[Federal Register Volume 70, Number 143 (Wednesday, July 27, 2005)]
[Rules and Regulations]
[Pages 43259-43262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-14811]



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  Federal Register / Vol. 70, No. 143 / Wednesday, July 27, 2005 / 
Rules and Regulations  

[[Page 43259]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 226

RIN 0584-AD66


For-Profit Center Participation in the Child and Adult Care Food 
Program

AGENCY: Food and Nutrition Service, USDA.

ACTION: Interim rule.

-----------------------------------------------------------------------

SUMMARY: This rule adds a provision to the Child and Adult Care Food 
Program (CACFP) regulations that authorizes for-profit centers 
providing child care or outside-school-hours care to participate based 
on the income eligibility of 25 percent of children in care for free or 
reduced price meals. This provision, which has been available 
nationwide on an interim basis through annual appropriation acts since 
December 2000, was permanently established by the Child Nutrition and 
WIC Reauthorization Act of 2004. This rule permits the ongoing 
participation of for-profit centers in the CACFP based on the income 
eligibility of children in care for free or reduced price meals.

DATES: This rule is effective August 26, 2005. To be assured of 
consideration, comments must be postmarked on or before September 26, 
2005.

ADDRESSES: The Food and Nutrition Service invites interested persons to 
submit comments on this interim rule. Comments may be submitted by any 
of the following methods:
     Mail: Send comments to Robert M. Eadie, Chief, Policy and 
Program Development Branch, Child Nutrition Division, Room 640, Food 
and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, 
Virginia 22302-1594. All submissions will be available for public 
inspection at this location Monday through Friday, 8:30 a.m.-5 p.m.
     Fax: Submit comments by facsimile transmission to: (703) 
305-2879. Please address your comments to Mr. Eadie and identify your 
comments as ``CACFP: For-Profit Centers''.
     E-Mail: Send comments to http://[email protected]. Please identify your comments as ``CACFP: 
For-Profit Centers''.
     Hand Delivery or Courier: Deliver comments to 3101 Park 
Center Drive, Room 634, Alexandria, Virginia 22301-1594, during normal 
business hours of 8:30 a.m.-5 p.m.
     Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instructions for submitting 
comments.

FOR FURTHER INFORMATION CONTACT: Keith Churchill or Linda Jupin, Child 
Care and Summer Section, Policy and Program Development Branch, Child 
Nutrition Division, Food and Nutrition Service, USDA, 3101 Park Center 
Drive, Alexandria, VA 22302, phone (703) 305-2590.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 119(a) of the Child Nutrition and WIC Reauthorization Act 
of 2004 (Pub. L. 108-265) amended section 17(a)(2)(B)(i) of the Richard 
B. Russell National School Lunch Act (NSLA)(42 U.S.C. 1766(a)(2)(B)(i)) 
to permanently authorize for-profit centers that provide child care or 
outside-school-hours care to participate in the CACFP if 25 percent of 
the children in care are eligible for free or reduced price meals under 
the Program. This criterion provides an additional means by which for-
profit centers may qualify for Program participation. For-profit 
centers in all States have been permitted to participate in the Program 
since December 2000, when a provision of Public Law 106-554, added 
Section 17(a)(2)(B)(i) to the NSLA, 42 U.S.C. 1766(a)(2)(B)(i). That 
time-limited provision was subsequently renewed annually until made 
permanent by Public Law 108-265 on June 30, 2004. Prior to December 
2000, the Food and Nutrition Service (FNS) implemented separate but 
similar authority in section 17(p) of the NSLA, 42 U.S.C. 1766(p), 
permitting for-profit centers in three States (Kentucky, Iowa, and 
Delaware) to participate in the Program. Section 119(a)(2) of Public 
Law 108-265 struck this provision. As a result of the permanent 
statutory provision affecting for-profit centers, these States have 
been notified that the pilot projects have been eliminated and their 
affected for-profit centers have been incorporated into regular for-
profit Program participation under section 17(a)(2)(B)(i).
    This authority differs from that in section 17(a)(2)(B)(ii) (42 
U.S.C. 1766(a)(2)(B)(ii)), which permits for-profit centers providing 
child care or outside-school-hours care to participate in the CACFP. In 
such cases, for-profit centers are eligible if they receive 
compensation from the State title XX funds and if at least 25 percent 
of the enrolled children or the licensed capacity (whichever is less) 
receive benefits under title XX of the Social Security Act. This 
criterion was established by Public Law 101-147, which reauthorized 
child nutrition programs in November 1989, and is located at section 
17(a)(2)(B)(ii) of the NSLA.
    This interim rule adds a new definition of For-profit center to 
Sec.  226.2 describing the eligibility criteria pertaining to for-
profit centers serving children and adults. In doing so, this new 
definition incorporates the current definitions in Sec.  226.2 for 
Proprietary title XIX center and Proprietary title XX center. This rule 
does not change the eligibility criteria for participation by for-
profit adult day care centers. Rather it consolidates several 
definitions that pertain to for-profit centers into one comprehensive 
definition in order to standardize the regulatory language on for-
profit center participation in the CACFP.
    In addition, we have clarified in this new definition of a for-
profit center that the eligibility criterion based on children's income 
eligibility or receipt of title XX benefits extends to centers that 
provide care to school age children outside of school hours, as 
mandated by section 17(a)(2)(B) of the NSLA, as well as to traditional 
child care centers. This includes any for-profit center that meets the 
definition in Sec.  226.2 of Child care center or Outside-school-hours 
care center.
    All other changes that are made by this interim rule stem from this 
new definition of for-profit center and consist primarily of name 
changes in which the new term ``For-profit center'' is substituted for 
``Proprietary title XIX center'' or ``Proprietary title XX center''.

