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Speaker: Mandana Yousefi, USDA Child Nutrition Program
Transcription provided by: Caption First, Inc
P.O. Box 3066 Monument, Colorado 80132
877-825-5234 www.captionfirst.com
>> MANDANA YOUSEFI: Hello, everyone. Welcome to today's webinar on the recently published
Child Nutrition Integrity proposed rule. My name is Mandana Yousefi, and I work for the
Child Nutrition Program here at the Food and Nutrition Service at the USDA.
Before we get started, let's cover the logistics for today's webinar. In the bottom left-hand
corner of the webinar tool, you will see a chat box. You may use this feature to ask
questions. I understand that you may have questions while I go through my presentation.
We will address them during the Q&A portion. The chat box can be distracting; so, please
use it sparingly throughout presentation so that you don't miss any important information.
So here is some general information about the proposed rule. This rule is called the
Child Nutrition Integrity proposed rule, which mainly codifies provisions of the Healthy,
Hunger-Free Kids Act of 2010 and recommendations from the Office of Inspector General impacting
the management of the Child Nutrition Program.
The rule was published in the Federal Register on March 29th with a Federal Register document
No. 2016-06801. The best way to find the proposed rule is to search using this number. You can
also find -- use the link that's provided on the slide to access the proposed rule on
the Federal Register website. The rule is open for a 60-day comment period that will
close on May 31st, 2016.
Today we will cover the background of the rule and how it was developed, the proposed
changes to the Child Nutrition Program regulations, and how we believe it would impact various
stakeholders and all of the Child Nutrition Programs. We will also go over how to provide
public comment on this rule.
The vast majority of states, schools, organizations, and staff who implement the nation's Child
Nutrition Programs are good stewards of federal funds and provide outstanding service to our
nation's children. However, we can do more to ensure that entities implementing these
critical programs meet high standards of program effectiveness and integrity. To that end,
USDA is proposing a series of program improvements that target those programs with systemic and
significant program violations to further safeguard the integrity of the Child Nutrition
Program and help ensure that taxpayer dollars are being invested as intended.
The programs on this slide capture all Child Nutrition Programs. This proposal, combined
with the USDA's gong efforts to support Child Nutrition Program operators, will result in
improved program implementation, ensuring America's children receive the nutritious
meals they need to learn and thrive.
The proposed changes to the Child Nutrition Programs are a response to statutory changes
made by the Healthy, Hunger-Free Kids Act of 2010, recommendations from several audits
done by the Office of Inspector General on the Child and Adult Care Food Program, as
well as some technical corrections to program regulation.
USDA believes that these proposed changes would further safeguard the integrity of the
programs and help ensure taxpayer dollars are being invested as intended. We believe
that the proposed changes will help to ensure proper and efficient administration of the
Child Nutrition Programs, reduce misuse of program funds, and improve compliance with
program eligibility requirements, nutrition standards, procurement practices, and other
critical program requirements.
The enhanced oversight and enforcement tools included in this proposed rule are intended
to strengthen the administration of USDA Child Nutrition Programs at all levels. These tools
will help USDA and state administering agencies reduce program errors of all types, resulting
in an improved compliance of program requirements including eligibility, standards, and nutritional
requirements. USDA believes that the proposed changes will enhance program oversight and
enforcement by establishing consistent procedures to permanently remove program operators who
continually or intentionally mismanage our programs, authorizing USDA and state agencies
to impose financial assessments in situations where willful, repeated, and egregious mismanagement
of a program has been committed, establishing procedures for disqualification of program
operators in the Summer Food Service Program, improving the management of the Child and
Adult Care Food Program by increasing state resources, strengthening review time frames
and establishing other requirements designed to improve oversight of CACFP operators, and
strengthening training of state and school program operators related to effective award
and management contracts.
So, why is this rule important? While the types of egregious mismanagement this rule
would address are infrequent, these changes provide USDA with the needed tools to address
these issues and also serve as a deterrent. Program violations reduce public confidence
in our programs and sometimes lead to improper payment. This rule provides tools to eliminate
mismanagement of federal funds and will help, first, ensure proper and efficient administration
of the program, reduce misuse of program funds, improve compliance in meal patterns and nutrition
standards, reduce participant certification error, improve the integrity of the procurement
process, and reduce meal counting and claiming error through increased administrative review
and penalties for noncompliance.
Each of the proposed rule's provisions is intended to remedy issues in the administration
of USDA Child Nutrition Programs at the sponsor, provider, school food authority, and state
agency levels.
So, before we discuss the proposed changes, let's talk about where we are in the rulemaking
process. Here is an illustration of how the regulation process works and what the next
steps are. The proposed rule was published on March 29th and is now open for public comment
for 60 days. This means anyone from the public is welcome and encouraged to submit their
feedback on the changes we have proposed until May 31st of this year. USDA will then take
all those comments into consideration when drafting a final rule.
Let's talk a little more specifically about how USDA proposes to implement the final version
of this rule. USDA anticipates the implementation for most of the provisions under this proposed
rule to be implemented 90 days after the publication of the final rule. The provisions granting
eligible state agencies additional CACFP audit funds will be implemented upon publication
of the final rule.
