[Federal Register Volume 78, Number 134 (Friday, July 12, 2013)]
[Proposed Rules]
[Pages 41857-41866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-16697]


 ========================================================================
 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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 

  Federal Register / Vol. 78, No. 134 / Friday, July 12, 2013 / 
Proposed Rules  

[[Page 41857]]



DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Parts 210 and 225

RIN 0584-AD84


Simplified Cost Accounting and Other Actions To Reduce Paperwork 
in the Summer Food Service Program and National School Lunch Notice 
Procedures

AGENCY: Food and Nutrition Service (FNS), USDA.

ACTION: Proposed rule.

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

SUMMARY: This rulemaking proposes to amend the Summer Food Service 
Program (SFSP) regulations to incorporate changes mandated by Section 
738 of the Consolidated Appropriations Act, 2008. The changes extend 
simplified cost accounting and reporting procedures to SFSP sponsors in 
all States, and eliminate the cost comparison requirements for 
determining payments to sponsors. This rulemaking would amend SFSP 
regulations to address these statutory changes. In addition, this 
rulemaking proposes several discretionary changes to improve 
administrative efficiency and reduce paperwork in the management of the 
SFSP. The intended effect of this rulemaking is to simplify and 
streamline administration while ensuring the integrity of the Program. 
Finally, this rulemaking proposes a change to the National School Lunch 
Program regulations to create consistency among the Child Nutrition 
Programs with regard to notice procedures.

DATE: To be assured of consideration, written comments must be received 
or postmarked on or before October 10, 2013.

ADDRESSES: FNS invites interested persons to submit comments on this 
proposed rule. Comments must be submitted through one of the following 
methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov and follow the online instructions for submitting 
comments.
     Mail: Address comments to Julie Brewer, Chief, Policy and 
Program Development Branch, Child Nutrition Division, Room 1206, Food 
and Nutrition Service, USDA, 3101 Park Center Drive, Alexandria, 
Virginia 22302.
    Comments submitted through either of these methods will be included 
in the record and available for public review. Comments submitted 
through any other methods will not be accepted and subsequently, not 
posted.
    Please be advised that the substance of the comments and the 
identity of the individuals or entities submitting the comments will be 
subject to public disclosure. FNS will make the comments publicly 
available through the Federal eRulemaking Portal at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Julie Brewer at the above address or 
telephone (703) 305-2590.

SUPPLEMENTARY INFORMATION: 

I. Background

    The Summer Food Service Program (SFSP) is authorized under section 
13 of the Richard B. Russell National School Lunch Act (NSLA), 42 
U.S.C. 1761. Its primary purpose is to provide free, nutritious meals 
to children from low-income areas during periods when schools are 
closed for vacation. The Department is committed to reducing barriers 
to SFSP participation. One such barrier identified by Program operators 
is the administrative. To address this issue, the Department has 
explored ways to streamline the administrative paperwork burden of SFSP 
sponsors and State agencies so more time and resources are directed 
toward increasing access, providing quality meal service to benefit 
eligible children, and ensuring Program integrity. To that end, this 
rule proposes to codify the nondiscretionary simplified cost accounting 
and reporting procedures established in the Consolidated Appropriations 
Act, 2008 (Pub. L. 110-161), and make discretionary changes to the SFSP 
regulations to improve management of the Program and reduce paperwork 
requirements.
    SFSP pilot projects were originally authorized by an amendment to 
Section 18 of the NSLA, 42 U.S.C. 1769, in the Consolidated 
Appropriations Act, 2001. The pilot projects, to be carried out from 
fiscal year 2001 through 2004 in 14 States (including Puerto Rico), 
were intended to increase the number of children participating in SFSP 
in States with low participation rates. The pilot projects allowed the 
Secretary to provide sponsors with a simplified reimbursement based on 
the number of meals served rather than requiring cost records to 
establish the reimbursement. Eligible pilot project participants 
included government sponsors, public and private nonprofit school food 
authority sponsors, public and private nonprofit National Youth Sports 
Program sponsors, and public and private nonprofit residential camp 
sponsors. All other private nonprofit organizations were prohibited 
from participating in the pilot projects.
    In Section 116(f) of the Child Nutrition and WIC Reauthorization 
Act of 2004 (Pub. L. 108-265), Congress made these pilot projects 
permanent as the ``Simplified Summer Food Program'' and added six more 
States. Subsequently, the Simplified Summer Program procedures were 
extended to all private nonprofit sponsors in eligible States. Finally, 
the Consolidated Appropriations Act, 2008, extended the simplified 
procedures to all sponsors in all States.
    This proposed rule is consistent with the simplified cost 
accounting and reporting procedures established in Section 13 of the 
NSLA by law. In implementing the statutory changes, FNS issued the 
following policy guidance: Implementation of the Summer Food Service 
Program Pilot Projects Authorized by the Consolidated Appropriations 
Act, 2001, January 19, 2001; SFSP 01-05: Simplified Summer Food 
Program, December 2, 2004; Transmittal of Guidance on the Simplified 
Summer Food Program, June 29, 2005; SFSP 01-2008, Nationwide Expansion 
of Summer Food Service Program Simplified Cost Accounting Procedures, 
January 2, 2008; and SFSP 03-2008, Simplified Procedures in the Summer 
Food Service Program, February 14, 2008.
    FNS also conducted conference calls with State agencies to support 
the implementation of the simplified cost accounting procedures. In 
December 2008, FNS held a conference for SFSP

[[Page 41858]]

State agencies and sponsoring organizations. FNS issued policy 
guidance, SFSP 03-2009, Transmittal of Guidance--Questions and Answers, 
September 24, 2009, to address questions about the simplified 
procedures that arose at the conference. On November 23, 2012, FNS 
updated this guidance by issuing SFSP 05-2012, Summer Food Service 
Program Questions and Answers.
    The Healthy, Hunger-Free Kids Act of 2010 (Pub. L. 111-296) (HHFKA) 
included additional changes to the SFSP, which became effective October 
1, 2012 and included removal of limits on the participation of private 
non-profit organizations and a requirement for permanent agreements 
between sponsors and the State agencies. FNS is addressing these both 
of these provisions in a final rule, Child Nutrition Programs: 
Nondiscretionary Amendments Related to the Healthy, Hunger-Free Kids 
Act of 2010. Amendments made by HHFKA also required FNS to establish a 
disqualification process for SFSP, which we are addressing in a 
separate proposed rule, Child Nutrition Program Integrity.

