants, and other incidents as deemed appropriate by the State agency.

Additionally, comments requested clarification on whether the one-hour requirement between meals will apply to camps. This rulemaking will not modify the exemption at § 225.16(b)(1)(ii) which excludes residential camps from meal service time restrictions.

Accordingly, this final rule modifies § 225.16(c) to remove existing meal service requirements, and codifies the requirement that all sites, except residential camps, must allow a minimum of at least one hour to elapse between the end of one meal and the beginning of another. Additionally, this final rule allows a State agency to approve for reimbursement meals served outside of the approved meal service time if an unanticipated event occurs. This rule will also clarify that meals claimed as a breakfast must be served at or close to the beginning of a child's day, and prohibit a three component meal from being claimed for reimbursement as a breakfast if it is served after a lunch or supper is served. Finally, this rule will reorganize § 224.16(c) to improve the clarity of the regulations.

ii. Off-Site Consumption of Food Items

Providing a meal service for children in a group setting, a concept known as “congregate feeding,” has been a part of the SFSP since its inception. Congregate feeding has many benefits, including providing an opportunity for children to socialize, creating time for sites to offer activities, and allowing adults to monitor food safety and encourage healthy eating practices. Current SFSP regulations provide that sponsors must agree to “maintain children on site while meals are consumed” (§ 225.6(e)(15)).

However, over the years, USDA has heard from stakeholders that, because the SFSP operates in a wide variety of settings, including sites that do not offer activities or programming separate from the meal service, keeping children on site for consumption of the entire meal offered is sometimes challenging. Some children, particularly those who are younger, are unable to eat all of the meal components in one sitting, which sponsors note can result in children not receiving vital nutrition and contributes to plate waste. Thus, USDA proposed to amend § 225.16 to codify the previously granted flexibility to allow participants to take one item (

i.e.,

either a fruit, vegetable or grain item) off-site for later consumption.

Public Comments

USDA received 63 comments regarding the codification of the flexibility to allow off-site consumption of certain food items, including nine form letter copies. There were 41 comments in support of the proposal, six comments in partial support of the proposal, 16 comments with mixed or neutral opinions, and zero comments opposing the proposal.

USDA also received responses to specific questions posed in the proposed rule. Ten comments addressed State agencies' ability to monitor the effective implementation of the provision, and 12 comments addressed whether States agencies would prohibit certain sponsors from utilizing the option.

Proponents of the proposal stated that allowing participants to take food off-site increased State agencies' and sponsors' ability to administer and operate the SFSP more effectively, and would increase program access. Several sponsors also asserted that the proposal would minimize food waste, and support children eating portions that are appropriate for their appetite at meal services. Sponsors further noted that taking food off-site would allow children to derive the health benefits from being able to eat the entire meal, rather than needing to throw a portion away. Supportive comments from State agencies highlighted that training and technical assistance for successfully implementing this provision is available to eligible sponsors in their State. State agency comments further noted that sponsors need to ensure that they have adequate staffing available to monitor the provision.

Proponents who partially supported the provision expressed a desire for all shelf-stable milk options to be permitted to be taken off-site, or suggested that participants be permitted to take multiple items off-site. A State agency commenter requested the authority to prohibit a sponsor from utilizing this option if the State agency finds that the sponsor is incapable of adequately monitoring its implementation.

Opponents of the provision requested removal of the congregate feeding requirement due to a belief that it hinders program access. Other comments expressed concerns regarding the ability of State agencies and sponsors to effectively monitor the implementation of the provision. These comments noted that the provision may be difficult to monitor, particularly in rural areas with transportation limitations. However, other State agencies stated that they had successfully monitored the use of the flexibility in the past, and found that sponsors were implementing it correctly.

State agency comments on whether they would prohibit certain sponsors from allowing an item to be taken off-site centered on if the State agency anticipated patterns of non-compliance from a sponsor, and if a sponsor was in good standing. State agencies that had observed patterns of non-compliance from a particular sponsor would prohibit that sponsor from utilizing the provision. Other State agencies noted that they would not prohibit sponsors from using the flexibility, but would assign corrective action to sponsors as needed if the provision was not implemented correctly. A commenter requested a delay in implementation to update training and resources necessary to successfully utilize this provision.

USDA Response

This final rule codifies, as proposed, the flexibility for off-site consumption of food items. USDA appreciates the attention to program integrity provided by comments on the feasibility of monitoring this provision. It is important for program integrity and the safety of children that site staff appropriately monitor this flexibility to ensure that children only bring home the correct types and quantities of food items, and that such items are not at risk of spoiling before they can be consumed. Previously published USDA guidance on the implementation of this flexibility permitted State agencies to approve sponsors to use this provision on a case-by-case basis, and also provided State agencies with a non-appealable decision-making authority to prohibit sponsors from using this option when there are concerns about adequate site monitoring. This final rule does not change that authority; therefore, State agencies retain the discretion to prohibit sponsors from using this flexibility if the State finds that the provision cannot be adequately monitored. However, USDA encourages State agencies to explore options for successfully implementing this provision including updating training, procedures, and relevant systems.

USDA seeks to ensure that program meals are accessible to even the youngest of the SFSP demographic,

while still ensuring that participants can enjoy their meals in a safe, supervised setting in accordance with program requirements. USDA appreciates that some commenters would like children to be permitted to take multiple items off-site for later consumption. However, taking a single item off-site is the amount already allowed through policy memoranda for the SFSP and the at-risk afterschool component of the CACFP, in part because it is straightforward for a site to monitor children taking home a single non-perishable item, and more complex to oversee children taking other combinations of items off-site. In addition, this rulemaking proposed to allow children to take a single item off-site for later consumption, and solicited comments specifically on this programmatic option. Therefore, suggestions to allow more food items or entire meals to be consumed off-site are outside the scope of this rulemaking.