To allow Child Nutrition Program operators to become familiar with the new requirements
and successfully implement these integrity procedures, USDA anticipates the provision
establishing criteria for assessments against state agencies and program operators will
be implemented no sooner than one school year following the publication of the final rule.
USDA is proposing an implementation schedule that allows timely and comprehensive compliance
of new program requirements. It is important that state agencies and Child Nutrition Program
operators are first familiar with the new requirements and are able to successfully
implement these integrity procedures. We will work with states, schools, organizations to
understand the new requirements and will continue to provide technical assistance, including
training and guidance materials to help state agencies, school food authorities, sponsoring
organizations, centers, and day care homes to successfully implement the regulatory changes.
Further, USDA will thoroughly consider all public comments on the proposal prior to the
issuance of an interim or final rule.
Now, let's move on to the second part of our webinar to discuss the specific changes that
the rule proposes. The department is proposing to establish criteria for assessments against
state agencies and program operators who jeopardize the of any Child Nutrition Program. Section
303 of the Healthy, Hunger-Free Kids Act requires the secretary to establish criteria for the
imposition of fines in Child Nutrition Programs.
Referred to as assessments in this proposed rule -- an assessment refers to a required
payment of funds from nonfederal sources. Note: While the authority set forth in Section
303 also extends to the Fresh Fruit and Vegetable Program, this proposed rule does not include
mandatory changes related to the FFVP as the FFVP regulations have not yet been codified.
However, we welcome comments related to FFVP assessments since it is the intent to mirror
this language in the FFVP final rule.
So, under Section 303, USDA or a state agency may establish an assessment against any program
operator administering the Child Nutrition Programs if it is determined that they fail
to correct severe mismanagement of any program, fail to correct repeated violations of a program
requirement, or disregarded a requirement of which they had been informed. Section 303
also provides USDA the authority to establish an assessment against any state agency if
the secretary determines the state agency has failed to correct severe mismanagement
of the programs, failed to correct repeated violations of program requirements, or disregarded
a requirement of which they had been informed.
Now, to reiterate, Section 303 implies that an assessment would be established only in
situations where the regular monitoring, oversight, corrective action, and technical assistance
processes used by the state agency or the department do not result in correction identified
-- correction of identified program violations. It is important to note that the statutory
scheme only anticipates assessments be established in instances of severe mismanagement of a
program, disregard of a program requirement of which the program operator had been informed,
or failure to correct repeated violations. These criteria suggest that violations that
would result in assessments would be egregious or persistent in nature, remaining unresolved
after the normal monitoring and oversight activities have failed to secure corrective
action.
The department anticipates assessments would be established only on rare occasions in securing
corrective action however it should serve as a useful tool when egregious or persistent
disregard of program requirements occur.
Section 303 prescribes upper limits on the amount of the assessments that can be established
against any program operators and state agencies. The department is directed to base the amount
on the reimbursement earned by the operator for the program in which the violation occurred.
In calculating assessments established against state agencies, the department is directed
to base the amount on the state administrative expense fund made available to the state agency
for the state agency's administration of all Child Nutrition Programs. Therefore, the amount
of the assessment is based on state administrative expense funds for all Child Nutrition Programs,
not only the state SAE funds that support the program in which the violation occurred.
Given the fiscal consequences of this provision, the department would provide school food authorities,
institutions, and sponsors the opportunity to appeal any assessment established pursuant
to this regulatory authority. School food authorities, institutions, and sponsors administering
the National School Lunch Program, Summer Food Service Program, or the Child and Adult
Food Care Program currently have the ability to appeal fiscal action through the existing
administrative review process in those program regulations. This proposed rule would extend
current regulatory appeal rights to include any assessment established pursuant to this
regulatory authority and would also extend those appeal rights and procedures to both
the Special Milk Program and the School Breakfast Program.
Finally, the proposed rule would require that all assessments and any interest charged would
be collected and paid to the department and transmitted to the U.S. Department of the
Treasury. Funds received by and from the state agencies as a result of assessments must be
paid from nonfederal sources. Therefore, any funds acquired through assessments may not
be used by the department.
Section 322 of the Healthy, Hunger-Free Kids Act provided the department the authority
to require state agencies to follow the procedures for the termination and disqualification of
participation of institutions in the summer food service program established by the USDA.
The procedures for termination must include a provision for a fair hearing, a prompt determination
for any service institution aggrieved by any action of the state agency that affects the
participation of a service institution in the Summer Food Service Program, or the claim
of a service institution for reimbursement.
USDA is now required to maintain a list of institutions and individuals that have been
terminated or otherwise disqualified from participation in the Summer Food Service Program
and to make the list available to states for use in approving or renewing applications
by institutions for participation in the Summer Food Service Program.
If this sounds familiar, it should. This is currently what is done in the Child and Adult
Care Food Program, known as the National Disqualified List. Section 322 sets up SFSP to have one
as well.