[[Page 43260]]

II. Procedural Matters

Executive Order 12866

    This rule has been determined to be not significant and was not 
reviewed by the Office of Management and Budget (OMB) under Executive 
Order 12866.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612). Roberto Salazar, 
Administrator for the Food and Nutrition Service, has certified that 
this rule will not have a significant impact on a substantial number of 
small entities. This interim rule implements a statutory change that 
permanently authorizes for-profit centers to participate in the Child 
and Adult Care Food Program on the basis of income eligibility of 25 
percent of children in care for free or reduced price meals. This 
provision has been available to for-profit centers as an eligibility 
criterion for participation in the Program since FY 2001. Since the 
provision is not new, the Food and Nutrition Service estimates that the 
permanent designation of this eligibility criterion will not 
substantially increase the number of for-profit centers that may apply 
to participate in the Program.

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This interim rule contains no 
Federal mandates (under regulatory provisions of Title II of the UMRA) 
for State, local, and tribal governments or the private sector of $100 
million or more in any one year. Thus, this interim rule is not subject 
to the requirements of sections 202 and 205 of the UMRA.

Executive Order 12372

    The Child and Adult Care Food Program is listed in the Catalog of 
Federal Domestic Assistance under No. 10.558. For the reasons set forth 
in the final rule in 7 CFR part 3015, Subpart V and related Notice (48 
FR 29115), this program is subject to the provisions of Executive Order 
12372, which requires intergovernmental consultation with State and 
local officials.

Executive Order 13132

    Executive Order 13132 requires Federal agencies to consider the 
impact of their regulatory actions on State and local governments. 
Where such actions have federalism implications, agencies are directed 
to provide a statement for inclusion in the preamble to the regulation 
describing the agency's considerations in terms of three categories 
called for under section (6)(a)(2)(B) of Executive Order 13132. FNS has 
considered the impact of this rule on State and local governments and 
has determined that this rule does not have federalism implications. 
This interim rule does not impose substantial or direct compliance 
costs on State and local governments. Therefore, under Section 6(b) of 
the Executive Order, a federalism summary impact statement is not 
required.

Executive Order 12988

    The rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule is intended to have preemptive effect with 
respect to any State or local laws, regulations, or policies that 
conflict with its provisions or that would otherwise impede its full 
implementation. This rule is not intended to have retroactive effect 
unless so specified in the DATES paragraph of the rule. Prior to any 
judicial challenge to the provisions of this rule or the application of 
its provisions, all applicable administrative procedures must be 
exhausted. In the Child and Adult Food Care Program, the administrative 
procedures are set forth at: (1) 7 CFR 226.6(k), which establishes 
appeal procedures; and (2) 7 CFR 226.22 and 7 CFR parts 3016 and 3019, 
which address administrative appeal procedures for disputes involving 
procurement by State agencies and institutions.