Accordingly, this final rule codifies the flexibility for sponsors to allow children to take a single fruit, vegetable, or grain item off-site for later consumption by amending § 225.6(i)(15), as redesignated through this rule, and adding a new § 225.16(h).

iii. Offer Versus Serve

Current regulations in § 225.16(f)(1)(ii) allow SFAs that are program sponsors to “permit a child to refuse one or more items that the child does not intend to eat.” This provision is known as “Offer versus Serve” (OVS). The regulations also require that an SFA using the OVS option must follow the meal pattern requirements for the NSLP, as set out in § 210.10. Finally, the regulations state that the sponsor's reimbursement must not be reduced if children do not take all required food components of the meal that is offered.

The goals of OVS are to simplify program administration and reduce food waste and costs while maintaining the nutritional integrity of the SFSP meal that is served. The use of OVS was first extended to SFSP operations through the Personal Responsibility and Work Opportunity Act of 1996 (Pub. L. 104-193), which permitted SFAs sponsoring the SFSP to use OVS on school grounds. Because the option is regularly implemented during the school year, it was thought that these sponsors could successfully implement the option during the summer. Recognizing that OVS was a useful tool to reduce food waste and food costs, the William F. Goodling Child Nutrition Reauthorization Act of 1998 (Pub. L. 105-336) extended the use of OVS to all SFSP sites sponsored by SFAs. In the years since, OVS has proved to be a useful tool for program operators.

After observing SFA sponsors successfully utilizing the option for many years and receiving significant feedback from stakeholders, including Congressional testimony about the positive effects of OVS on reducing food waste and containing program costs, USDA extended the option to use OVS to non-SFA sponsors through policy guidance in 2011 (SFSP 11-2011, Waiver of Meal Time Restrictions and Unitized Meal Requirements in the Summer Food Service Program, October 31, 2011). USDA continued to clarify policies surrounding OVS, including guidelines for required meal service components under the SFSP meal pattern (SFSP 08-2014, Meal Service Requirements, November 12, 2013) and extending the use of the SFSP OVS meal pattern guidelines to SFA sponsors that had previously been required to follow the OVS requirements for the NSLP (SFSP 05-2015 (v.2), Summer Meal Programs Meal Service Requirements Q&As—Revised, January 12, 2015). This guidance highlighted the distinguishing aspects of the SFSP and NSLP, including variations in settings and resources, and adjusted the OVS requirements for use in the SFSP accordingly.

As mentioned in the background of this rule, these waivers of statutory and regulatory requirements pertaining to OVS were rescinded in 2018. Between 2019 and 2020, 39 States requested individual waivers of program requirements through section 12(l) of the NSLA to allow them to continue utilizing OVS as had previously been permitted through guidance. FNS granted these requests to provide continuity to States and sponsors while the agency completed this rulemaking.

The proposed rule sought to retain the regulatory requirement that only SFA sponsors may utilize the OVS option. In addition, the rule proposed to allow SFA sponsors electing to use the SFSP meal pattern to use SFSP OVS guidelines. This would align the regulations with the NSLA, which only authorizes SFA sponsors to use OVS. Through on-site reviews, USDA has also observed meal pattern violations tied to the improper use of the OVS guidelines specifically at sites sponsored by non-SFAs. In light of these observations, maintaining OVS for the types of sponsors that are most likely to implement it correctly would promote program integrity while also operating the program in accordance with statutory intent.

Finally, the proposed rule sought the following specific comments on OVS:

• What level of training do non-SFA sponsors receive in order to be able to properly implement OVS?

• Do non-SFA sponsors have the resources needed to properly implement OVS?

• What level of technical assistance do non-SFA sponsors receive?

• How would non-SFA sponsors be impacted if OVS were no longer an available option?

• What are the specific benefits to sponsors that use OVS?

Public Comments

USDA received 62 comments regarding OVS, including nine form letter copies. Of the 62 comments, seven supported the proposal as written, 49 expressed support for OVS as an option and for the use of the SFSP meal pattern, while also expressing concerns with the overall proposal, six held a mixed opinion, and zero opposed it entirely. Thirteen stakeholders also submitted comments directly responding to all or some of the specific questions posed in the proposed rule.

Proponents of this provision included State agencies that have observed improper implementation of OVS from non-SFAs, or otherwise believed that SFAs are better equipped with the knowledge and resources to correctly utilize OVS. Additionally, these comments supported allowing SFA sponsors that elect to use OVS during SFSP operations to follow the SFSP meal pattern.

The majority of commenters supported continuing the flexibility for SFAs, but requested that this meal service option also be extended to non-SFA sponsors, including those that operate the CACFP and use OVS during the school year in their At-Risk Afterschool Meals programs. These comments highlighted that OVS benefits sponsors through decreased operation and administrative costs and reduced food waste. Commenters noted that training and technical assistance are generally offered to all SFSP sponsors that wished to use OVS and some stated that they have not witnessed implementation errors from non-SFA sponsors. Multiple State agencies said that not all non-SFA sites are equipped to successfully use OVS, and thus recommended it should be limited to those sponsors that have adequate resources or on a case-by-case basis. Other commenters echoed the suggestion that the use of OVS by non-SFA sponsors could be limited to those that are capable of using it correctly.

Mixed comments largely offered general support for OVS or focused on answering the specific questions posed

in the proposed rule. In response to USDA's questions about the level of OVS training and technical assistance that non-SFA sponsors receive and whether non-SFA sponsors have the resources needed to properly implement OVS, State agencies said that OVS is included in their regular training regimen, with non-SFAs receiving as much training as SFA sponsors. These commenters also expressed that sponsors presently have the resources needed to properly implement OVS, and are provided technical assistance by request or when needs are identified by State agency representatives. In response to USDA's questions about the benefits of OVS and the impact of it no longer being available for non-SFA sponsors, commenters said that OVS decreases program waste and cost, while providing more food choices to program participants. Non-SFA sponsors who previously implemented OVS would not realize these benefits and would need to retrain staff if OVS is no longer available to them. A few indicated that this change could have a negative impact on sponsor participation. These commenters included State agencies, sponsor organizations, and school districts.