Prior to the enactment of the Healthy, Hunger-Free Kids Act, the department and state agencies
did not have the authority to disqualify summer sponsors. Current regulations only provide
authority to terminate sponsor participation. These regulations prohibit state agencies
from entering into an agreement with any applicant sponsor or allowing participation in the program
of a sponsor who was seriously deficient in its operation of the SFSP or any other federal
Child Nutrition Programs. Additionally, state agencies are required in current regulation
to terminate the program agreement with any sponsor determined to be seriously deficient
and provide a sponsor reasonable opportunity to correct problems before termination.
Current regulations indicate the types of serious deficiencies which are grounds for
disapproval of an application and termination. So this proposed rule would reorganize the
current SFSP regulations, amend the current termination process, and establish a disqualification
process similar to the process employed in the Child and Adult Care Food Program; however,
with modification reflecting the shorter duration of the Summer Food Service Program. For example,
the proposed maximum timeframe for which the corrective action plan may be implemented
in the SFSP is ten days, whereas in the CACFP this maximum timeframe is 90 days.
Section 362 of the Healthy, Hunger-Free Kids Act prohibits any individual or organization
terminated from any Child Nutrition Program and if in CACFP or SFSP is on the National
Disqualified List, from being approved to participate in or administer any Child Nutrition
Program. This provision is expected to protect program integrity and federal funds since
entities that have been terminated or disqualified from one Child Nutrition Program will be prevented
from participating in all the department's Child Nutrition Programs.
We like to refer to this provision as reciprocal disqualification. The proposed rule would
require state agencies to develop a process to share information about entities and individuals
no longer eligible to administer or to participate in the programs within the state.
The process must be approved by the department and must ensure that the state agency work
closely with any other state agency administering a Child Nutrition Program to ensure information
is shared on a timely basis. The department has chosen to allow state agencies to develop
their own process due to the different organizational structures of each state.
Please note: USDA has interpreted the reciprocal disqualification provision to only apply to
entities authorized to participate in the Child Nutrition Programs. Entities administering
the Special Supplemental Nutrition Program for Women, Infants, and Children, known as
WIC or the WIC Farmers' Market Nutrition Program under Section 17 of the Child Nutrition Act
are referred to as local agencies. Because Section 362 of the Healthy, Hunger-Free Kids
Act does not include the term "local agencies," the department determined that this provision
does not apply to the WIC program. Instead, the proposed rule would require state agencies
to notify WIC state agencies of entities disqualified from participation in any Child Nutrition
Program so that WIC state agencies may look into potential threats to WIC program integrity.
Finally, the department also determined that the term "individuals" refers to responsible
principals or responsible individuals and not individuals receiving nutrition assistance
benefits under the Child Nutrition Program.
This proposed rule also amends current CACFP regulations to make a corresponding change
on how we deal with noncompliant centers that are sponsored in the CACFP to align with the
intended effects of Section 362, the reciprocal disqualification provision. That provision
explicitly prohibits persons or organizations terminated or disqualified from one Child
Nutrition Program from being approved to participate in or administer any other Child Nutrition
Program. Current CACFP regulations include serious deficiency, termination, and disqualification
procedures for only sponsored day care homes, not sponsored centers.
It is important to understand the distinction between the two types of sponsored centers,
which are affiliated and unaffiliated. Unlike affiliated centers, unaffiliated centers are
not part of the same legal entity as the sponsoring organization responsible for administration
of the CACFP. Currently, if an unaffiliated center is seriously deficient in the operation
of the program, it is the sponsor which the state agency would declare seriously deficient.
Approval or participation of seriously deficient sponsored child or adult day care center then
would be contrary to the intent of Section 362. In order to implement Section 362, this
proposed rule would create serious deficiency, termination, and disqualification procedures
which mirror the same process used for family day care homes to ensure that all noncompliant
persons or organizations are prohibited from participation in any Child Nutrition Program.
So let's take a break and answer any questions you may have up -- at this point about the
proposed rule. Please submit your questions to the chat box feature, and I'll try to get
through as many as I can.
So, first question is incredibly easy. Will the slides be available after the webinar?
Yes, we will send out these slides after the webinar.
So here's another question: What is the relationship between moving to termination and assessments?
In other words, wouldn't termination be appropriate for repeated violations if there is serious
deficiencies? Would assessments be in addition to the termination process? You know, that's
a really great question. We would like feedback from state agencies when there would be opportunities
where an assessment would be more appropriate than termination, depending on if there was
reasoning behind maintaining that organization in the program but there was some type of
systemic abuse or reason that mismanagement was happening and establishing assessment
against that organization would be sufficient. These are absolutely things that the department
welcomes comments on.
What is the process that would need to be developed by the state agency to share information
if the USDA is maintaining a National Disqualified List for CACFP and SFSP which would be accessible
for all state agencies? So, while access to the National Disqualified List is something
that program state staff would have in some states, not all Child Nutrition Programs are
administered in the same agency or maybe the same office; and so this might not necessarily
be something that every state agency needs to develop a process for. But I encourage
you to look in this section of the preamble where we talk about the type of information
sharing that might be required, and please submit comments on what type of burden that
this would create for your office, specifically.