II. Simplified Cost Accounting and Reporting

    The purpose of the simplified procedures is to encourage more 
organizations to provide meals to children through the SFSP. By 
reducing reporting requirements, ensuring the maximum level of per meal 
reimbursement, and providing greater flexibility in the use of Program 
funds for any allowable cost, more local organizations may choose to 
participate or expand current operations and thereby reach more 
children.
    Before implementation of the simplified cost accounting procedures, 
the SFSP statutory and regulatory framework required State agencies to 
reimburse participating sponsors on a per-meal basis for meals meeting 
Program requirements and served to eligible children. Reimbursement was 
made for both operating costs (costs incurred for preparing, obtaining, 
delivering, and serving meals) and administrative costs (costs incurred 
for planning, organizing, and administering the Program). The 
reimbursement rates for each cost category were separate. Because 
operating and administrative costs were considered distinct categories, 
claims for costs incurred in each category could not be combined. 
Reimbursements were calculated separately as well. For operating costs, 
sponsors were paid the lesser of either the actual documented food 
service costs or the sum of the number of meals served to eligible 
children times the operating payment rate. For administrative costs, 
sponsors were paid the lesser of the actual documented administrative 
costs, the number of meals served to eligible children times the 
administrative payment rate, or the amount specified in the sponsor's 
approved budget.
    Under the simplified cost accounting procedures, all sponsors now 
receive the maximum ``meals times rates'' combined operating and 
administrative reimbursement without regard to their actual or budgeted 
costs. Sponsors may use the combined reimbursement to pay for any 
allowable cost, whether operating or administrative, defined in SFSP 
regulations at 7 CFR 225.2. This proposed rule would codify the 
elimination of the cost comparison requirements at 7 CFR 225.9(d)(7) 
and 225.9(d)(8).
    In keeping with the simplified cost accounting structure, this rule 
also proposes to streamline the process for calculating advances. 
Currently, advance payments made under 7 CFR 225.9(c) are divided 
between those made for administrative costs and for operating costs. 
Because reimbursements are no longer allocated separately, this rule 
proposes combining advances as well. Accordingly, as proposed, 7 CFR 
225.9(c) would no longer differentiate between advances for 
administrative costs and those for operating costs. The proposed rule 
would allow sponsors to request from the State agency a single combined 
advance to be provided at the same intervals as under current Program 
regulations.

III. Program Management

    With increased flexibility in Program administration, however, also 
comes an increased risk of Program mismanagement. Therefore, this 
proposed rule also addresses State agency and sponsor management and 
oversight responsibilities under the simplified cost accounting 
procedures. The following issues are addressed by this proposed rule: 
Budget submission, nonprofit food service requirements, use of excess 
funds, and State agency monitoring.

Budget Submission

    Although SFSP sponsors are no longer required to report actual or 
budgeted costs, an annual budget submission continues to be an 
important aspect of participating in the SFSP. Current regulations 
require all SFSP sponsors, unless exempted, to submit budgets annually 
with their applications for participation as specified in 7 CFR 
225.6(c)(2)(ii)(B) and (c)(3)(ii)(B) and to receive start-up or advance 
payments as specified in 7 CFR 225.9(a) and (c)(2)(i). The budget must 
contain enough information to enable the State agency to assess the 
sponsor's ability to operate the Program within its estimated 
reimbursement.
    This rule proposes to amend 7 CFR 225.6(b)(7) to allow State 
agencies to exempt from the annual budget submission requirement school 
food authority (SFA) sponsors that participated successfully in the 
SFSP in the previous year and have had no documented serious problems 
managing the SFSP or National School Lunch Program (NSLP). However, 
school sponsors that do not meet these criteria, including those with a 
break in participation of one or more years, must submit an annual 
budget. School sponsors that are exempted from submitting a budget 
should recognize that they will not have the advantage of State agency 
budget review to determine the allowability of planned expenditures. 
Unallowable costs that would be identified during the budget submission 
and amendment process may go undetected by the State agency until a 
review and/or audit is conducted. For this reason, State agencies that 
elect to waive the budget requirement for experienced SFA sponsors 
should emphasize the importance of using funds only for allowable 
costs, and State agencies should remind these sponsors of their 
liability with regard to any costs that are subsequently determined to 
be unallowable.

Nonprofit Food Service

    Sponsors that operate multiple Child Nutrition Programs on a year-
round basis are not required to maintain a separate nonprofit food 
service account for the SFSP. SFSP reimbursements and expenditures may 
be included in a single account with funds from any other Child 
Nutrition Programs authorized under NSLA, 42 U.S.C. 1751 et seq., or 
the Child Nutrition Act of 1966, 42 U.S.C. 1771 et seq., except the 
Special Supplemental Nutrition Program for Women, Infants, and Children 
(WIC), 42 USC 1786. However, this rule proposes to amend 7 CFR 225.15 
to require sponsors to maintain documentation confirming the operation 
of a nonprofit food service. Sponsors currently receive a flat 
reimbursement rate per reimbursable meal served, in accordance with 
statutory changes. Sponsors are still required, however, to use the 
reimbursement received only for allowable costs. By requiring

[[Page 41859]]

documentation of a nonprofit food service, State agencies will have the 
ability to ensure that SFSP funds are being properly expended.
    The sponsor's documentation of nonprofit food service should enable 
the State agency to determine whether or not all costs charged to the 
food service were allowable and all funds accruing to the food service 
were properly identified and recorded as food service revenue. This 
rule also proposes to clarify 7 CFR 225.12(a) and 225.15(c), which 
state that only allowable costs may be paid using SFSP reimbursements. 
Further, sponsors must maintain records of all costs associated with 
the meal service and document that all costs are allowable. If it is 
determined that the sponsor has used SFSP funds for unallowable costs, 
the State agency is required under 7 CFR 225.12 to disallow any portion 
of a claim for reimbursement and recover from the sponsor any amount of 
funds not properly paid.

Excess Funds

    Program reimbursements are now made on a ``meals times rates'' 
basis and the funds provided are intended to be expended on the SFSP 
meal service or other Child Nutrition Programs administered by the 
sponsor. Operation of a nonprofit food service requires sponsors to 
monitor all program costs and revenues. In addition, sponsors must use 
reimbursement to improve the meal service or other aspects of the food 
program if costs are less than the anticipated reimbursement. This rule 
proposes to amend 7 CFR 225.9 to require sponsors to use reimbursements 
that exceed their costs to improve the meal service or management of 
the Program or to pay allowable costs of other Child Nutrition Programs 
operated by the sponsor. If a sponsor does not intend to continue 
participation in the Program and does not operate other Child Nutrition 
Programs, excess Program funds would have to be collected by the State 
agency and returned to FNS in accordance with 7 CFR 225.12.