USDA Response

This final rule codifies the proposed changes to OVS regulations. USDA understands that OVS has been a popular flexibility among SFSP sponsors and, for many years, sponsors of all types have used OVS to increase cost efficiency and provide more food choice for children during meal services. However, section 13(f)(7) of the NSLA only authorizes SFAs to use OVS. The flexibilities that allowed non-SFAs to utilize OVS were pursuant to policy guidance that was rescinded in 2018, or COVID-19-related waiver authority which was not permanent and was intended to aid program operators during the public health emergency and as they transition back to normal operations. As previously discussed in the background section of this rule, a 2018 OIG report led USDA to determine that offering waivers under 42 U.S.C. 1760(l) on a nationwide basis is not supported by the statute. As such, the use of nationwide waivers is no longer a viable option to address OVS. USDA exercised its discretion in 2019 to issue individual waivers under section 12(l) of the NSLA for 37 State agencies in order to bridge the gap between when the nationwide waiver was rescinded and this rulemaking was completed. As discussed in the proposed rule, the operation of OVS by non-SFA sponsors has also raised some program integrity concerns. Information obtained from site visits, and some State agency comments have indicated improper OVS implementation among non-SFA sponsors. Therefore, limiting OVS to only SFA sponsors, which generally have experience with OVS in the NSLP, will ensure that program regulations and operations remain in agreement with the statute and promote program integrity. As a result, this final rule continues the current regulatory requirement that only SFA sponsors may utilize the OVS option, while revising the regulations to allow the use of the SFSP meal pattern with OVS.

USDA does not expect a significant impact on program participation as OVS is an optional flexibility that functions to modify meal component offerings at meal services; SFA and non-SFA sponsors alike may operate meal services without OVS. USDA stands ready to provide technical assistance, as needed, to support this transition. Further, FNS data indicate that a relatively small share of all sponsors will be affected; fewer than 10% of SFSP sponsors are non-SFAs that used OVS under the waivers.

1

With regard to food waste, section D ii of this rule codifies the option for participants to take one fruit, vegetable, or grain item off-site for later consumption. Similarly, the use of share tables, where children may return whole food or beverage items they choose not to eat for other children to take, is also an option for sponsors to reduce food waste.

1

According to the most recently available USDA administrative data, approximately 60% of sites were SFA sites in July 2021. According to the Summer Meals Study (Report Volume 3, page 3-15), only 24% of non-SFA sites used OVS in 2018. This gives a total of 9.6% of all sites who will need to transition to meal service without the use of OVS as a result of this rule (40% × 24% = 9.6%). The Summer Meals Study is available online at

https://www.fns.usda.gov/cn/usda-summer-meals-study.

Accordingly, this final rule retains the requirement at § 225.16(f)(1)(ii) that only SFA sponsors may utilize the OVS option. Further, this rule allows SFA sponsors electing to use the SFSP meal pattern to use SFSP OVS guidelines.

E. Clarification of Program Requirements

i. Reimbursement Claims for Meals Served Away From Approved Locations

Under current regulations, meals are reimbursable only when served at sites approved by the State agency. As defined in § 225.2, a site is “a physical location at which a sponsor provides a food service for children and at which children consume meals in a supervised setting.” Site approval applies only to the specific location approved, not to meals removed from that site for service at another location that has not been approved. The State agency must approve any changes in site service time or location after the initial site approval. However, USDA granted State agencies the flexibility to approve exceptions to this requirement for the operation of field trips under USDA Instruction 788-13:

Sub-Sites in the Summer Food Service Program

and policy guidance,

Field Trips in the Summer Food Service Program (SFSP),

February 3, 2003.

USDA proposed codifying the flexibility to allow sponsors the option to receive reimbursement for meals served away from the approved site without requiring formal approval from the State agency, and establishing conditions that must be met in order for sponsors to receive reimbursement for these meals. The proposed rule:

• Requires sponsors to notify the State agency in advance that meals will be served away from the site.

• Permits State agencies to set time limits for how far in advance of the field trip sponsors would send notification to the administering agency.

• Requires sponsors of open sites to continue operating at the approved open site location while the field trip occurs, if feasible, or notify the community of the change in meal service and provide information about alternative open sites where community children can receive free summer meals.

Under these proposed changes, sponsors must be capable of meeting program requirements and local health, safety, and sanitation standards during the field trip, and meals are required to be served at the approved meal service times.

Public Comments

USDA received 29 comments addressing the proposal to allow reimbursement claims for meals served away from approved locations, including three form letter copies. Of these comments, 27 were supportive, and two were mixed. None of the comments USDA received for this provision were opposed. Thirteen of the comments received specifically addressed the condition that sponsors of open sites continue operating during field trips, or alert the public where children can access meals during those times. Of those, one was opposed, one was mixed, and the remaining were supportive of the condition as proposed.

Proponents wrote that the proposed changes would simplify the process for State agencies and local program operators. A few respondents in support also provided recommendations for different aspects of the provision for

USDA to consider. An advocacy group wrote that proposed changes should not put undue burden on sites or allow State agencies to set unreasonable limits. Another commenter requested that USDA set time limits for notice and notification to the community.

Several proponents also voiced concerns over the condition that sponsors of open sites should remain open. These commenters expressed concern for children who frequent open sites and rely on the availability of meals at these sites, while also acknowledging the burden on sponsors, particularly small sponsors, of maintaining a meal service at the site while administering a field trip. One of the commenters opposed the condition as written, stating that allowing sponsors to close sites during field trips would limit access for children who lack transportation to alternative sites. A State agency suggested that USDA consider a limitation that sites can close for field trips for no more than half of their weekly operation. Another respondent wrote that sponsors should be able to make the determination as to whether a site will remain open while field trips occur. A State agency requested clarification on several aspects of this proposal, including the appropriate amount of advanced notice, allowable circumstances for an open site to close, parameters for selecting alternative sites, State agency responsibility in monitoring sponsor compliance with this provision, and the requirement for advanced notification without formal approval.

USDA also received two comments that provided suggestions that were out of scope for this proposal. One commenter recommended USDA consider expanding the definition of site to include a vehicle in order to assist in the expansion of the SFSP to rural sites. Another respondent wrote that it would be helpful for staff of smaller sites if SFSP staff did not necessarily have to attend a field trip to administer a meal.