The question is: Does this include participation in the USDA TCAP (ph.) and CACFP? And so I'm
assuming that question is on the two provisions that touch on all Child Nutrition Programs?
No. This only includes the programs that we have referenced in this presentation.
With regards to the previous slide, what constitutes program requirements of which the individual
had been informed? Would publication in the Federal Register or CFR constitute having
been informed? Just to be clear -- and let's please go back to the slide where we do talk
about establishing assessments. So, as I said, the statute only anticipates assessments to
be established in instances of severe mismanagement of the program and it would be established
in situations where the regular monitoring, oversight, corrective action, and technical
assistance processes used by the state does not result in the correction of the identified
program violation. So, it really is the last resort. It's not something was in the program
regulations, they did it wrong, and so we're going to fine them. That's not the intent
of this, just to make that clear.
Tanya O'Connor asks would the National Disqualified List for CACFP and SFSP be the same list or
would they be separate? So for those who work on the Child and Adult Care Food Program and
have access to the National Disqualified List, it's a web-based database and so FNS expects
-- we anticipate adding to that current database so it would be separate lists but within the
same database, and you'd be able to cross-reference them. We're anticipating the ability to make
it as user-friendly as possible.
There is a question on if the final rule will define egregious errors. If -- please submit
comments on the different terminology that the proposed rule uses that you would like
explicit definitions of.
There is a question: What happens in states where it is the law that schools participate
in the National School Lunch Program and they are terminated from CACFP or SFSP? I think
this is a great question. So, reciprocal disqualification of Child Nutrition Programs -- so let's say
you have a school who does NSLP really well and they picked up the summer program and
in the summer program, the person operating that summer program, let's say the food service
director, under the food service director's watch there was major serious deficiencies
and we -- and they had to move to terminate and disqualify. That entire school is not
disqualified from doing the National School Lunch Program. That responsible principal,
that individual can no longer operate the National School Lunch Program.
And please, it seems like this is -- these two provisions that I talked about so far,
you folks have a lot of questions on. The preamble does, we think, does a nice job of
clarifying in instances of what the outcome would be. We don't necessarily want access
to our programs to be restricted because somebody mismanaged one of our programs. We want those
organizations to remove those responsible principals or individuals from their operation.
Will at-risk sponsors -- that means at-risk sponsors of the Child and Adult Care Food
Program -- be able to declare their providers seriously deficient and place them on the
National Disqualified List under this new rule? As the proposed rule is written, yes.
Unaffiliated centers and sponsors, including at-risk sponsors, would be able to declare
their center seriously deficient.
When an organization gets on the National Disqualified List, we have a number of cases
in which the organization sells the center to a less than arm's length person. Is there
anything in this proposed rule that would prevent this? In that situation, that still
would not get the organization off of the National Disqualified List. The name of the
organization would still be on the National Disqualified List. If this is something that
is currently happening, please work with your regional offices and we will try to -- we
will try -- we have policies out on that already that can help you deal with that situation.
We have a comment, the law states that the list of summer sponsors terminated will be made
available to states for use in approving or renewing service institution applications
for summer participation. This list should also be made available to the states administering
the CACFP. It will be the same list, as I've stated before. The National Disqualified List
is a web-based database, and so folks would have access to both.
There are a couple comments that
are coming in about the specific comments that you guys are having about the rule. I
think this is great. These are not comments -- they're not questions, and so I'm not going
to address them. I will say please include that to the comments that you submit to the
Federal Register. As for the different definitions around terminology, please include those in
the comments that you have for this rule; and if you have proposed definitions or things,
definitions that your state uses, we would welcome those in the comments, as well.
So there's a question on disqualification and the determination -- the term -- the duration
of time that someone would be disqualified from the program if they were terminated from
the Summer Food Service Program. So the proposed rule proposes to place entities on the National
Disqualified List for seven years, and then after seven years they could come off so long
as they paid any debts owed. That's in the proposed rule. If there's any comments on
that, we welcome comments on that duration, as well.
For the interest of time, I'm going to move on. We have a lot more to cover, but thank
you so much for your questions. I'll try to get to them as we go on. I do want to say
I keep getting questions on what's the definition of this and what's the definition of that?
If the rule does not define it and this is something that you would like the department
to define in the regulations, not so much guidance, please include that in your comments
for the rule.
All right. Moving on, now let's talk specifically about the Child and Adult Care Food Program.
Section 331(b) requires the department to develop for state agencies additional criteria
or priorities for use in choosing institutions for review including institutions at risk
of having serious management problems and institutions conducting activities other than
the Child and Adult Care Food Program.
As directed by the statute, each state agency must conduct, first, at least one scheduled
site visit at not less than a three-year interval to each institution to identify and prevent
management deficiencies and fraud and abuse under the program, and to improve program
operations and, second, more frequent reviews of any institution that sponsors a significant
share of facilities participating in the program, conduct other activities other than Child
and Adult Care Food Program, have serious management problems as identified in a prior
review, is at risk of having serious management problems, or meets such other criteria as
are defined by the department.