State Agency Monitoring

    With the implementation of the simplified Program requirements, it 
is critical that State agencies and sponsors practice sound Program 
management to ensure integrity. This will require careful selection of 
applicants and dedicated training efforts, especially those directed at 
new sponsors. Additionally, State agencies must initiate diligent 
review of the budgets, monitoring of Program operations, and prompt 
follow up where problems are found.
    With this in mind, and in keeping with the nonprofit food service 
requirements discussed above, this rule proposes to amend 7 CFR 
225.7(d) to establish the responsibilities of State agencies when 
reviewing a sponsor's operation under simplified procedures and to 
require State agencies to closely monitor the sponsor's use of funds 
when questions arise about whether the sponsor is maintaining a 
nonprofit food service. Under the proposed rule, during sponsor 
reviews, the State agency would be required to:
    1. Ensure that all expenditures charged to the food service were 
allowable and consistent with FNS instructions and guidance and all 
funds accruing to the food service were properly identified and 
recorded as food service revenue. Additionally, the State agency should 
consider whether or not expenditures are reasonable when compared to 
previous years, the expenditures of comparable sponsors, and/or 
budgeted costs. If it is determined that the sponsor used SFSP funds 
for unallowable expenses or that the expenditures were unreasonable, 
the State agency would assess a claim against the sponsor for the 
amount of funds spent inappropriately as required under 7 CFR 225.12.
    2. Ensure that the net cash resources of the sponsor's nonprofit 
food service do not exceed three months' average expenditures. 
Similarly, the State agency would be required to assess the sponsor's 
budgeted and actual expenditures to determine if excess funds are 
likely to result. This requirement is consistent with the limit on net 
cash resources in the NSLP. State agency approval is required for net 
cash resources in excess of three months' average expenditures.
    3. Consider whether the sponsor is providing a nutritious, high 
quality food service that uses Program resources effectively. If the 
State agency review finds poor food quality, a high ratio of 
administrative to operational costs (as defined by 7 CFR 225.2) as 
compared to other similar sponsors, significant use of alternative 
funding for food costs, or a significant supply of privately donated 
food or very low cost food, the State agency may require the sponsor to 
improve food quality or take other action to improve the nonprofit food 
service. If the sponsor is operating a program with poor quality meal 
service and is operating below the reimbursement level, the proposed 
amendment to 7 CFR 225.11 would direct the State agency to require the 
sponsor to implement appropriate corrective action that improves the 
quality of the meal service.
    In the scope of conducting reviews, State agencies would also be 
required to consider whether other areas identified by sponsor 
reviewers are being managed appropriately. In addition, this rule 
proposes to amend 7 CFR 225.7(f) to require that State agency systems 
and standards include monitoring and reviewing the institutions' 
nonprofit food service to ensure that all Program reimbursements are 
used solely for the conduct of the food service operation and the net 
cash resources of the nonprofit food service do not exceed three 
months' average expenditures.

IV. Additional Provisions

Small Purchase Procedures

    Small purchase procedures are simple and informal procurement 
methods used to procure services, supplies, or other property that fall 
below the established threshold. SFSP regulations at 7 CFR 225.17(a) 
require that State agencies and sponsors comply with the procurement 
requirements of 7 CFR parts 3016 or 3019, as applicable.
    Currently, the SFSP regulations contain procurement provisions that 
lack consistency in threshold applicability, specifically in terms of 
contract award amounts that trigger requirements to more strict 
standards. To eliminate contradictory requirements, we are proposing to 
eliminate the reference to a $10,000 threshold in 7 CFR 225.15(m)(4). 
This provision provides an exception to competitive bidding procedures 
for sponsors whose total contracts with food service management 
companies will not exceed $10,000. Because this exception refers to 
aggregate contracts not exceeding $10,000, it has limited 
applicability. Further, this threshold conflicts with the threshold 
identified in 41 U.S.C. 403(11) and may cause confusion regarding the 
applicability of the procedures required under 7 CFR parts 3016 and 
3019.
    Therefore, the Department is proposing to amend 7 CFR 225.15(m)(4) 
by removing reference to a specific amount, and allowing State and 
local agencies to use the simplified acquisition procedures for small 
purchases up to the threshold set by 41 U.S.C. 403(11). This increase 
in the threshold will allow for more small purchase procurements to be 
conducted using informal methods for securing services, supplies, or 
other property [7 CFR 3016.36(d)] provided that each procurement, 
regardless of amount, is conducted in a manner that ensures free and 
open competition. It will also

[[Page 41860]]

ensure that the small purchase threshold in SFSP remains consistent 
with the threshold applied to the other Child Nutrition Programs.
    FNS issued guidance, SFSP 01-2013, Federal Small Purchase Threshold 
Adjustment, on October 2, 2012, to confirm that State and local SFSP 
agencies may use the simplified acquisition procedures for small 
purchases up to the threshold set by 41 U.S.C. 403(11). The current 
threshold set by 41 U.S.C. 403(11) is $150,000.

Standard Contracts

    Currently, 7 CFR 225.6(h)(2) allows sponsors with food service 
management company contracts that do not exceed $10,000 in aggregate to 
use their existing contracts rather than the standard form of contract 
developed by the State agency. Consistent with the small purchase 
procedures, we propose to remove the existing limit and instead link 
the standard contract threshold to 41 U.S.C. 403(11). Because the 
threshold in 41 U.S.C. 403(11) is adjusted regularly, this change will 
ensure that the standard contract threshold in SFSP is adjusted 
regularly in line with the thresholds applied to the other Child 
Nutrition Programs.
    We also propose to apply the threshold to individual rather than 
aggregate contracts. This would allow sponsors with individual 
contracts that do not exceed the small purchase threshold in 41 U.S.C 
403(11), to use their existing or usual form of contract provided it 
has been submitted to and approved by the State agency. Any individual 
contracts that exceed the small purchase threshold in 41 U.S.C. 
403(11), would require use of the State agency's standard contract. The 
original threshold was based on aggregate contracts and was set so low 
that it had little applicability. These proposed changes will bring the 
threshold in line with other regulatory requirements regarding approval 
of State bids and will simplify the contracting process for a greater 
number of small sponsors.
    FNS has implemented these changes in policy guidance, SFSP Summer 
Food Service Program Standard Contract Threshold, on January 24, 2013. 
This guidance allows sponsors with individual contracts that do not 
exceed the small purchase threshold, which is currently set at 
$150,000, to use their existing or usual form of contract, provided it 
has been submitted to and approved by the State agency.

Food Service Management Companies and Procurement Standards

    We propose to amend the SFSP regulations at 7 CFR 225.6(h)(7) to 
include two provisions to ensure that SFSP is consistent with the NSLP 
with regard to requirements pertaining to food service management 
company contracts. The first provision would allow sponsors to enter 
into annual contracts that may be renewed for up to four additional 
years. This would simplify the procurement process for sponsors by 
allowing for annual renewal of existing contracts rather than requiring 
sponsors to enter into new contracts each year.
    Additionally, the Department-wide regulations at 7 CFR 
3016.36(i)(2) require subgrantees to include in each contract in excess 
of $10,000 a clause for both termination for cause and for convenience. 
Therefore, we propose that all contracts in excess of $10,000 contain 
clauses for termination for both cause and convenience. Specifically, 
food service management company contracts in excess of $10,000 must 
include a termination clause whereby either party may cancel for cause 
with a 60-day notification. We also propose to amend the SFSP 
regulations regarding procurement standards at 7 CFR 225.17 to include 
this provision.