USDA Response

Consistent with the proposed rule, this final rule codifies the flexibility to allow sponsors the option to receive reimbursement for meals served away from the approved site. However, the final rule adjusts the requirements for maintaining a meal service at the site during a field trip and provides points of clarification in response to comments received.

Sponsors must notify the State agency in advance that meals will be served away from the site, but formal approval of the alternative meal service is not required. If the State agency is not notified prior to the SFSP field trip, meals served may be considered “consumed off-site” and the State agency has the discretion to not reimburse those meals. This procedure is similar to the notification requirements for field trips in the CACFP, where providers must notify either their sponsoring organization or the State agency in advance of a planned field trip. However, while obtaining formal approval of the off-site meal service for a field trip is not a requirement in order for the sponsor to receive reimbursement under this final rulemaking, the State agency has the discretion to require formal approval if deemed necessary.

In addition, this final rule gives State agencies the discretion to set time limits for how far in advance of the field trip sponsors would send notification to the administering agency, as proposed. Though comments pointed to concerns over the time limit for advanced notification, including one commenter who requested that USDA set the limit for the amount of advanced notice needed, USDA prefers to allow State agencies to determine their individual notification deadlines in this instance.

This final rule modifies a condition that must be met in order for sponsors of open sites to receive reimbursement for meals served away from approved locations. This rule requires sponsors of open sites to continue operating at the approved open site location while a field trip occurs. If this is not possible (for example, if there is limited staff coverage), the State agency may permit the sponsor to close the open site. In this case, the sponsor must notify the community of the change in meal service and provide information about alternative open sites that are likely to be accessible to community children so that they have continued access to free summer meals.

In response to comments, USDA modified the condition to allow State agencies the discretion to permit sponsors of open sites to close operations at the approved location while the field trip occurs. USDA acknowledges that field trips are widely supported at sites and by sponsors as they are a fun, educational tool for children. On the other hand, open sites are intended to serve the community at large and closing open sites due to circumstances related to a field trip could prevent children in the community from receiving meals. USDA understands the importance of this flexibility for the occasional field trip, but emphasizes that this flexibility should not be used in a manner that habitually impacts operations at the approved open site location. While USDA recognizes the additional burden this stipulation may place on some sponsors, sponsors enter into a written agreement with State agencies that attests they are capable of operating the Program, and the site type they oversee. In consideration of this change, administering agencies should work closely with sponsors electing to operate a field trip and exercise special care to ensure that the sponsors of open sites have developed adequate procedures to resolve any potential issues. When it is not possible to continue operating at the approved site location, sponsors should have plans to ensure that children in the community are provided ample notification of changes in meal service and are directed to appropriate alternate sites to obtain a meal. In accordance with 7 CFR 225.7(g) and FNS Instruction 113-1, State agencies should take reasonable steps to assure meaningful access to the program, including providing notification of alternate site location in the languages of the individuals in the community that the site serves and in alternative formats for persons with disabilities. Furthermore, State agencies should consider site type during application to make sure sites are correctly classified and serving the community as intended.

Finally, consistent with the proposed rule, in order to operate field trips in the SFSP, the sponsor must be capable of successfully operating the Program during an outing. When considering if sponsors are eligible to receive reimbursement for meals served away from approved sites, State agencies must determine that all program requirements, including all applicable State and local health, safety, and sanitation standards will be met while traveling and at the field trip meal service location.

Accordingly, the final rule addresses meals served away from the approved site location during a field trip at redesignated § 225.6(i)(7)(v) and in a new § 225.16(g).

ii. Timeline for Reimbursements to Sponsors

Current regulations in § 225.9(d)(4) require that State agencies must forward reimbursements to sponsors within 45 calendar days of receiving a valid claim. The regulations also require that if a sponsor submits a claim for reimbursement that is incomplete or invalid, the State agency must return the claim to the sponsor within 30 calendar days with an explanation of the reason for disapproval. If the sponsor submits a complete revised claim, the State agency must take final action within 45

calendar days of receipt. These requirements are necessary to ensure that sponsors receive reimbursement for meals served in a timely manner.

However, in recent years, USDA has received numerous inquiries and waiver requests to extend the timeline for taking final action on a claim for reimbursement beyond 45 calendar days of receiving a revised claim, due to concerns that the sponsor may have engaged in unlawful acts such as fraud. State agencies have stated that the 45 calendar day timeline to complete a final action is not sufficient to conduct a thorough review of all the sponsor's records and make a determination that the claim is valid.

While § 225.9(d)(10) of the regulations provides State agencies with the ability to use evidence found in audits, reviews, or investigations as the basis for nonpayment of a claim for reimbursement, the State agency may not be able to make this determination within the given timeframe. Therefore, the proposed rule exempted the State agency from requirements in § 225.9(d)(4) to take final action on a claim within 45 calendar days of receipt of a revised claim if the State agency has reason to believe that the sponsor has engaged in unlawful acts that would necessitate an expanded review. In addition, the proposed rule clarified that even if a State agency determines, in accordance with § 225.9(d)(10), that there is reason to believe the sponsor has engaged in unlawful acts, the State agency must still return the claim to the sponsor within 30 calendar days with an explanation of the reason for disapproval.

Public Comments

USDA received 21 comments on the proposed changes to the timeline for reimbursement to sponsors, including three form letter copies. Of these, 18 were supportive, and three were mixed. Proponents stated that the exemption would allow State agencies the flexibility to further investigate questionable sponsor claims, particularly in instances requiring thorough and complex reviews.

Several of the respondents provided comments on specific aspects of the provision. One commenter expressed concern about the 30 calendar day timeline to disapprove a sponsor's claim, stating that it may lead States to deny claims that may be valid and as a result increase appeals. Another commenter wrote that the 30 calendar day timeline would put State agencies in the position of processing a claim they are concerned is invalid to meet a regulatory timeframe. One respondent suggested that the State agency be given 45 days from receipt of the original claim to approve or deny the claim, rather than 30 days. The commenter also suggested that the disapproval be included in the exemption as well.