Current regulations at 226.6M6 requires state agencies to annually review at least 33 percent
of all institutions participating in the program in each state. Institutions with one to a
hundred facilities must be reviewed at least once every three years. Institutions with
more than a hundred facilities must be reviewed at least once every two years. New institutions
with five or more facilities must be reviewed within the first 90 days of operation. This
proposed rule would amend 226.6M6 to modify the review requirements for institutions that
must be reviewed at least every two years.
In addition to reviewing institutions with more than a hundred facilities as currently
required, the proposed rule would also require the state agency to review at least every
two years institutions with one to a hundred facilities that conduct activities other than
the CACFP, and institutions that have been identified during a previous review as having
serious management problems or that are at-risk of having serious management problems. Institutions
that conduct activities other than the CACFP with more than a hundred facilities are currently
reviewed at least once every two years. Therefore, the proposed rule would not alter the review
requirements for these institutions.
Examples of criteria to be considered as posing a risk of serious management problems include
change in ownership or significant staff turnover; change in licensing status; complaints received
by facilities, day care providers, or participants; significant change in number of claims submitted;
or significant increase in the number of sponsored facilities or day care homes. Because the
composition of institutions varies throughout each state, determining the burden placed
on state agencies by requiring more frequent reviews of institutions is difficult to predict.
Therefore the department asks for comments regarding the effect that this proposed rule
will have with respect to the frequency and number of reviews the state agency would be
required to administer.
Section 17(i) of the National School Lunch Act authorizes the secretary to provide funds
to each CACFP state agency to conduct audits of participating institutions. Each fiscal
year, each state agency receives up to 1.5 percent of funds used by the state in the
program during the second preceding fiscal year to conduct these audits. Section 335
of the Healthy, Hunger-Free Kids Act amended section 17(i) of the National School Lunch
act to allow the department to make available for each fiscal year additional funding for
a total of up to 2 percent of the funds used by each state agency in the program during
the second preceding year if the state agency can effectively use the funds to improve program
management under criteria established by the department.
This provision is expected to allow for better program management and improve the integrity
of the CACFP. Program integrity audits are an integral component of the CACFP, therefore
allowing state agencies to comprehensively monitor program funding and operations will
ensure that providers and sponsors are operating the program in accordance with the law.
The proposed rule would allow state agencies to submit a request for an increase in the
amount of audit funds. The department's approval will be based on criteria related to the effective
use of funds to improve program management. The department expects this criteria to include
a description of the additional audit and other allowable activity. For example, additional
review activity the state agency would conduct. The department expects this process to be
similar to the process currently used for reallocation of state administrative funds.
Now, section 17(e) of the national school lunch act requires state agencies to provide
an opportunity for a fair hearing and a prompt determination to any institution aggrieved
by any action by the state agency that affects either the participation of the institution
in the CACFP or the claim of the institution for reimbursement in the CACFP. Section 332
of the Healthy, Hunger-Free Kids Act amended Section 17(e) of the National School Lunch
Act to require state agencies failing to meet required timeframe in providing a fair hearing
and a prompt determination to pay all valid claims for reimbursement to the applicant
institution and the facility of the institution using funds from nonfederal sources. That
means that the state will be liable now for any claims due to the institution after 60
days of the state agency's receipt of the request for an administrative review.
The rule proposes a procedure that would track this timeline. The proposed rule would make
no changes to the existing administrative procedures or timeframe, however the proposed
rule would require the state agency to provide a copy of the written request for an administrative
review, including the date of receipt of the request to the department within ten days
of the receipt of the request. This information will allow the department to track state agency
progress and timeliness in meeting the required administrative review timeframe.
The department would notify the state agency of its liability for all valid claims for
reimbursement to an aggrieved institution at least 30 days prior to imposing any liability.
Liability for reimbursement would then begin 61 days following the state agency's receipt
of the request for an avert review and end on the date on which the hearing determination
is made. During this period, the state agency would be required to pay from nonfederal sources
all valid claims for reimbursement to the aggrieved institution.
The proposed rule would afford a state agency the opportunity to seek a reduction or reconsideration
of its liability by submitting to the department information concerning the state's liability
for reimbursement to an aggrieved institution including information regarding any mitigating
circumstances.
The department recognizes the financial implications for state agencies resulting from implementation
of this proposed rule and will assist state agencies' efforts to ensure that administrative
review structures meet the required timeframe. The department also recognizes that many state
agencies are experiencing difficult fiscal circumstances. The department will work with
the state agencies to ensure milestones to implement this provision and minimize potential
financial burden. Therefore, the department encourages state agency commenters to address
the financial implications of this proposed rule as related to their state and suggest
appropriate milestones the department could require of state agencies during implementation.
Looking again at CACFP, through targeted management and evaluation of state agencies conducted
by the department in fiscal years 2010 and 2011 and previous management evaluations,
it was determined that misuse of funds was often an indicator of a sponsoring organization's
systemic program abuse. It was also determined that financial reviews of sponsors conducted
by state agencies could be improved to better detect and prevent the misuse of funds.