Civil Rights Impact Analysis

    FNS has reviewed this rule in accordance with the Department 
Regulation 4300-4, Civil Rights Impact Analysis, to identify and 
address any major civil rights impact the rule might have on 
minorities, women, and persons with disabilities. After a careful 
review of the rule's intent and provisions, FNS has determined that 
there is no negative effect on these groups. All data available to FNS 
indicate that protected individuals have the same opportunity to 
participate in the CACFP as non-protected individuals. Regulations at 
Sec.  226.6(f)(1) require that CACFP institutions agree to operate the 
Program in compliance with applicable Federal civil rights laws, 
including title VI of the Civil Rights Act of 1964, title IX of the 
Education amendments of 1972, Section 504 of the Rehabilitation Act of 
1973, the Age Discrimination Act of 1975, and the Department's 
regulations concerning nondiscrimination (7 CFR Part 15, 15a, and 15b). 
At Sec.  226.6(m)(1), State agencies are required to monitor CACFP 
institution compliance with these laws and regulations.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. Chap. 35; see 5 CFR 
1320) requires that the Office of Management and Budget (OMB) approve 
all collections of information by a Federal agency from the public 
before they can be implemented. Respondents are not required to respond 
to any collections of information unless it displays a current valid 
OMB control number. The interim rule does not contain information 
collections that are subject to review and approval by OMB.

Government Paperwork Elimination Act

    FNS is committed to compliance with the Government Paperwork 
Elimination Act (GPEA), which requires Government agencies to provide 
the public the option of submitting information or transacting business 
electronically to the maximum extent possible. This interim rule does 
not impose any information collections or transactions that require 
consideration under GPEA.

Public Participation

    This action is being finalized without prior notice or public 
comment under authority of 5 U.S.C. 553(b)(3)(A) and (B). This rule 
implements through amendments to current program regulations a 
nondiscretionary provision mandated by the Child Nutrition and WIC 
Reauthorization Act of 2004 (Pub. L. 108-265). Thus, the Department has 
determined in accordance with 5 U.S.C. 553(b) that Notice of Proposed 
Rulemaking and Opportunity for Public Comments is unnecessary and 
contrary to the public interest and, in accordance with 5 U.S.C. 
553(d), finds that good cause exists for making this action effective 
without prior public comment.

List of Subjects in 7 CFR Part 226

    Accounting, Aged, Day care, Food and nutrition service, Food 
assistance programs, Grant programs, Grant programs--health, American 
Indians, Individuals with disabilities, Infants and children, 
Intergovernmental relations, Loan programs, Reporting and recordkeeping 
requirements, Surplus agricultural commodities.

0
Accordingly, 7 CFR part 226 is amended as follows:

PART 226--CHILD AND ADULT CARE FOOD PROGRAM

0
1. The authority citation for Part 226 continues to read as follows:


[[Page 43261]]


    Authority: Secs. 9, 11, 14, 16, and 17, Richard B. Russell 
National School Lunch Act, as amended (42 U.S.C. 1758, 1759a, 1762a, 
1765, and 1766).

PART 226--[Nomenclature Change]

0
2. In part 226, remove the words, ``proprietary title XIX or title 
XX'', wherever they appear and add the words, ``for-profit'', in their 
place.
0
3. In Sec.  226.2:
0
a. Revise the first sentence of the definition ``Child care center'';
0
b. Add a new definition ``For-profit center'' in alphabetical order;
0
c. Revise the first sentence of the definition ``Outside-school-hours 
care center'';
0
d. Remove the definitions ``Proprietary title XIX center'' and 
``Proprietary title XX center''; and
0
e. Revise the last sentence of paragraph (d) of the definition 
``Sponsoring organization''.
    The addition and revisions read as follows:


Sec.  226.2  Definitions.