Two State agencies supported the proposal, but requested clarification on the process for requesting an exemption. Another State agency asked if State agencies must take final action within the 30 days of receipt, and if appeal rights must be issued within the 30 day timeframe as well even when the State agency elects to conduct an expanded review.

USDA Response

This final rule codifies the proposed changes to the timeline for reimbursement to sponsors and adds additional clarity on providing notification to the sponsor and to USDA. Consistent with the proposed rule, the final rule exempts the State agency from requirements in § 225.9(d)(4) to take final action on a claim within 45 calendar days of receipt of a revised claim if the State agency has reason to believe that the sponsor has engaged in unlawful acts that would necessitate an expanded review. In addition, the final rule clarifies that even if a State agency determines, in accordance with § 225.9(d)(10), that there is reason to believe the sponsor has engaged in unlawful acts, the State agency must still return the claim to the sponsor within 30 calendar days with an explanation of the reason for disapproval, and allow the sponsor to submit a revised claim as allowed by § 225.9(d)(4). The State agency must complete final action on the revised claim once the review has concluded. Once final action is taken, the final rule specifies that the State agency must advise the sponsor of its rights to appeal consistent with the due process provided by the regulations in § 225.13(a).

In addition, the final rule provides more clarity on the process for a State agency to request an exemption provided under this provision. Consistent with current guidance on other one-time exceptions for claims, State agencies must notify the appropriate FNS Regional Office (FNSRO) that they suspect fraud and will be taking the exemption to the 45 day timeline to conduct an expanded review by submitting to the FNSRO a copy of the claim disapproval at the same time as it is provided to the sponsor.

Some comments expressed concerns that the 30 calendar day timeframe forces State agencies to incorrectly process a claim. However, it appears that these commenters misunderstood the proposal. The proposed rule did not seek to make changes to the current regulations seen at § 225.4(d)(4), but rather to clarify the responsibility of the State agency in this process, even when they suspect fraud. While USDA understands the commenters concerns, the process is consistent with other Child Nutrition Programs where the administering agency has a period of time in which they must notify the institution of an incomplete or incorrect claim that must be revised for payment. The purpose of this timeframe is to prevent withholding of a claim without notifying the sponsor that the claim is invalid or allowing the sponsor to submit a revised claim in a timely manner. After notifying the sponsor of disapproval of the claim within 30 calendar days of receipt, the State agency can extend the review and meal claims validations to determine if it is incomplete or invalid, and if the claim should be denied, in order to prevent the potential payment of a suspected unlawful claim. To aid sponsors whose claims are initially disapproved, this final rule adds additional language to clarify that, when returning the claim to the sponsor with an explanation of the reason for disapproval, the State agency must indicate how the claim must be revised in order for it to be payable.

Accordingly, this rule amends regulations found in § 225.9(d)(4) to indicate that if a claim is determined to be potentially unlawful based on § 225.9(d)(10), the State agency must still disapprove the claim within 30 calendar days with an explanation of the reason for disapproval and how the claim must be revised for payment. Additional changes to § 225.9(d)(4) specify that the State agency notify the sponsor of its right under § 225.13(a) to appeal a denied claim. This rule also amends § 225.9(d)(10) to clarify that State agencies may be exempt from the 45 calendar day timeframe for final action in § 225.9(d)(4) if more time is needed to complete a thorough examination of the sponsor's claim. In addition, this rule clarifies in § 225.9(d)(10) that a State agency must provide notification to the FNSRO that it is taking the exemption to the 45 calendar day timeframe at the same time as the sponsor's claim is disapproved.

iii. Requirements for Media Release

Current regulations at § 225.15(e) require all sponsors operating the SFSP, including sponsors of open sites, camps, and closed enrolled sites, to annually announce the availability of free meals in the media serving the area from

which the sponsor draws its attendance. The regulations specify that media releases issued by sponsors of camps or closed enrolled sites must include income eligibility standards, a statement about automatic eligibility to receive free meal benefits at eligible program sites, and a civil rights statement. However, USDA received questions from State agencies and analyzed data from management evaluations that show the current requirements are difficult to understand and implement correctly, leaving some State agencies and sponsors to make inadvertent errors in fulfilling the requirements. To assist sponsors, USDA issued guidance and resources encouraging State agencies to complete this requirement on behalf of all sponsors of open sites in their State through an all-inclusive Statewide media release (SFSP 07-2014,

Expanding Awareness and Access to Summer Meals,

November 12, 2013).

USDA proposed codifying current guidance allowing State agencies the discretion to issue a media release on behalf of all sponsors operating SFSP sites, including camps, in the State. The proposed rule clarifies that, in the absence of a Statewide notification, sponsors of camps and other sites not eligible under § 225.2, sub-sections (a) through (c), in the definition of “areas in which poor economic conditions exist,” are only required to notify participants or enrolled children of the availability of free meals and do not need to issue a media release to the public at large. Finally, the proposed rule renames the section, “Notification to the Community,” to more accurately describe the types of activities required of sponsors.

Public Comments

USDA received 28 comments addressing the proposed changes to requirements for media release, including three form letter copies. Of these, 21 were supportive, and two were mixed. The remaining five comments supported the proposed changes, but expressed concerns with certain aspects of the provision.

Proponents stated that the proposed changes would relieve administrative burden for State agencies and sponsors. Proponents also agreed that sponsors of camps and other sites not eligible under the definition of “areas in which poor economic conditions exist” must only notify participants or enrolled children of the availability of free meals. One respondent wrote that restructuring the language to clearly identify that sponsors of closed enrolled and camp sites only need to notify participants or enrolled children of the availability of free meals would help alleviate some of the current confusion around the media release requirement for these types of sites. However, several comments expressed concern about aspects of the proposed changes for sponsors of closed enrolled sites. One commenter wrote that the stipulation should be required for sponsors of all closed enrolled sites and not just those that are not eligible under § 225.2, sub-sections (a) through (c), in the definition of “areas in which poor economic conditions exist.” Several commenters supported the statewide media release, but requested that State agencies be able to use a statewide media release without being required to include closed enrolled sites and camps since the release is for the public at large.