Current regulations require state agencies to approve sponsor's budgets and assess sponsor's
compliance with program requirements, including ensuring the program funds are used only for
allowable expenses. Currently the process by which sponsor compliance of CACFP financial
rule is assessed is left to the discretion of the state agency, consistent with program
regulation. Thorough reviews of sponsor financial records are vital to ensuring program integrity.
The department found that the financial reviews conducted by state agencies were inconsistent
with federal regulations and often lacked focus on a sponsor's CACFP bank account activity
but rather focused on the matching of the sponsor's representation of their expenses
to supporting documents. This often resulted in other suspicious transactions on sponsor's
CACFP bank account to be left unnoticed if supporting documents presented were valid.
Current federal regulations do not require sponsors to fully account for their expenditure
of CACFP funds.
Also the state agency's current ability to monitor sponsors use of CACFP funds is limited.
While sponsors must submit annual budgets for state agency approval which must detail
the projected expenditures by cost category, sponsors are not required to report actual
expenditures. Therefore, the department has proposed to require annual reporting of actual
expenditures to improve sponsor accountability and provide state agencies a means by which
to identify misuse of CACFP funds.
State agencies could then reconcile reported expenditures to program payments to ensure
funds are spent on allowable costs and use the reported actual expenditures as the basis
for selecting a sample of expenditures for validation against the sponsor's CACFP bank
activity. To facilitate reconciliation, the report should use the same cost categories
as are used on the sponsor's approved annual budget. The department also proposes to require
state agencies to have a system in place to annually review at least one month bank account
activity of all sponsoring organizations compared to the documents adequate to demonstrate that
the transactions meet program requirements.
Under this rule if the state agency identifies any expenditures that have the appearance
of violating program requirements, the state agency reviewer could continue to investigate
the account activity further or refer the matter to someone else within their agency
such as an auditor. The proposed rule would also require state agencies to have a system
in place to annually review a report of actual expenditures of program funds and the amount
of meal reimbursement funds retained from centers if any for administrative costs for
all sponsoring organizations of unaffiliated centers. For example, this could be done during
your annual recertification of a sponsor.
Under this rule, estate agencies would be required to reconcile reported expenditures
with program payments to ensure funds are fully accounted for and use the reported actual
expenditures as the basis for selecting a sample of expenditures for validation. If
the state agency identifies any expenditures that have the appearance of violating program
requirements, the state agency would be required to refer the sponsoring organization's account
activity to the appropriate state authorities for verification.
All right. So let's take another break and answer any questions you may have up to this
point. So again, please submit your comments to the chat box.
All right, so going back to the review of CACFP sponsors, conduct what kind of activities
other than CACFP? So that means if the organization does any other function besides being a CACFP
sponsor. So they could sponsor another Child Nutrition Program, they could operate something
else where they're making money another way. That's what constitutes being an organization
that is something other than the CACFP.
I'm getting a lot of comments in here, and I absolutely appreciate them. I just want
to make very clear, to submit an official comment or reaction to this rule, it has to
be submitted to the Federal Register. I will talk about that more later.
There's a question, what state agency would be appropriate to refer a sponsor's account
to if it appears that they have an in-auditable expenditures? That really depends on your
state. If you have auditors within your state agency office, if you or your staff are comfortable
conducting a more detailed review of those accounts, then you're more than welcome. The
preamble talks about that, about who would be best appropriate. We understand that not
all state staff have the expertise to conduct that type of detailed review; but, of course,
the state staff could do that themselves.
Question, would all child care centers be considered as organizations that operate more
than one program since they operate child care and the CACFP? No, they would not. No,
this isn't a loophole. This is not a loophole.
So there's a question, why wasn't independent centers included in the annual financial reporting
of expenditures? This is because independent centers do not take a percentage of -- they
don't retain, you know, reimbursement funds because they're their own center. And looking
at expenditures in the OIG report, they found that sponsors of unaffiliated centers and
looking at their expenditures was what would ensure the -- would identify the appearance
of program violations and spark the need to look further. That's a great question.
So there's a question, will USDA forgive a state for missing the appeal deadline if the
state is awaiting a ruling by an outside court, which is out of the state agency's control?
So as I said and the preamble also states that USDA would absolutely give state agencies
the opportunity to explain their situation on a case-by-case basis and understand that.
With that said, the reason that this provision was included in the Healthy, Hunger-Free Kids
Act was because sometimes it is out of the state's hands and some of these cases were
going on for years at a time. And so people that were likely not appropriate operators
of our program were receiving meal reimbursement for months and months and months because their
case was being delayed. And so as the preamble states, we want state agencies to look inside
their state structures of their administrative review officials and the scheduling to see
how these can be most efficiently scheduled because we do want to maintain that 60-day
timeline to the degree possible.