* * * * *
    Child care center means any public or private nonprofit institution 
or facility (except day care homes), or any for-profit center, as 
defined in this section, that is licensed or approved to provide 
nonresidential child care services to enrolled children, primarily of 
preschool age, including but not limited to day care centers, 
settlement houses, neighborhood centers, Head Start centers and 
organizations providing day care services for children with 
disabilities. * * *
* * * * *
    For-profit center means a Child care center, Outside-school-hours 
care center, or Adult day care center providing nonresidential care to 
adults or children that does not qualify for tax-exempt status under 
the Internal Revenue Code of 1986. For-profit centers serving adults 
must meet the criteria described in paragraph (a) of this definition; 
for-profit centers serving children must meet the criteria described in 
paragraphs (b)(1) or (b)(2) of this definition.
    (a) A for-profit center serving adults must meet the definition of 
Adult day care center as defined in this section and, during the 
calendar month preceding initial application or reapplication, the 
center receives compensation from amounts granted to the States under 
title XIX or title XX and twenty-five percent of the adults enrolled in 
care are beneficiaries of title XIX, title XX, or a combination of 
titles XIX and XX of the Social Security Act.
    (b) A for-profit center serving children must meet the definition 
of Child care center or Outside-school-hours care center as defined in 
this section and one of the following conditions during the calendar 
month preceding initial application or reapplication:
    (1) Twenty-five percent of the children in care (enrolled or 
licensed capacity, whichever is less) are eligible for free or reduced-
price meals; or
    (2) Twenty-five percent of the children in care (enrolled or 
licensed capacity, whichever is less) receive benefits from title XX of 
the Social Security Act and the center receives compensation from 
amounts granted to the States under title XX.
* * * * *
    Outside-school-hours care center means a public or private 
nonprofit institution or facility (except day care homes), or a For-
profit center as defined in this section, that is licensed or approved 
to provide organized nonresidential child care services to children 
during hours outside of school. * * *
* * * * *
    Sponsoring organization * * *
    (d) * * * The term ``sponsoring organization'' also includes a For-
profit center, as defined in this section, that is entirely responsible 
for administration of the Program in any combination of two or more 
child care centers, at-risk afterschool care centers, adult day care 
centers, or outside-school-hours care centers, provided that the 
centers are part of the same legal entity as the sponsoring 
organization.
* * * * *

0
4. In Sec.  226.6:
0
a. Revise paragraph (b)(1)(viii);
0
b. Revise paragraph (c)(3)(ii)(L); and
0
c. Revise paragraph (f)(3)(iv).
    The revisions read as follows:


Sec.  226.6  State agency administrative responsibilities.

* * * * *
    (b) * * *
    (1) * * *
    (viii) Documentation of for-profit center eligibility. Institutions 
must document that each for-profit center for which application is made 
meets the definition of a For-profit center, as set forth at Sec.  
226.2;
* * * * *
    (c) * * *
    (3) * * *
    (ii) * * *
    (L) Claiming reimbursement for meals served by a for-profit child 
care center or a for-profit outside-school-hours care center during a 
calendar month in which less than 25 percent of the children in care 
(enrolled or licensed capacity, whichever is less) were eligible for 
free or reduced-price meals or were title XX beneficiaries;
* * * * *
    (f) * * *
    (3) * * *
    (iv) Require for-profit child care centers and for-profit outside-
school-hours care centers to submit documentation of:
    (A) Eligibility of at least 25 percent of children in care 
(enrolled or licensed capacity, whichever is less) for free or reduced 
price meals; or
    (B) Compensation received under title XX of the Social Security Act 
for nonresidential day care services and certification that at least 25 
percent of children in care (enrolled or licensed capacity, whichever 
is less) were title XX beneficiaries during the most recent calendar 
month.
* * * * *

0
5. In Sec.  226.8, revise the second sentence of paragraph (a) to read 
as follows:


Sec.  226.8  Audits.