Several respondents voiced concerns over the public receiving the correct information if site information is released at the state level. Two State agencies wrote that a media release should still be required for open sites in some format. One State agency reasoned that State agencies do not have knowledge of local media outlets needed for a successful media release campaign. Another State agency supported the proposed provision, but would want to train sponsors on the benefit of submitting individual media releases to assist with local level promotion efforts.

USDA Response

In accordance with the proposed rule, this final rule codifies current guidance allowing State agencies the discretion to issue a media release on behalf of all sponsors operating SFSP sites in the State, including camps and closed enrolled sites. In addition, this final rule modifies the proposed language to make clear that closed enrolled sites are only required to notify participants or enrolled children of the availability of free meals and if a free meal application is needed. Finally, this final rule renames this section, “Notification to the Community,” to more accurately describe the types of activities required of sponsors.

This final rule requires State agencies using the option to issue a statewide media release to ensure that all notification requirements for camps and closed enrolled sites are met. USDA acknowledges commenters' concerns regarding State agencies' ability to effectively communicate information for particular site types in a statewide media release, and emphasizes that this is an optional flexibility. State agencies have the discretion to require sponsors to follow the requirements for notification to the community if deemed appropriate. As a best practice, USDA encourages sponsors to maintain promotion and outreach efforts at the local level, even when the State agency elects to issue a statewide notification. In all cases, State agencies and sponsors have a responsibility to take reasonable steps to ensure meaningful access to their programs and activities by people with limited English proficiency and those with disabilities, in accordance with 7 CFR 225.7(g) and FNS Instruction 113-1. This includes providing notification in the languages of the individuals in the community that a site will serve, and in alternative formats for persons with disabilities.

USDA understands the concerns of commenters who said that it would be confusing to require closed enrolled sites that are eligible under § 225.2, sub-sections (a) through (c), in the definition of “areas in which poor economic conditions exist,” (

i.e.,

those that use community data to determine area eligibility) to provide notification to the public at large in the same manner as an open site. Such notifications would not benefit the public because the advertised meal service at these sites is not open to the public. The final rule clarifies that, in the absence of a Statewide notification, sponsors of camps and all closed enrolled sites are only required to notify participants or enrolled children of the availability of free meals and do not need to issue a media release to the public at large. However, closed enrolled sites must also notify participants or enrolled children if a free meal application is needed so that the participants or their families know if they are expected to submit a free meal application. These modifications limit the sponsor's responsibility to notify only those who could potentially receive meals at the site.

A State agency suggested modifying the press release that State agencies are required to submit prior to February 1st each year (7 CFR 225.6(a)(2)) to fulfill the requirement in § 225.15(e) to announce the availability of free meals in the media serving the area from which the sponsor draws its attendance. While USDA appreciates the suggestion, the two releases serve different, but equally important purposes, and therefore, it is necessary to issue these releases separately. The February 1st press release is used to actively seek eligible applicant sponsors to serve priority outreach areas. The notification to the community alerts the community about the availability of meals, and may provide information about sites that is generally unavailable or unknown prior to the February 1st press release.

Finally, the final rule renames this section, “Notification to the Community,” to more accurately describe the types of activities required of sponsors, including sponsors of camps and closed enrolled sites that will no longer be required to issue a media release.

Accordingly, this rule amends § 225.15(e) by renaming the subsection “Notification to the Community,” specifying that State agencies may issue a media release on behalf of all sponsors operating open SFSP sites in the State, and clarifying that sponsors of camps and closed enrolled sites must only notify participants or enrolled children of the availability of free meals.

iv. Annual Verification of Tax-Exempt Status

In order to be eligible to participate in the SFSP, sponsors must maintain their nonprofit status (§§ 225.2 and 225.14(b)(5)). In 2011, the Internal Revenue Service (IRS) changed its filing requirements for some tax-exempt organizations. Failure to comply with these requirements could result in the automatic revocation of an organization's tax-exempt status. Due to this change, USDA released guidance for confirming sponsors' tax-exempt status, which requires that State agencies annually review a sponsor's tax-exempt status (SFSP 04-2017,

Automatic Revocation of Tax-Exempt Status—Revised,

December 1, 2016).

To ensure compliance with the filing requirements, the proposed rule amends § 225.14(b)(5) to codify the requirement for annual confirmation of tax-exempt status at the time of application.

Public Comments

USDA received 18 comments addressing the annual verification of sponsors' tax-exempt status including three form letter comments. All of the comments were supportive of the proposal. One respondent supported the proposed provision, but suggested that USDA work with the IRS to streamline the process for State agencies to determine an applicant's nonprofit status.

USDA Response

All comment submissions expressed support for the proposal without opposition. Thus, this final rule makes no changes from the proposed rule. USDA acknowledges that annually verifying the tax-exempt status of nonprofit organizations may be time consuming for State agencies, however, modifying filing requirements is outside the scope of USDA's authority. State agencies are responsible for approving and overseeing sponsors to operate the SFSP, and thus play an integral part in maintaining program integrity. This requirement is necessary to ensure program compliance, protection of Federal funds, and fiscal responsibility. Accordingly, this rule codifies the requirement for annual confirmation of tax-exempt status at the time of application by amending § 225.14(b)(5).

F. Important Definitions in the SFSP

i. Self-Preparation Versus Vended Sites

Current regulations in §  225.2 define the terms “self-preparation sponsor” and “vended sponsor.” These definitions are critical to the proper administration of the SFSP because reimbursement rates are determined, in part, by the sponsor's classification as either self-preparation or vended. Per statutory requirements, reimbursement rates are calculated using operating and administrative costs (42 U.S.C. 1761(b)(1) and 42 U.S.C. 1761(b)(3)) to determine a reimbursement rate for each meal served. Rates are higher for sponsors of sites located in rural areas and for “self-preparation” sponsors that prepare their own meals at sites or at a central facility instead of purchasing from vendors. This is due to the higher administrative costs associated with program operation in rural areas and preparing meals rather than contracting with a food service management company. Therefore, correct classification of self-preparation or vended sponsors is necessary for proper program management and maintaining the fiscal integrity of the Program when site-based claiming is not feasible.