All right. I am going to move on for the interest of time. So, moving on to National School
Lunch Program. This rule also proposes to incorporate recommendations made by the Department
of Agriculture's Office of Inspector General Audit Report entitled National School Lunch
Program Food Service Management Company Contracts. Specifically, this audit found risk of misuse
of federal funds due to difficulties experienced by state agencies and school food authorities
enforcing contractible terms and regulatory procurement requirements.
Currently there is no regulatory requirements related to procurement trainings for the National
School Lunch Program; however, the department issued a memorandum on February 12th of 2013
strongly encouraging periodic training for state agency and school food authorities tasked
with procurement responsibilities.
Given that the audit as well as the department's own monitoring activities determined that
program integrity may be at-risk, it is necessary to specifically require training to ensure
that all relevant staff are aware of procurement requirements. Under such a requirement the
state agency and school food authority staff annually would gain knowledge of procurement
requirements for implementation at the state and local level.
This proposed rule would require state agency and school food authority staff tasked with
procurement responsibilities to successfully complete procurement training annually. The
department expects the agencies to ensure required training includes the applicable
state and federal procurement requirements, including a general overview of the procurement
process, competitive procurements, Buy American provision, state agency and school food authority
provisions with regard to food service management company contracts and all contract changes,
USDA Foods, intergovernmental cooperation, geographic preference, protests and ethics
as it relates to the operation of the National School Lunch Program.
This requirement may be met at the discretion of the state agency through a variety of methods
including using state-developed procurement training or trainings on an aforementioned
procurement area developed by other expert organizations such as the USDA-based procurement
training offered by the National Food Service Management Institute, which is available at
no cost.
Continuing on the top of National School Lunch Program procurement and OIG audits, since
2002, the Department of Agriculture's OIG has conducted various reviews of the effectiveness
of federal and state oversight and monitoring of school food authority contracts with food
service management company. These OIG reports referenced in the proposed rule preamble identify
compliance problems associated with procurement issues. Many instances were identified where
school food authorities were not receiving the full benefits of discounts and rebates
received by food service management companies on their behalf and/or the proper value of
USDA foods returned to their nonprofit food service account.
In the National School Lunch Program when entering into agreements to purchase products
and services, all school food authorities must follow federal procurement regulations.
However, in evaluating state agency oversight of these contracts with information provided
by OIG audits and investigations and agency compliance reviews, FNS has determined that
school food authorities are often engaged in practices that weaken the competitive procurement
process. Current program regulations prohibit contracts which permit all income and expenses
to accrue to the food service management company.
There are two types of food service management contracts currently allowed. Contracts that
provide for fixed fees commonly referred to as fixed price contracts and those that provide
for management fees established on a permanent basis, cost-reimbursable contracts. An alternative
to fixed price contracts are those that provide for payment of allowable incurred costs. Unlike
fixed price contracts, cost-reimbursable contracts require the return of rebates, discounts,
and credits on all costs.
Several OIG audits along with the FNS compliance reviews revealed a history of cost-reimbursable
contracts between school food authorities and food service management companies where
the rebates, discounts and, credits as required for purchases made on behalf of the school
food authorities were not returned. FNS program operation reviews have further identified
that many cost-reimbursable contracts with food service management companies are failing
to comply with program and federal procurement requirements.
State agency and school food authority oversight failures found by the audits include missing
required contract provisions in the solicitation; lack of review of contract to work procedures;
failure to monitor practices of cost-reimbursable contracts to ensure that discounts, rebates,
and credits were returned to the nonprofit food service account and ensure no prohibited
expenses were paid using program funds and errors in crediting for the value of donated
food, meaning USDA food.
This rule proposes to eliminate cost-reimbursable contracts as a type of food service management
contract school food authorities may use in the National School Lunch Program. This rule
proposes to require the use of only fixed price contracts, such as contracts that provide
per meal and/or management fees established on a per meal basis either with or without
economic price adjustments tied to a standard index and solicitation seeking and resulting
in a fixed price contract, contractors respond with bids and proposals that have already
taken discounts, rebates, and other credits into consideration when formulating their
prices for fixed price contracts. The same holds true for the fixed fee component of
a cost-reimbursable contract. However, fixed price contracts eliminate the need to recover
rebates, discounts, and credits as they are already factored into the fixed price.
FNS has determined the process to ensure that the origin and the amounts of the rebates,
discounts, and credits have been properly returned is too complex and burdensome to
expect of school food authority staff. To this effect, state agencies have also vocalized
to FNS that they do not have the appropriately skilled staff to monitor transactions as this
level.
The transactions are -- often involve various entities, some of which are unwilling to reveal
their agreements with other parties from which the rebates, discounts, or credits may be
derived as they believe them to be proprietary in nature. Again, for these reasons, the department
proposes to eliminate the use of cost-reimbursable contracts.
Now that we've covered the provisions, we wanted to talk about the impact. The department
gave much consideration to the impact that these proposed changes would have on our stakeholders.
We do recognize that the provisions in this proposal will impact many aspects of state
administration of Child Nutrition Programs as well as local level operations. As a result,
the department will provide guidance and technical assistance to state agencies to ensure successful
implementation of this regulation.