Administrative Oversight at Approved Meal Service Sites

    FNS proposes to amend the SFSP regulations at 7 CFR 225.14(d)(3) to 
clarify sponsors' responsibilities with respect to the meal services at 
the approved meal service sites and to emphasize that sponsors must 
have administrative oversight of meal services. Currently, the SFSP 
regulations require sponsors to have direct operational control of meal 
service sites, meaning they are responsible for managing site staff, 
including such areas as hiring and determining conditions of employment 
and termination. Based on FNS' experience in administering the SFSP and 
consultation with local, State, and Federal administrators, the 
Department has determined that sponsors find it difficult to meet the 
current understanding of ``direct operational control.'' Many sponsors 
deliver meals to recreational sites that are not directly affiliated 
with or managed by the sponsors and do not have the authority to hire 
or terminate employees at those sites. Instead, these sponsors have 
control over only the meal service provided at the site and related 
activities such as training of staff on meal counting and record 
keeping procedures.
    To eliminate confusion over the responsibilities of SFSP sponsors, 
FNS proposes to clarify that sponsors must have administrative 
oversight of the meal service at approved sites by replacing the words 
``direct operational control'' with ``administrative oversight.'' FNS 
also proposes to clarify that ``administrative oversight'' means the 
sponsor is responsible for maintaining contact with meal service staff, 
ensuring that there is adequate trained meal service staff on site, 
monitoring meal service operations at the site throughout the period of 
Program participation, and terminating meal service at a site if staff 
at the site fail to comply with Program regulations.

Options To Submit a Combined Claim

    SFSP sponsors represent a wide range of administrative and 
programming models, including schools that operate a year-round food 
service, churches that operate a food service only a few weeks in the 
summer months, civic organizations that operate many open sites, and 
camps that operate closed, enrolled sites. In view of these differences 
and to support their efforts in providing quality programs, this rule 
proposes to allow State agencies and SFSP sponsors more latitude to 
choose between submitting a monthly claim or a combined claim for 
reimbursement.
    First, this rule proposes to make optional the current requirement 
in 7 CFR 225.9(d)(3) that sponsors operating for less than 10 days in 
the final month of operations submit a combined claim for the final and 
immediate preceding month. Submitting separate monthly claims enables 
some SFSP sponsors, especially those with a tight budget or that 
operate for very short periods of time during the summer, to receive 
their reimbursement in a more timely manner. The argument for the 
provision of separate claims is strengthened by technological advances 
that have made it possible for many State agencies to accept claims for 
the SFSP online through web-based reporting systems, enabling State 
agencies to process claims on a more frequent basis. This proposed rule 
allows State agencies to maximize system efficiencies permitted by 
these advances.
    Second, sponsors that would like to submit combined claims are 
accommodated under this proposed regulation as well. In an effort to 
streamline Program operations and reduce paperwork for State agencies, 
and to provide sponsors with additional flexibility, FNS issued policy 
guidance on May 15, 2000, Summer Food Service Program--Authority for 
Sponsors to Combine Claims for Reimbursement, allowing sponsors more 
alternatives to combine claims for reimbursement. Consistent with this 
earlier guidance, FNS proposes to amend SFSP

[[Page 41861]]

regulations to permit sponsors to consolidate claims for reimbursement 
and submit a single claim for reimbursement in the following ways:
     Claims for 10 operating days or less in the initial month 
of operations may be combined with the claim for the subsequent month;
     Claims for 10 operating days or less in the final month of 
operations may be combined with the claim for the preceding month; and
     Claims for 3 consecutive months may be combined, as long 
as this combined claim only includes 10 operating days or less from 
each of the first and last months of Program operations.
    This proposed regulation makes clear, however, that a sponsor may 
not claim meal reimbursements on one claim that crosses Federal fiscal 
years. In addition, State agencies must ensure that the correct 
reimbursement rates are applied for meals claimed for months when 
different reimbursement rates are in effect. For example, there are 
SFSP sponsors that operate from October through April to provide meal 
services during school vacations in year-round schools. Because the 
SFSP reimbursement rates are published annually and are effective from 
January 1 until December 31, State agencies must ensure that 
reimbursement rates for December and January are applied correctly when 
processing claims.

Definition of Delivery of Notice

    Finally, this rule proposes to specify in NSLP regulations at 7 CFR 
210.18(j) and in SFSP regulations at 7 CFR 225.13(b)(1) what 
constitutes proper delivery and receipt of a notice describing an 
action proposed or taken by a State agency or FNS that affects the 
Program reimbursement and participation of a school food authority, 
food service management company, or sponsor. Currently, only the CACFP 
regulations define notice and delivery by a State agency or FNS to an 
institution.
    The CACFP regulation at 7 CFR 226.2 states that a notice is 
considered received by an institution when it is delivered or sent by 
facsimile or email. If a notice is undeliverable, it is considered 
received by the institution five days after being sent to the last 
known mailing address, facsimile number, or email address. FNS proposes 
to extend this definition to NSLP and SFSP, making it consistent across 
the Child Nutrition Programs. FNS is proposing this change because some 
State agencies are experiencing difficulties in notifying institutions 
of review findings, required corrective actions, and terminations. By 
choosing to avoid accepting the State agency's certified mail, non-
complying institutions have continued to operate, claim reimbursement, 
and mismanage the Programs.

V. Procedural Matters

Executive Order 12866 and Executive Order 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This proposed rule has been determined to be not 
significant and was reviewed by the Office of Management and Budget in 
conformance with Executive Order 12866.
Regulatory Impact Analysis
Need for Action
    In recent years, FNS has undertaken a number of paperwork reduction 
initiatives to attract additional sponsors in order to expand the 
Program to reach more children. This proposed rule will further reduce 
paperwork, ensure high quality administrative standards in the 
management of the SFSP, and clarify existing requirements. Since its 
creation through the Consolidated Appropriations Act of 2001, the 
simplified cost accounting procedures have been implemented through 
pilot projects and FNS guidelines. The Child Nutrition and WIC 
Reauthorization Act of 2004 made the simplified cost accounting 
procedures permanent and applicable to additional States. Various 
appropriations incrementally added States, which, by January 2006, 
totaled 27. The Consolidated Appropriations Act, 2008 extended the 
procedures to all States. This rulemaking brings the regulations into 
conformity with the legislative change.
    Programming changes often occur with expansion and lessons learned 
through implementation. Likewise, FNS proposes revisions of the SFSP to 
reduce paperwork and increase efficiency. More schools will be 
encouraged to participate in the SFSP if they are able to receive their 
SFSP reimbursements as soon as their programs end. Also, FNS 
regulations must reflect how sponsors operate and clarify that sponsors 
must have administrative oversight of the approved meal service sites.
Benefits
    This proposed rule will make permanent the benefits both the SFSP 
sponsors and the administering State agencies have accrued under the 
January 2, 2008, policy implementing Program simplification and will 
result in additional benefits by further reducing paperwork and 
simplifying administrative requirements. The administrative burden on 
State agencies will be reduced by the elimination of annual budget 
reviews of school sponsors, and more importantly, simplification of the 
advance payment and reimbursement process for all sponsors.
Costs
    This proposed rule, when published as a final rule, will codify 
guidelines governing existing simplified cost accounting procedures in 
the Program. Because most of the provisions are already in place, FNS 
anticipates no significant change in Program costs.
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). Pursuant to that 
review, it has been certified that this rule will not have a 
significant economic impact on a substantial number of small entities. 
SFSP sponsors may choose whether or not to expand their existing 
program to reach more children. The additional meal service will not 
have a significant paperwork or reporting burden because of the 
simplified cost accounting procedures. Besides reducing paperwork 
burden, this rule will streamline requirements and allow flexibility to 
improve the management of the SFSP.
Unfunded Mandates Reform Act
    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. Under Section 202 of the UMRA, the 
Department generally must prepare a written statement, including a cost 
benefit analysis, for proposed and final rules with Federal mandates 
that may result in expenditures by State, local, or Tribal governments, 
in the aggregate, or the private sector, of $100 million or more in any 
one year. When such a statement is needed for a rule, section 205 of 
the UMRA generally requires the