Advances in technology have allowed State agencies and sponsors to develop increasingly sophisticated reporting systems that are capable of collecting detailed information on the number and type of meals being served. Many State agencies have developed the ability to classify individual sites as self-preparation or vended, rather than classifying a sponsor and all of its sites as one type or the other. USDA is aware that some State agencies that have these capabilities also provide reimbursements based on the classification of the individual sites. This is significant because providing reimbursements to sponsors that operate a mix of sites based on the individual site classification is more accurate and helps protect the integrity of the SFSP.

In recognition of the advances being made at the State agency and local level, USDA proposed to add definitions for “self-preparation site” and “vended site,” and to require that sponsors and sites include information about how meals will be obtained for each site in their application to participate in the SFSP.

Further, to better understand the current state of claiming systems nationwide and the implications for policy development, including potential changes to regulatory requirements, USDA requested specific comments on the following questions:

• How many State agencies have systems that are capable of receiving claims at the site level? Are any State agencies currently receiving claims at the site level and providing reimbursement based on the individual site classification?

• What are the costs and benefits of implementing systems that can receive claims at the site level?

• How common or uncommon is it for a site to use two different methods of obtaining meals (

e.g.,

offering a self-prepared breakfast and a vended lunch)?

• Do any State agencies have systems that are able to account for different methods of obtaining meals within the same site?

• What would be the impact on claiming and monitoring of collecting and paying claims at the site level?

Public Comments

USDA received 29 comments regarding the addition of these definitions, including three form letter copies. Of these comments, 11 were supportive, two were partially supportive, and 16 comments had mixed or neutral opinions regarding the proposal.

Stakeholders also submitted comments responding to specific questions posed in the proposed rule. USDA received:

• 22 comments regarding how many State agencies have systems that are capable of receiving claims at the site level, and whether any State agencies are currently receiving claims at the site level and providing reimbursement based on the individual site classification.

• 12 comments regarding the costs and benefits of implementing systems that can receive claims at the site level.

• 17 comments regarding how common or uncommon is it for a site to use two different methods of obtaining meals (

e.g.,

offering a self-prepared breakfast and a vended lunch).

• 17 comments regarding whether any State agencies have systems that are able to account for different methods of obtaining meals within the same site.

• 13 comments regarding the potential the impact on claiming and monitoring of collecting and paying claims at the site level.

Proponents of these definitions included an advocacy group and State agencies, who stated that their systems are already equipped to process reimbursement for site-level claims.

Proponents that partially supported the definitions voiced concerns about some of the terminology used. Specifically, these commenters highlighted that use of the term “food service management company” could generate confusion because it is used in other Child Nutrition Programs where the meaning is slightly different. A State agency also believed that the proposed definition overlooked instances in which a self-preparation site received meals that were prepared at a sponsor organization's central kitchen.

State agencies also submitted mixed or neutral opinions on the definitions. While some of these comments echoed concerns about the use of the term “food service management company,” other comments centered on the specific requests for comments presented in the proposed rule. Most of the responses indicated that State agency systems already include mechanisms to receive reimbursement claims at the site level. Few State agencies provided information on the cost to upgrade systems because many State agencies noted that there would be zero cost as their systems can currently collect site-level claims. However, others estimated that it could be costly, but that actual expenses would ultimately be determined by whether the system is developed in-house or by an external entity. Responses also indicated that it was not common for sites to utilize two different methods of attaining meals, and thus very few State agencies reported having systems capable of making this sort of distinction. Finally, State agencies noted that they did not anticipate an impact on claiming and monitoring from collecting and paying claims at the site level because these State agencies already had site-level claiming mechanisms. A State agency also expressed that the impact would be positive because collecting and paying claims at the site level would increase integrity. However, two State agencies wrote that site-level claiming posed a significant administrative burden as the agencies would need to update their systems and increase monitoring. These comments further noted that there may be an increase in claim processing costs due to the increase in entities that would need to be paid directly.

USDA Response

This final rule codifies the definitions of self-preparation and vended sites with revisions to provide additional clarity, and codifies as proposed the requirement that sponsors provide a summary of how meals will be obtained at each site when applying to participate in the SFSP.

USDA seeks to increase program integrity through this rulemaking. To satisfy this goal, any added definitions must be as clear as possible. In order to avoid the potential terminology confusion cited by the comments, USDA re-examined the proposed definitions and has modified the language to better reflect the types of arrangements found in SFSP operations. While the term “food service management company” is still used in the definitions, the revised language clarifies its applicability. Likewise, the definition of a self-prep site has been amended to indicate that these sites may receive meals prepared at their sponsor's central kitchen. Establishing clear definitions of self-prep and vended sites will help ensure that site-based claims are accurate for States that provide reimbursements based on the classification of the individual sites.

Commenters and USDA's own monitoring activities have indicated that all but several State agencies have systems that are equipped with site-level claiming mechanisms. USDA appreciates the efforts that State agencies have made to employ technological advances to modernize agency systems. Comments also indicated that there would be no impact on program operations in most States to implement site-level claiming because of this. However, among several State agencies with systems that are not currently configured for site-level claiming, State agencies noted a belief that implementation would result in increased costs due to additional monitoring and system requirements.

Collecting information about how sites will obtain their meals as part of the sponsor's application will aid State agencies to ensure proper accounting during claims processing. States that process claims at the site level need this information to determine the rate at which meals will be reimbursed for each site. For States that process claims at the sponsor level, information on the sponsor's sites is critical to determining whether the sponsor should be deemed self-prep or vended. Thus, although USDA is not requiring State agencies to collect site-level claims at this time, sponsors will be required to submit a summary of how meals will be obtained by a site as part of their application for program participation.