As a reminder, we anticipate that the provisions under this proposed rule would be implemented
90 days following publication of the final rule with the exception of those related to
assessments against state agencies and program operators and CACFP audit funds. The provision
establishing criteria for assessments against state agencies and program operators would
be implemented one school year following the publication of the final rule. The provision
granting eligible state agencies additional CACFP audit funds will be implemented upon
publication of the final rule.
Now let's talk about public comment. All comments must be submitted in writing. Verbal comments
will not be recorded. Written comments may be submitted two ways. First you may submit
your comment online by visiting regulations.gov. The link for the proposed rule on regulations.gov
is provided on the slide. Submitting comments through regulations.gov is the preferred method;
however, you may also submit comments via mail to the address presented on the slide.
Comments submitted via e-mail or any other medium cannot be accepted.
The comment period is now open for 60 days which ends May 31st, 2016. Comments should
be specific, confined to issues pertinent to the proposed rule, and should explain the
reason and/or provide supporting information for any change you recommend or proposal you
oppose. When possible, please reference the specific section or paragraph of the proposal
you are addressing. Also, if there's something you like, feel free to add that, as well.
And please remember, anyone can comment and that includes state agency staff.
That concludes our webinar. Before we move into the Q&A portion, the final Q&A portion,
I want to say thank you for all of -- those of you who tuned in today to listen to the
changes outlined in this important proposed rule. Thanks for hanging in there. I know
it's a very dry topic. So now I'm going to hop into the chat box and try to answer some
of your questions.
So I'm getting a lot of questions about whether or not this presentation's going to be made
available, will my script be in there? It will all be in there. You guys will get it.
Will the passage of reauthorization impact this proposed rule? I cannot answer that question.
I wish I knew the answer to that. We are forging ahead with what we know. So please, make sure
your comments, as you submit them, relate to the world that we exist in now.
Are the procurement training expenses only related to food service management -- FCMC.
I'm assuming that's FSMC. The procurement training requirement is for National School
Lunch Program state agency and school food authority staff who work on procurement. So
it's only those people that are required to take the training.
So, will USDA be providing training, annual training, for state agency staff? As of now,
as the proposed rule is published, USDA imagines that the ICM training that's made available,
because we contract with ICM, that that would be the type of training that we support and
promote to be used, but state agencies can actually choose what trainings that they would
assign their staff to take and encourage the school food authorities to take to meet this
requirement. We're not being too prescriptive with what that training should be because
we think that there are different needs depending on the staff and each year, the topic that
needs to be covered; and so we are not being too specific there.
There's some questions about if there's going to be an interim rule, how long do we anticipate
there being a final rule? Again, like, with reauthorization, I cannot predict. I cannot
tell the future, but we hope to take in your comments and begin working on a final rule
as soon as possible.
Will cost-reimbursable contracts need to be rebid with fixed price contracts that only
allow that option? I think that's a great question and that will be something that the
final rule addresses so please submit your comments. If there is options or something
that you would like to propose for us to consider, please include that in your comments.
All right. Any additional funding for the increased oversight required in various areas
of this presentation? No. There is no additional funding associated with this rule. Aside from
the additional CACFP audit funds that would be made available to the states that operate
the Child and Adult Care Food Program, and those would be made available once the rule
goes final.
There's a question, so state agencies would redo the same ICM training each year? That
is the choice of the state agency. If the state agency believes that that is an appropriate
training, that would ensure that the stat agency staff that works on procurement, if
that's information they would need. We, of course, will work with ICM and make sure that
trainings are relevant and useful like they always are; but it absolutely can be any type
of training that the state agency feels is necessary.
So we have a question, will FNS be revising or rescinding the FNS instructions 796-2?
We will not be rescinding it but we will absolutely be revising it. And for everyone to know,
if there are any changes, if there are any ripple effects to resources and policies that
we have that this rule, when it goes final, conflicts with, we will absolutely correct
those and make clarification in our guidance.
So there's a question about ICN. It's the National Food Service Management Institute,
NFSMI, also known as ICN. They're the ones who, there's free training available through
them and if you need more information about that, please contact your regional office
and they can link you up with them.
All right. All right, everyone. I want to thank you for your questions. I see that a
lot of you are taking in what's in the rule and are trying to make sense of it all. I
do encourage you to take some time and read through the preamble. The preamble will have
answered a lot of the questions that I see. If there are clarifying questions or there's
more information or there's additional guidance that you think needs to be associated with
the proposed rule, please include that in your comments.
If there is something that you would like us to define more clearly or if you think
something would be a burden or there's a piece that we missed and you think we should require
something else, those are the types of things that we want to see in your comments. Throughout
the preamble, there are places where specifically we ask for specific input on the state agency
and how it affects the state agency. So I really do encourage you-all to look specifically
for those parts in the rule so that we can get your feedback on that.
I want to thank you all. This is being recorded. We will send out the slides and hopefully
this helps as you develop your comments on our child nutrition proposed integrity rule.
Thank you everyone very much, and I hope you-all have a wonderful day.
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