[[Page 41862]]

Department to identify and consider a reasonable number of regulatory 
alternatives and adopt the least costly, more cost-effective or least 
burdensome alternative that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) that impose costs on State, local, 
or Tribal governments or to the private sector of $100 million or more 
in any one year. This rule is, therefore, not subject to the 
requirements of sections 202 and 205 of the UMRA.
Executive Order 12372
    SFSP is listed in the Catalog of Federal Domestic Assistance under 
No. 10.559. For the reasons set forth in the final rule in 7 CFR part 
3015, subpart V and related Notice published at 48 FR 29115, June 24, 
1983, this Program is included in the scope of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials.
Federalism Summary Impact Statement
    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 regulations 
describing the agency's considerations in terms of the three categories 
called for under section (6)(b)(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 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
    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. This rule, when published final, 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 Dates paragraph of the 
final 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 SFSP, the 
administrative procedures are set forth at 7 CFR 225.13, which 
establishes appeal procedures, and at 7 CFR 225.17, 3016, and 3019 
which address administrative appeal procedures for disputes involving 
procurement by State agencies and institutions.
Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments
    E.O. 13175 requires Federal agencies to consult and coordinate with 
tribes on a government-to-government basis on policies that have tribal 
implications, including regulations, legislative comments or proposed 
legislation, and other policy statements or actions that have 
substantial direct effects on one or more Indian tribes, on the 
relationship between the Federal Government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
Government and Indian tribes. In late 2010 and early 2011, USDA engaged 
in a series of consultative sessions to obtain input by Tribal 
officials or their designees concerning the impact of this rule on the 
tribe or Indian Tribal governments, or whether this rule may preempt 
Tribal law. Reports from these consultations will be made part of the 
USDA annual reporting on Tribal Consultation and Collaboration. USDA 
will respond in a timely and meaningful manner to all Tribal government 
requests for consultation concerning this rule and will provide 
additional venues, such as webinars and teleconferences, to 
periodically host collaborative conversations with Tribal officials or 
their designees concerning ways to improve this rule in Indian country.
    We are unaware of any current Tribal laws that could be in conflict 
with the proposed rule. We request that commenters address any concerns 
in this regard in their responses.
Civil Rights Impact Analysis
    FNS has reviewed this proposed rule in accordance with the 
Department Regulation 4300-4, ``Civil Rights Impact Analysis,'' to 
identify and address any major civil rights impacts this rule might 
have on minorities and persons with disabilities.
    A careful review of the rule's intent and provisions revealed that 
the rule is not intended to affect the participation of protected 
individuals in SFSP. All data available to FNS indicate that protected 
individuals have the same opportunity to participate in the SFSP as 
non-protected individuals. The regulations at 7 CFR 225.7(g)(1) require 
that SFSP 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 parts 15, 15a and 15b). At 7 CFR 
225.6(c)(4)(i), each sponsor applying to participate in the SFSP must 
submit a statement of nondiscrimination in its policy for serving meals 
to children.
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 collection of information unless it displays a current, valid 
OMB control number. This is a revision of a currently approved 
collection. This revision consists of the proposed rule, Simplified 
Cost Accounting and Other Actions to Reduce Paperwork in the Summer 
Food Service Program (SFSP) and National School Lunch Notice 
Procedures, to existing collection: 7 CFR part 225, Summer Food Service 
Program (SFSP), OMB Control Number 0584-0280, expiration date March 31, 
2016. The current collection burden inventory for SFSP is 175,391. 
These changes are contingent upon OMB approval under the Paperwork 
Reduction Act of 1995. When the information collection requirements 
have been approved, FNS will publish a separate action in the Federal 
Register announcing OMB's approval.
    Comments on the information collection in this proposed rule must 
be received by September 10, 2013.
    Send comments to the Office of Information and Regulatory Affairs, 
OMB, Attention: Desk Officer for FNS, Washington, DC 20503. Please also 
send a copy of your comments to Jon Garcia, Program Analysis and 
Monitoring Branch, Child Nutrition Division, 3101 Park Center Drive, 
Alexandria, VA 22302. For further information, or for copies of the 
information collection requirements, please contact Jon Garcia at the 
address indicated above. Comments are invited on: (1) Whether the 
proposed collection of information is necessary for the proper 
performance of the Agency's functions, including whether the 
information will have practical utility; (2) the accuracy of the 
Agency's estimate of the proposed information collection burden, 
including the validity of the

[[Page 41863]]