Finally, USDA is aware that most States are currently able to process site-based claims for SFSP sponsors, which makes the classification of sponsors as being either self-prep or vended no longer relevant for those States. However, sponsor classifications are still needed for State agencies that are not yet able to process claims at the site level. Therefore, although this rule establishes definitions for self-prep and vended sites, USDA is retaining the sponsor level definitions, which apply for States that are claiming at the sponsor level. However, because site-level claiming is a more accurate and efficient means of determining reimbursements, USDA encourages all State agencies to work toward adopting that method. USDA has created these site definitions to complement existing site-level claiming processes and ensure that State agencies categorize sites accurately and consistently.

Accordingly, this rule adds definitions to § 225.2 for “self-preparation site” and “vended site.” In addition, this rule amends §§ 225.6(c)(2)(viii) and 225.6(c)(3)(vi) to require a summary of how meals will be obtained at each site as part of the sponsor application.

ii. Eligibility for Closed Enrolled Sites

The current definition of closed enrolled sites included in § 225.2 requires that at least 50 percent of the enrolled children at the site are eligible for free or reduced-price meals under the NSLP and the SBP, as determined by approval of applications in accordance with § 225.15(f). This provision outlines the requirement to use income eligibility forms to “determine the eligibility of children attending camps and the eligibility of sites that are not open sites as defined in paragraph (a) of the definition of `areas in which poor economic conditions exist' in § 225.2”. To reduce administrative burden on sponsors, USDA published guidance in 2002 that permitted closed enrolled sites to establish eligibility based on data of children eligible for free and reduced-priced meals in the area where the site was located (

Summer Food Service Program (SFSP) Waiver for Closed Enrolled Sites,

November 17, 2002). During the 15 years in which this nationwide waiver was active, this flexibility was shown to reduce administrative burden on sponsors of closed enrolled sites and eliminate barriers to participation for children and families enrolled at these sites.

The waiver noted above was rescinded in 2018, as discussed in the background section of this final rule. Beginning in summer, 2019 State agencies and program operators were allowed to request a waiver on an individual basis. Between summers

2019 and 2020, 43 States requested waivers for area eligibility for closed enrolled sites. Feedback received during the waiver process confirms that a reduction in administrative burden and elimination of barriers to participation remain the principal benefits of permitting closed enrolled sites to rely on area eligibility rather than applications. Requests from 36 out of 40 State agencies that requested waivers in 2019 noted that the reduction in administrative costs can be more productively invested in technical assistance and oversight to improve the quality of services provided to participants. Further, the Healthy, Hunger-Free Kids Act of 2010, Public Law 111-296, amended the definition of “areas in which poor economic conditions exist” in the NSLA. This revised definition allows for enrolled sites to demonstrate eligibility through “other means approved by the Secretary.” As a result, USDA proposed to codify the flexibility allowing use of area eligibility to determine eligibility for closed enrolled sites.

Public Comments

USDA received 52 comments on this provision, including nine form letter copies. Of these, 45 were in support, three expressed partial support, three were in opposition, and one expressed a mixed opinion.

Proponents of the provision cited the benefits to program participants and administrators, including reduced administrative burden and increased program access. Commenters who partially supported the provision requested that the 50 percent threshold required in the definition of “area in which poor economic conditions exist” be decreased to 40 percent. A commenter also stated that the proposed description of closed enrolled sites in subpart (d) of the definition of “areas in which poor economic conditions exist” could be confusing because closed enrolled sites do not need to be located in such an area.

Opponents voiced concerns that the provision could increase incidence of sites that would otherwise have operated as an open site, electing to operate as a closed enrolled site, thereby decreasing program access for children who live in the community but are not enrolled at the site. The commenters also expressed apprehension that the reference population used to qualify for closed enrolled status would not be the population that is ultimately served by the site.

USDA Response

This final rule codifies, as proposed, changes allowing closed enrolled sites to use area eligibility to determine site eligibility. This rule also includes additional changes which require State agencies to have criteria for approving closed enrolled sites to ensure operation of a site as closed enrolled does not limit access to the community at large.

USDA strives to streamline and reduce administrative burden where possible. Codifying guidance permitting closed enrolled sites to establish eligibility based on data of local children eligible for free and reduced-price meals supports that goal.

In response to commenters who suggested lowering the threshold for area eligibility to 40 percent, changes to how area eligibility is determined are beyond the scope of this rulemaking. Further, the 50 percent threshold outlined in the definition of “areas where poor economic conditions exist” is a statutory limit found at 42 U.S.C. 1761(a)(1)(i). USDA is not permitted to regulate against the authority delegated to the Department through statute. USDA is obligated to observe this threshold and cannot lower it. Therefore, this rule codifies previous guidance with no further modifications.

USDA also understands the concerns associated with the correlation between potential increases in closed enrolled site locations and decreases in program access. However, in approving sponsor applications for SFSP participation, State agencies play a central role in safeguarding program access. State agencies should closely examine each closed enrolled site application, and assess the effect that approving the application could have on program access in the area the site is located. Operating as an open site should be encouraged where possible, thus State agencies should discuss with the respective sponsoring organization whether a closed enrolled designation for a potential site is absolutely necessary. As such, USDA is requiring that State agencies establish criteria for approving closed enrolled sites to ensure operation of a site as closed enrolled does not limit program access to the community at large.

Accordingly, this final rule amends the definitions of “areas in which poor economic conditions exist” and “closed enrolled site” in § 225.2 to clarify eligibility requirements and include eligibility determination based on area data of children eligible for free and reduced-price meals. This final rule also updates redesignated §§ 225.6(g)(1)(ix) and 225.6(g)(2)(iii) to establish the frequency at which the site must re-establish eligibility, if based on area data as described in section III. G. ii of this final rule. Further, this rule makes a technical correction to § 225.15(f) to reflect changes made to the definition of “areas in which poor economic conditions exist.” Finally, this rule amends § 225.6(a)(2) to require State agencies to establish criteria for closed enrolled sites.

iii. Roles and Responsibilities of Site Supervisors

The site supervisor plays a critical role in managing and maintaining quality at an SFSP site. Although USDA has provided technical assistance to aid site supervisors to perform their jobs, regulations did not include a definition of site supervisor that clearly addresses their core responsibilities, including the requirement that the site supervisor is on site during the meal service. Providing such a definition would help sponsors and sites comply with program requirements and improve pro

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