Child and Adult Care Food Program: Overclaim Authority

SUMMARY: This rule proposes an amendment to the Child and Adult Care

Food Program (CACFP) regulations which would explicitly authorize the

Department and State agencies to assess overclaims against institutions

that fail to abide by CACFP recordkeeping requirements. This authority

has been successfully challenged in several judicial rulings on the

grounds that such authority was not specifically established in program

regulations. This rule serves to affirm the Department's authority to

assess overclaims for recordkeeping infractions and to clarify any

regulatory ambiguities or inconsistencies regarding overclaims

authority.

DATES: To be assured of consideration, comments must be postmarked no

later than February 5, 1996.

ADDRESSES: Comments should be addressed to Mr. Robert M. Eadie, Chief,

Policy and Program Development Branch, Child Nutrition Division, Food

and Consumer Service, Department of Agriculture, 3101 Park Center

Drive, Room 1007, Alexandria, Virginia 22302. Comments in response to

this rule may be inspected at the address above during normal business

hours, 8:30 a.m. to 5:00 p.m., Monday through Friday.

FOR FURTHER INFORMATION CONTACT: Mr. Robert M. Eadie or Mr. Edward

Morawetz at the above address or by telephone at 703-305-2620.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been determined to be not significant for

purposes of Executive Order 12866, and, therefore, has not been

reviewed by the Office of Management and Budget.

Regulatory Flexibility Act

This action has been reviewed with regard to the requirements of

the Regulatory Flexibility Act (5 U.S.C. 601-612). The Administrator of

the Food and Consumer Service has certified that this action will not

have a significant economic impact on a substantial number of small

entities. There will be no significant impact because this rule

represents only a clarification of current procedures.

Executive Order 12372

This Program is listed in the Catalog of Federal Domestic

Assistance under No. 10.558 and is subject to the provisions of

Executive Order 12372, which requires intergovernmental consultation

with State and local officials (7 CFR Part 3015, Subpart V, and final

rule related notice published in 48 FR 29114, June 24, 1983).

Information Collection

This proposed rule contains no new information collection

requirements. In accordance with the Paperwork Reduction Act of 1980

(44 U.S.C. 3507), current reporting and recordkeeping requirements for

Part 226 were approved by the Office of Management and Budget under

Control Number 0584-0055.

Executive Order 12778

This proposed rule has been reviewed under Executive Order 12778,

Civil Justice Reform. This rule is intended to have preemptive effect

with respect to any State or local laws, regulations or policies which

conflict with its provisions or which would otherwise impede its full

implementation. This rule is not intended to have retroactive effect

unless so specified in the ``Effective Date'' section of the preamble

of the final rule. All available administrative procedures must be

exhausted prior to any judicial challenge to the provisions of this

rule or the application of its provisions. In the Child and Adult Care

Food Program, the administrative procedures are set forth under the

following regulations: (1) Institution appeal procedures in 7 CFR

Sec. 226.6(k); and (2) Disputes involving procurement by State agencies

and institutions must follow administrative appeal procedures to the

extent required by 7 CFR Sec. 226.22 and 7 CFR Part 3015.

Background

The Child and Adult Care Food Program (CACFP) is authorized by

section 17 of the National School Lunch Act, as amended (42 U.S.C.

1766). Section 17(n) of that Act stipulates that ``States and

institutions participating in the program shall keep accounts and

records as may be necessary to enable the Secretary to determine

whether there has been compliance with the requirements of this

section.'' Furthermore, the CACFP regulations include a number of

requirements relating to recordkeeping: Section 226.7(m) requires State

agencies to establish standards for institutional recordkeeping;

Section 226.15(e) prescribes the minimum recordkeeping requirements for

institutions in the CACFP; Section 226.10(c) requires institutions to

certify that records are available to support reimbursement claims; and

Section 226.10(d) establishes a timeframe for record retention.

Moreover, Section 226.6(f)(1) requires that the Program agreement

between the State agency and each institution stipulate that each

participating institution must agree to comply with all regulatory

requirements including these recordkeeping requirements. Finally, the

importance with which the Department views an institution's

recordkeeping responsibilities is found in Section 226.6(c)(4), where

failure to maintain adequate records is specifically listed as a

serious deficiency for which termination of an institution's

participation may be appropriate.

On numerous occasions, the Department and State agencies have used

the authority in the regulatory provisions cited above to recover funds

paid to institutions which did not have records necessary to support

claims for reimbursement. However, this authority has been successfully

challenged in court cases in Arkansas and California. In both cases,

assessment of overclaims against institutions which were based on

inadequate or missing records were

[[Page 62228]]

overturned by the courts on the grounds that the CACFP regulations do

not specifically authorize overclaims for those reasons.

In recognition of the fact that State agencies may review an

institution's performance under the CACFP as infrequently as once every

four years, effective administration depends on access to complete

documentation of program activities for an entire review period. Such

documentation is necessary for the Department and State agencies to

maintain a check on possible fraud, abuse and mismanagement in the

Program. Without proper records concerning the content and number of

meals served, and documentation of participants' income category, there

is no evidence that such participants were fed in accordance with basic

program requirements, and no assurance that program funds were spent as

mandated in the law and in the regulations.