methodology and assumptions used; (3) ways to enhance the quality, 
utility and clarity of the information to be collected; and (4) ways to 
minimize the burden of the collection of information on those who are 
to respond, including use of appropriate automated, electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology.
    All responses to this request for comments will be summarized and 
included in the request for OMB approval. All comments will also become 
a matter of public record.
    Title: Information Collection for the Summer Food Service Program 
(SFSP)
    Form: FNS-418
    OMB Number: 0584-0280
    Expiration Date: March 31, 2016
    Type of Request: Revision of a currently approved Collection
    Abstract: SFSP is authorized under section 13 of the Richard B. 
Russell National School Lunch Act (42 U.S.C. 1761). Its primary purpose 
is to provide free, nutritious meals to children from low-income areas 
during periods when schools are closed for vacation. To improve the 
efficiency of the Program, the Department is committed to reducing 
barriers to SFSP participation. One such barrier identified by Program 
operators is the paperwork burden involved in administering the 
Program. To address this issue, the Department has explored ways to 
streamline the administrative burden of SFSP sponsors and State 
agencies so more time and resources are directed toward increasing 
access, providing quality meal service to benefit eligible children, 
and ensuring Program integrity. To that end, apart from general program 
adjustments, this rule proposes to implement the simplified cost 
accounting and reporting procedures enacted by Congress in the 
Consolidated Appropriations Act, 2008 (Pub. L. 110-161) and make 
discretionary changes to the SFSP regulations to improve management of 
the Program and reduce paperwork requirements.
    This proposed rule is consistent with the simplified cost 
accounting and reporting procedures established by law and implemented 
by FNS through policy memoranda. The Consolidated Appropriations Act of 
2001 authorized SFSP pilot projects from fiscal year 2001 through 2004 
in 14 States (including Puerto Rico) with the intent to increase the 
number of children participating in the Program in States with low 
participation rates. This provision applied to government sponsors, 
public and private nonprofit school food authority sponsors, public and 
private nonprofit National Youth Sports Program sponsors, and public 
and private nonprofit residential camp sponsors. The law specifically 
excluded all other private nonprofit organizations from the pilot 
projects. The Child Nutrition and WIC Reauthorization Act of 2004 
(Public Law 108-265) made these pilots permanent, named the program 
``Simplified Summer Food Program,'' added six additional States, and 
extended the simplified procedures to all private nonprofit sponsors in 
eligible States. Through various appropriations laws, Congress 
incrementally provided pilot authority to additional States. By January 
2006, the Simplified Summer Food Program was extended to a total of 27 
States. The Consolidated Appropriations Act, 2008 extended the 
simplified procedures to all sponsors in all States. As many provisions 
in the proposed rule aimed at reducing paperwork in SFSP along with 
program updates and reduction of administrative burden, this revision 
realized a reduction in the number of burden hours since last renewal. 
This revision also consists of corrections to the recordkeeping burden 
hours. The average burden per response and the annual burden hours for 
reporting and recordkeeping are explained below and summarized in the 
charts which follow.
    Affected Public: State agencies, camps and other sites, and 
households
    Estimated Number of Respondents: 111,785
    Estimated Number of Responses per Respondent: 6.042
    Estimated Total Annual Responses: 675,390.
    Estimate Time Per Response: 0.219.
    Estimated Total Annual Burden: 148,207.
    Current OMB Inventory: 175,391.
    Difference (Burden Revisions Requested): -27,184.
    Refer to the table below for estimated total annual burden for each 
type of respondent.

----------------------------------------------------------------------------------------------------------------
                                     Estimated       Number of                       Estimated
         Affected public             number of     responses per   Total annual     total hours      Estimated
                                    respondents     respondent       responses     per response    total burden
----------------------------------------------------------------------------------------------------------------
                                                    REPORTING
----------------------------------------------------------------------------------------------------------------
State Agencies..................              53             381          20,193           0.722          14,588
Sponsors........................           4,754            2.80          13,357           1.693          22,608
Camps and Other Sites...........             791               1             791             .25             198
Households......................         100,589               2         201,178            .375          75,442
                                 -------------------------------------------------------------------------------
    Total Estimated Reporting            106,187  ..............         235,519  ..............         112,836
     Burden.....................
----------------------------------------------------------------------------------------------------------------
                                                  RECORDKEEPING
----------------------------------------------------------------------------------------------------------------
State Agencies..................              53             122           6,466            .081             525
Sponsors........................           4,754              91         432,614            .080          34,609
Camps and Other Sites...........             791               1             791            .300             237
                                 -------------------------------------------------------------------------------
    Total Estimated                        5,598  ..............         439,871  ..............          35,372
     Recordkeeping Burden.......
----------------------------------------------------------------------------------------------------------------
                                      TOTAL OF REPORTING AND RECORDKEEPING
----------------------------------------------------------------------------------------------------------------
Reporting.......................         106,187        2.217965         235,519         .479095         112,836
Recordkeeping...................           5,598        78.57646         439,871        .0804137          35,372
                                 -------------------------------------------------------------------------------
    Total.......................         111,785           6.042         675,390            .219         148,207
----------------------------------------------------------------------------------------------------------------


[[Page 41864]]

E-Government Act Compliance
    FNS is committed to complying with the E-Government Act, 2002, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

List of Subjects

7 CFR Part 210

    Grant programs--education, Grant programs--health, Infants and 
children, Nutrition, Penalties, Reporting and recordkeeping 
requirements, School breakfast and lunch programs, Surplus agricultural 
commodities.

7 CFR Part 225

    Food assistance programs, Grant programs--health, Infants and 
children, Labeling, Reporting and recordkeeping requirements.
    Accordingly, 7 CFR parts 210 and 225 are proposed to be amended as 
follows:

PART 210--NATIONAL SCHOOL LUNCH PROGRAM

0
1. The authority citation for 7 CFR part 210 continues to read as 
follows:

    Authority:  42 U.S.C. 1751-1760, 1779.

0
2. In Sec.  210.18, remove the last two sentences of paragraph (j), and 
add, in their place, four new sentences to read as follows:


Sec.  210.18  Administrative reviews.

* * * * *
    (j) * * * This notice shall also include a statement indicating 
that the school food authority may appeal the denial of all or a part 
of a Claim for Reimbursement or withholding payment and the entity 
(i.e., FNS or State agency) to which the appeal should be directed. The 
notice is considered to be received by the school food authority when 
it is delivered by certified mail, return receipt (or the equivalent 
private delivery service), by facsimile, or by email. If the notice is 
undeliverable, it is considered to be received by the school food 
authority, five days after being sent to the addressee's last known 
mailing address, facsimile number, or email address. The State agency 
shall notify the school food authority, in writing, of the appeal 
procedures as specified in Sec.  210.18(q) for appeals of State agency 
findings, and for appeals of FNS findings, provide a copy of Sec.  
210.29(d)(3).
* * * * *

PART 225--SUMMER FOOD SERVICE PROGRAM

0
3. The authority citation for 7 CFR part 225 continues to read as 
follows:

    Authority:  Secs. 9, 13 and 14, Richard B. Russell National 
School Lunch Act, as amended (42 U.S.C. 1758, 1761 and 1762a).

0
4. In Sec.  225.6:
0
a. Amend paragraph (b)(7) by adding three new sentences at the end of 
the paragraph;
0
b. Add new paragraphs (b)(7)(i), (ii), and (iii);
0
c. Amend paragraph (h)(1) by removing the citation ``Sec. Sec.  
225.15(h)'' and adding the citation ``Sec. Sec.  225.15(m)'' in its 
place;
0
d. Amend paragraph (h)(2) by revising the second sentence;
0
e. Redesignate paragraph (h)(7) as paragraph (h)(8);
0
f. Add new paragraph (h)(7); and
0
g. Amend newly designated paragraph (h)(8) by removing the citation 
``Sec.  225.15(h)(1)'' and adding the citation``Sec.  225.15(m)'' in 
its place.
    The revision and additions read as follows:


Sec.  225.6  State agency responsibilities.