    (a) * * * State agencies must establish audit policy for for-profit 
institutions. * * *
* * * * *

0
6. In Sec.  226.10, revise the third, fourth, and fifth sentences of 
paragraph (c) introductory text to read as follows:


226.10  Program payment procedures.

* * * * *
    (c) * * * For each month in which independent for-profit child care 
centers and independent for-profit outside-school-hours care centers 
claim reimbursement, they must submit the number and percentage of 
children in care (enrolled or licensed capacity, whichever is less) 
that documents at least 25 percent are eligible for free or reduced-
price meals or are title XX beneficiaries. Sponsoring organizations of 
for-profit child care centers or for-profit outside-school-hours care 
centers must submit the number and percentage of children in care 
(enrolled or licensed capacity, whichever is less) that documents that 
at least 25 percent are eligible for free or reduced-price meals or are 
title XX beneficiaries. Sponsoring organizations of such centers must 
not submit a claim for any for-profit center in which less than 25 
percent of the children in care (enrolled or licensed capacity, 
whichever is less) during the claim month were eligible for free or 
reduced-price meals or were title XX beneficiaries. * * *
* * * * *

0
7. In Sec.  226.11:

[[Page 43262]]

0
a. Revise the first sentence of paragraph (b); and
0
b. Revise the introductory text of paragraph (c).
    The revisions read as follows:


Sec.  226.11   Program payments for centers.

* * * * *
    (b) Each child care institution or outside-school-hours care 
institution must report each month to the State agency the total number 
of meals, by type (breakfast, lunch, supper, and snack), served to 
children, except that such reports must be made for a for-profit center 
only for calendar months during which not less than 25 percent of the 
children in care (enrolled or licensed capacity, whichever is less) 
were eligible for free or reduced price meals or were title XX 
beneficiaries. * * *
    (c) Each State agency must base reimbursement to each child care 
institution or outside-school-hours institution on the number of meals, 
by type (breakfast, lunch, supper, and snack), served to children 
multiplied by the assigned rates of reimbursement, except that 
reimbursement must be payable to for-profit child care centers or for-
profit outside-school-hours care centers only for calendar month during 
which at least 25 percent of children in care (enrolled or licensed 
capacity, whichever is less) were eligible for free or reduced price 
meals or were title XX beneficiaries. Each State agency must base 
reimbursement to each adult day care institution on the number of 
meals, by type, served to adult participants multiplied by the assigned 
rates of reimbursement, except that reimbursement must be payable to 
for-profit adult day care centers only for calendar months during which 
at least 25 percent of the enrolled adult participants were 
beneficiaries of title XIX, title XX, or a combination of titles XIX 
and XX. In computing reimbursement, the State agency must either:
* * * * *

0
8. In Sec.  226.15, revise paragraph (a) to read as follows:


Sec.  226.15   Institution provisions.

    (a) Tax exempt status. Except for for-profit centers and sponsoring 
organizations of such centers, institutions must be public, or have tax 
exempt status under the Internal Revenue Code of 1986.
* * * * *

0
9. In Sec.  226.17:
0
a. Remove the words ``proprietary title XX'' in paragraph (b)(2) and 
add in their place the words ``for-profit''; and
0
b. Revise the second sentence of paragraph (b)(4).
    The revision reads as follows:


Sec.  226.17   Child care center provisions.

* * * * *
    (b) * * *
    (4) * * * For-profit child care centers may not claim reimbursement 
for meals served to children in any month in which less than 25 percent 
of the children in care (enrolled or licensed capacity, whichever is 
less) were eligible for free or reduced price meals or were title XX 
beneficiaries. * * *
* * * * *

0
10. In Sec.  226.19:
0
a. In paragraph (b)(2), remove the words ``proprietary title XX'' and 
add in their place the words ``for-profit''; and
0
b. Revise the second and third sentences in paragraph (b)(5).
    The revision reads as follows:


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

* * * * *
    (b) * * *
    (5) * * * Reimbursement may not be claimed for more than two meals 
and one snack provided daily to each child or for meals served to 
children at any one time in excess of authorized capacity. For-profit 
centers may not claim reimbursement for meals served to children in any 
month in which less than 25 percent of the children in care (enrolled 
or licensed capacity, whichever is less) were eligible for free or 
reduced price meals or were title XX beneficiaries.
* * * * *

    Dated: July 20, 2005.
Roberto Salazar,
Administrator, Food and Nutrition Service.
[FR Doc. 05-14811 Filed 7-26-05; 8:45 am]
BILLING CODE 3410-30-P