Accordingly, the Department is proposing to amend Sections

226.14(a), 226.15(e) and 226.16(e), and to add new Sections 226.17(c),

226.18(g), 226.19(c), and 226.19a(c) to the CACFP regulations to

clarify that failure to adhere to CACFP recordkeeping requirements may

be used as a basis for State agencies to assess overclaims against

sponsors.

This rulemaking also contains a technical change to the CACFP

regulations which would transfer two recordkeeping responsibilities

established for sponsoring organizations from Section 226.16(e) to

Section 226.15(e).

Accordingly, the Department proposes to amend Sections 226.15(e)

and 226.16(e) by moving Section 226.16(e) (1)-(2) to Section 226.15(e)

under redesignated paragraphs (10) and (12).

List of Subjects in 7 CFR Part 226

Day care, Food assistance programs, Grant programs-health, infants

and children, Records, Reporting and recordkeeping requirements,

Surplus agricultural commodities.

Accordingly, 7 CFR Part 226 is proposed to be amended as follows:

PART 226--CHILD AND ADULT CARE FOOD PROGRAM

1. The authority citation for Part 226 continues to read as

follows:

Authority: Secs. 9, 11, 14, 16, and 17, National School Lunch

Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 1765 and 1766).

2. In Sec. 226.14, the introductory text of paragraph (a) is

amended by adding a new sentence after the first sentence to read as

follows:

Sec. 226.14 Claims against institutions.

(a) * * * State agencies may consider claims for reimbursement not

properly payable if an institution does not comply with the

recordkeeping requirements contained in this part. * * *

* * * * *

3. In Sec. 226.15:

a. The introductory text of paragraph (e) is revised;

b. Paragraphs (e)(10), (e)(11) and (e)(12) are redesignated as

paragraphs (e)(11), (e)(13) and (e)(14);

c. New paragraphs (e)(10) and (e)(12) are added;

d. Newly redesignated paragraph (e)(11) is amended by removing the

word ``and'' at the end of the paragraph;

e. Newly redesignated paragraph (e)(13) is amended by adding the

word ``and'' after the semicolon at the end of the paragraph; and

f. Newly redesignated paragraph (e)(14) is amended by removing the

first word ``Maintain'' from the paragraph.

The additions and revisions specified above read as follows:

Sec. 226.15 Institution provisions.

* * * * *

(e) Recordkeeping. Each institution shall establish procedures to

collect and maintain all necessary program records. Failure to maintain

such records shall be grounds for denial of reimbursement for meals

served during the period covered by the records in question and for the

denial of reimbursement for costs associated with such records. At a

minimum, the following records shall be collected and maintained:

* * * * *

(10) Information concerning the dates and amounts of disbursement

to each child care facility or adult day care facility with which it

has a program agreement;

* * * * *

(12) Information concerning the location and dates of each child

care or adult day care facility review, any problems noted, and the

corrective action prescribed and effected;

* * * * *

4. In Sec. 226.16, paragraph (e) is revised to read as follows:

Sec. 226.16 Sponsoring organization provisions.

* * * * *

(e) Each sponsoring organization shall comply with the

recordkeeping requirements established in Secs. 226.10(d) and 226.15(e)

and any recordkeeping requirements established by the State agency in

order to justify the administrative payments made in accordance with

Sec. 226.12(a). Failure to maintain such records shall be grounds for

the denial of reimbursement for the costs associated with those records

during the period covered by the records in question.

* * * * *

5. In Sec. 226.17, a new paragraph (c) is added to read as follows:

Sec. 226.17 Child care center provisions.

* * * * *

(c) Each child care center shall comply with the recordkeeping

requirements established in Secs. 226.10(d) and 226.15(e), and the

recordkeeping requirements contained in this section. Failure to

maintain such records shall be grounds for the denial of reimbursement

for meals served during the period covered by the records in question

and for the denial of reimbursement for costs associated with such

records.

6. In Sec. 226.18, a new paragraph (g) is added to read as follows:

Sec. 226.18 Day care home provisions.

* * * * *

(g) Each day care home shall comply with the recordkeeping

requirements established in Secs. 226.10(d) and 226.15(e), and the

recordkeeping requirements contained in this section. Failure to

maintain such records shall be grounds for the denial of reimbursement

for meals served during the period covered by the records in question.

7. In Sec. 226.19, a new paragraph (c) is added to read as follows:

Sec. 226.19 Outside-school-hours care center provisions.

* * * * *

(c) Each outside-school-hours care center shall comply with the

recordkeeping requirements established in Secs. 226.10(d) and

226.15(e), and the recordkeeping requirements contained in this

section. Failure to maintain such records shall be grounds for the

denial of reimbursement for meals served during the period covered by

the records in question and for the denial of reimbursement for costs

associated with such records.

8. In Sec. 226.19a, a new paragraph (c) is added to read as

follows:

Sec. 226.19a Adult day care center provisions.

* * * * *

(c) Each adult day care center shall comply with the recordkeeping

requirements established in Secs. 226.10(d) and 226.15(e), and the

recordkeeping requirements contained in this section. Failure to

maintain such records shall

[[Page 62229]]

be grounds for the denial of reimbursement for meals served during the

period covered by the records in question and for the denial of

reimbursement for costs associated with such records.

Dated: November 27, 1995.

William E. Ludwig,

Administrator.

[FR Doc. 95-29569 Filed 12-4-95; 8:45 am]

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