* * * * *
    (b) * * *
    (7) * * * State agencies may exempt school food authority sponsors 
that participated successfully in the Program in the prior year from 
the annual budget submission requirement. State agencies that elect to 
waive the budget requirement for experienced school sponsors must 
remind sponsors of the importance of using funds only for allowable 
costs. Those school sponsors that are not exempt and must submit an 
annual budget include:
    (i) First year school sponsors;
    (ii) Returning school sponsors that experienced a break in 
participation of one or more years; and
    (iii) School sponsors with documented serious problems in managing 
a child nutrition program.
* * * * *
    (h) * * *
    (2) * * * Sponsors that are public entities, sponsors with 
exclusive year-round contracts with a food service management company, 
and sponsors that have no food service management company contracts 
exceeding the small purchase threshold in 41 U.S.C. 403(11), as 
applicable, may use their existing or usual form of contract, provided 
that such form of contract has been submitted to and approved by the 
State agency. * * *
* * * * *
    (7) The contract between a sponsor and food service management 
company shall be no longer than 1 year; and options for the yearly 
renewal of a contract may not exceed 4 additional years. All contracts 
shall include a termination clause whereby either party may cancel for 
cause with 60-day notification.
* * * * *
0
5. In Sec.  225.7:
0
a. Add paragraph (d)(2)(iii);
0
b. Amend paragraph (f) by adding three new sentences at the end; and
0
c. Add new paragraphs (f)(1) through (4).
    The additions read as follows:


Sec.  225.7  Program monitoring and assistance.

* * * * *
    (d) * * *
    (2) * * *
    (iii) Review of sponsor's operation. State agencies shall determine 
if:
    (A) The sponsor is providing a nutritious, high quality food 
service that uses program resources effectively;
    (B) Expenditures are allowable and consistent with FNS Instructions 
and guidance and all funds accruing to the food service are properly 
identified and recorded as food service revenue;
    (C) Expenditures are consistent with the expenditures of comparable 
sponsors, budgeted costs, and the previous year's expenditures taking 
into consideration any changes in circumstances;
    (D) Reimbursements have not resulted in accumulation of excess 
funds as defined in Sec.  225.7(f);
    (E) The level of administrative spending is reasonable and does not 
affect the sponsor's ability to operate a nonprofit food service and 
provide a quality food service; and
    (F) Other issues identified by reviewers are being managed 
appropriately.
* * * * *
    (f) * * * Additionally, each State agency shall establish a system 
for monitoring and reviewing institutions' nonprofit food service to 
ensure that all Program reimbursement funds are used solely for the 
conduct of the food service operation and the net cash resources of the 
nonprofit food service of each sponsor participating in the Program do 
not exceed three months' average expenditures. State agency approval 
shall be required for net cash resources in excess of three months' 
average expenditures. Based on this monitoring, the State agency may 
require the sponsor to improve food quality or take other action 
designed to improve the nonprofit food service under the following 
conditions:

[[Page 41865]]

    (1) The sponsor's net cash resources exceed three months' average 
expenditures for the sponsor's nonprofit food service or such other 
amount as may be approved in accordance with this paragraph;
    (2) The ratio of administrative to operational costs (as defined in 
Sec.  225.2) is high as compared to similar sponsors;
    (3) There is significant use of alternative funding for food and/or 
other costs; or
    (4) A significant portion of the food served is privately donated 
or purchased at a very low price.
* * * * *
0
6. In Sec.  225.9:
0
a. Revise the last sentence of paragraph (a);
0
b. Revise introductory paragraph (c);
0
c. Revise paragraph (c)(1);
0
d. Remove paragraph (c)(2), redesignate paragraph (c)(3) as paragraph 
(c)(2), and revise the new paragraph (c)(2);
0
e. Remove paragraph (c)(4);
0
f. Redesignate paragraphs (c)(5), (c)(6), and (c)(7) as paragraphs 
(c)(3), (c)(4), and (c)(5), respectively;
0
g. Amend paragraph (d)(2) by removing the words ``projected 
administrative costs'' wherever it appears and adding the words 
``projected expenses'' in its place and by removing the words ``advance 
administrative costs payment'' and adding the words ``advance payment'' 
in its place;
0
h. Revise paragraph (d)(3);
0
i. Revise paragraph (d)(7);
0
j. Remove paragraph (d)(8) ;
0
m. Redesignate paragraphs (d)(9), (d)(10), and (d)(11) as (d)(8), 
(d)(9), and (d)(10), respectively;
0
n. Amend newly designated paragraph (d)(8) by removing the citations 
``(d)(7)(ii) and (d)(8)(iii)'' and adding in their place ``(d)(7)''; 
and
0
o. Add a new paragraph (g).
    The revisions and additions read as follows:


Sec.  225.9  Program assistance to sponsors.

    (a) * * * The amount of the start-up payment shall be deducted from 
the first advance payment or, if the sponsor does not receive advance 
payments, from the first reimbursement.
* * * * *
    (c) Advance payments. At the sponsor's request, State agencies 
shall make advance payments to sponsors that have executed Program 
agreements in order to assist these sponsors in meeting expenses. For 
sponsors operating under a continuous school calendar, all advance 
payments shall be forwarded on the first day of each month of 
operation. Advance payments shall be made by the dates specified in 
paragraph (c)(1) of this section for all other sponsors whose requests 
are received at least 30 days prior to those dates. Requests received 
less than 30 days prior to those dates shall be acted upon within 30 
days of receipt. When making advance payments, State agencies shall 
observe the following criteria:
    (1) Payments. (i) State agencies shall make advance payments by 
June 1, July 15, and August 15. To be eligible for the second and third 
advance payments, the sponsor must certify that it is operating the 
number of sites for which the budget was approved and that its 
projected costs do not differ significantly from the approved budget. 
Except for school food authorities, sponsors must conduct training 
sessions before receiving the second advance payment. Training sessions 
must cover Program duties and responsibilities for the sponsor's staff 
and for site personnel. A sponsor shall not receive advance payments 
for any month in which it will participate in the Program for less than 
10 days. However, if a sponsor operates for less than 10 days in June 
but for at least 10 days in August, the second advance payment shall be 
made by August 15.
    (ii) To determine the amount of the advance payment to any sponsor, 
the State agency shall employ whichever of the following methods will 
result in the larger payment:
    (A) The total reimbursement paid to the sponsor for the same 
calendar month in the preceding year; or
    (B) For vended sponsors, 50 percent of the amount determined by the 
State agency to be needed that month for meals, or, for self-
preparation sponsors, 65 percent of the amount determined by the State 
agency to be needed that month for meals.
    (2) Advance payment estimates. When determining the amount of 
advance payments payable to the sponsor, the State agency shall make 
the best possible estimate based on the sponsor's request and any other 
available data. Under no circumstances may the amount of the advance 
payment exceed the greater of the amount estimated by the State agency 
to be needed by the sponsor to meet Program costs or $40,000.
* * * * *
    (d) * * *
    (3) Sponsors shall submit a monthly claim or a combined claim 
within 60 days of the last day of operation. Sponsors may not submit a 
combined claim for meal reimbursements that crosses fiscal years. In 
addition, State agencies must ensure that the correct reimbursement 
rates are applied for meals claimed for months when different 
reimbursement rates are in effect. Sponsors may combine the claim for 
reimbursement in the following ways:
    (i) For 10 operating days or less in their initial month of 
operations with the claim for the subsequent month;
    (ii) For 10 operating days or less in their final month of 
operations with the claim for the preceding month; or
    (iii) For 3 consecutive months, as long as this combined claim only 
includes 10 operating days or less from each of the first and last 
months of program operations.
* * * * *
    (7) Payments to a sponsor must equal the amount derived by 
multiplying the number of meals, by type, actually served under the 
sponsor's program to eligible children by the applicable reimbursement 
rate for each meal type. Sponsors must be eligible to receive 
additional reimbursement for each meal served to participating children 
at rural or self-preparation sites.
* * * * *
    (g) Excess funds. If reimbursements exceed a sponsor's allowable 
costs, the sponsor must use the excess funds to improve the meal 
service or management of the Program. Excess funds remaining at the end 
of the Program year may be used to pay allowable costs of other Child 
Nutrition Programs. If the sponsor does not operate other Child 
Nutrition Programs, the State agency must collect from the sponsor any 
reimbursements that exceeded the sponsor's allowable costs. The excess 
funds shall be collected in accordance with the procedures outlined in 
Sec.  225.12(b).
0
7. In Sec.  225.11, revise paragraph (f)(1) to read as follows:


Sec.  225.11  Corrective action procedures.

* * * * *
    (f) * * * (1)Whenever the State agency observes violations during 
the course of a site review, it shall require the sponsor to take 
corrective action. If the State agency finds a high level of meal 
service violations, the State agency shall require a specific, 
immediate corrective action plan to be followed by the sponsor. If the 
State agency finds that a sponsor is operating a program with poor 
quality food service and is operating below the reimbursement level, 
the State agency shall require corrective action to improve the meal 
service. The State agency shall either conduct a follow-up visit or in 
some

[[Page 41866]]

other manner verify that the specified corrective action has been 
taken.
* * * * *
0
8. In Sec.  225.12, revise the second sentence of paragraph (a) to read 
as follows:


Sec.  225.12  Claims against sponsors.

    (a) * * * State agencies shall consider claims for reimbursement 
not properly payable if a sponsor's records do not include all costs 
associated with the meal service and document that all costs are 
allowable. * * *
* * * * *
0
9. In Sec.  225.13, revise paragraph (b)(1) to read as follows:


Sec.  225.13  Appeal procedures.

* * * * *
    (b) * * *
    (1) The sponsor or food service management company be advised in 
writing of the grounds upon which the State agency based the action. 
The notice of action shall also state that the sponsor or food service 
management company has the right to appeal the State's action. The 
notice is considered to be received by the sponsor or food service 
management company when it is delivered by certified mail, return 
receipt (or the equivalent private delivery service), by facsimile, or 
by email. If the notice is undeliverable, it is considered to be 
received by the sponsor or food service management company, five days 
after being sent to the addressee's last known mailing address, 
facsimile number, or email address;
* * * * *
0
10. In Sec.  225.14:
0
a. Amend introductory paragraph (d)(3) by removing the words ``direct 
operational control'' at the end of the first sentence and adding in 
their place the words ``administrative oversight'' and removing the 
words ``Operational control'' at the beginning of the second sentence 
and adding in their place the words ``Administrative oversight''; and
0
b. Revise paragraph (d)(3)(i).
    The revision reads as follows:


Sec.  225.14  Requirements for sponsor participation.

* * * * *
    (d) * * *
    (3) * * *
    (i) Maintaining contact with meal service staff, ensuring that 
there is adequately trained meal service staff on site, monitoring the 
meal service throughout the period of Program participation, and 
terminating meal service at a site if staff fail to comply with Program 
regulations; and
* * * * *
0
11. In Sec.  225.15:
0
a. Add paragraph (a)(4);
0
b. Revise the first sentence of paragraph (c)(1); and
0
c. Revise the second sentence of introductory paragraph (m)(4);
0
d. Revise paragraph (m)(4)(xii); and
0
e. Revise paragraphs (m)(5) and (m)(6).
    The addition and revisions read as follows:


Sec.  225.15  Management responsibilities of sponsors.

    (a) * * *
    (4) Sponsors must maintain documentation of a nonprofit food 
service. Program reimbursements and expenditures may be included in a 
single nonprofit food service account with funds from any other Child 
Nutrition Programs authorized under the Richard B. Russell National 
School Lunch Act or the Child Nutrition Act of 1966, except the Special 
Supplemental Nutrition Program for Women, Infants, and Children. All 
Program reimbursement funds must be used solely for the conduct of the 
food service operation. The net cash resources of the nonprofit food 
service of each sponsor participating in the Program may not exceed 
three months' average expenditures. State agency approval shall be 
required for net cash resources in excess of three months' average 
expenditures. Sponsors shall monitor Program costs and take action to 
improve the meal service or other aspects of the Program if actual 
costs are less than the anticipated reimbursement.
* * * * *
    (c) * * * (1) Sponsors shall maintain accurate records of all costs 
associated with the meal service and document that all costs are 
allowable. * * *
* * * * *
    (m) * * *
    (4) * * * Sponsors that are schools or school food authorities and 
have an exclusive contract with a food service management company for 
year-round service, and sponsors whose total contracts with food 
service management companies will not exceed the small purchase 
threshold in 41 U.S.C 403(11), shall not be required to comply with 
these procedures. * * *
* * * * *
    (xii) All bids in an amount which exceeds the lowest bid and all 
bids totaling the amount specified in the small purchase threshold in 
41 U.S.C 403(11), or more are submitted to the State agency for 
approval before acceptance. State agencies shall respond to a request 
for approval of such bids within 5 working days of receipt.
    (5) Each food service management company which submits a bid 
exceeding the small purchase threshold in 41 U.S.C. 403(11), shall 
obtain a bid bond in an amount not less than 5 percent nor more than 10 
percent, as determined by the sponsor, of the value of the contract for 
which the bid is made. A copy of the bid bond shall accompany each bid.
    (6) Each food service management company which enters into a food 
service contract exceeding the small purchase threshold in 41 U.S.C. 
403(11), with a sponsor shall obtain a performance bond in an amount 
not less than 10 percent nor more than 25 percent of the value of the 
contract for which the bid is made, as determined by the State agency. 
Any food service management company which enters into more than one 
contract with any one sponsor shall obtain a performance bond covering 
all contracts if the aggregate amount of the contracts exceeds the 
small purchase threshold in 41 U.S.C. 403(11). Sponsors shall require 
the food service management company to furnish a copy of the 
performance bond within ten days of the awarding of the contract.
* * * * *
0
12. In Sec.  225.17, add paragraph (f) to read as follows:


Sec.  225.17  Procurement standards.

* * * * *
    (f) All contracts in excess of $10,000 must contain a clause 
allowing termination for cause and for convenience by the sponsor 
including the manner by which it will be effected and the basis for 
settlement.

    Dated: April 14, 2013.
Audrey Rowe,
Administrator, Food and Nutrition Service.
[FR Doc. 2013-16697 Filed 7-11-13; 8:45 am]
BILLING CODE 3410-30-P