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Secs. 9, 13 and 14, Richard B. Russell National School Lunch Act, as amended (42 U.S.C. 1758, 1761 and 1762a).
54 FR 18208, Apr. 27, 1989, unless otherwise noted.
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(a) State agencies and sponsors shall comply with the requirements of 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, as applicable, concerning the procurement of supplies, food, equipment and other services with Program funds. These requirements ensure that such materials and services are obtained for the program efficiently and economically and in compliance with applicable laws and executive orders. Sponsors may use their own procedures for procurement with Program funds to the extent that:
(1) Procurements by public sponsors comply with applicable State or local laws and the standards set forth in 2 CFR part 200, subpart F and USDA implementing regulations 2 CFR part 400 and part 415; and
(2) Procurements by private nonprofit sponsors comply with standards set forth in 2 CFR part 200, subpart F and USDA implementing regulations 2 CFR part 400 and part 415.
(b) The State agency shall make available to sponsors information on 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, as applicable.
(c) Sponsors may use their own procurement procedures which reflect applicable State and local laws and regulations, provided that procurements made with Program funds conform with provisions of this section, as well as with procurement requirements which may be established by the State agency, with approval of FNS, to prevent fraud, waste, and Program abuse.
(d) The State agency shall ensure that each sponsor is aware of the following practices specified in 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, as applicable, with respect to minority business enterprises:
(1) Including qualified minority business enterprises on solicitation lists,
(2) Soliciting minority business enterprises whenever they are potential sources,
(3) When economically feasible, dividing total requirements into smaller tasks or quantities so as to permit maximum participation by minority business enterprises,
(4) Establishing delivery schedules which will assist minority business enterprises to meet deadlines, and
(5) Using the services and assistance of the Small Business Administration, and the Office of Minority Business Enterprise of the Department of Commerce as required.
(e) Geographic preference.
(1) Sponsors participating in the Program may apply a geographic preference when procuring unprocessed locally grown or locally raised agricultural products, including the use of “locally grown”, “locally raised”, or “locally caught” as procurement specifications or selection criteria for unprocessed or minimally processed food items. When utilizing the geographic preference to procure such products, the sponsor making the purchase has the discretion to determine the local area to which the geographic preference option will be applied, so long as there are an appropriate number of qualified firms able to compete;
(2) For the purpose of applying the optional geographic preference in paragraph (e)(1) of this section, “unprocessed locally grown or locally raised agricultural products” means only those agricultural products that retain their inherent character. The effects of the following food handling and preservation techniques shall not be considered as changing an agricultural product into a product of a different kind or character: Cooling; refrigerating; freezing; size adjustment made by peeling, slicing, dicing, cutting, chopping, shucking, and grinding; forming ground products into patties without any additives or fillers; drying/dehydration; washing; packaging (such as placing eggs in cartons), vacuum packing and bagging (such as placing vegetables in bags or combining two or more types of vegetables or fruits in a single package); addition of ascorbic acid or other preservatives to prevent oxidation of produce; butchering livestock and poultry; cleaning fish; and the pasteurization of milk.
(f) All contracts in excess of $10,000 must contain a clause allowing termination for cause or for convenience by the sponsor including the manner by which it will be effected and the basis for settlement.
[54 FR 18208, Apr. 27, 1989, as amended at 71 FR 39518, July 13, 2006; 76 FR 22607, Apr. 22, 2011; 81 FR 66492, Sept. 28, 2016; 83 FR 25361, June 1, 2018; 87 FR 57365, Sept. 19, 2022; 89 FR 32087, Apr. 25, 2024]
(a) Grant closeout procedures. Grant closeout procedures for the Program shall be in accordance with 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, as applicable.
(b) Termination for cause.
(1) FNS may terminate a State agency's participation in the Program in whole, or in part, whenever it is determined that the State agency has failed to comply with the conditions of the Program. FNS shall promptly notify the State agency in writing of the termination and reason for the termination, together with the effective date, and shall allow the State 30 calendar days to respond. In instances where the State does respond, FNS shall inform the State of its final determination no later than 30 calendar days after the State responds.
(2) A State agency shall terminate a sponsor's participation in the Program by written notice whenever it is determined by the State agency that the sponsor has failed to comply with the conditions of the Program.
(3) When participation in the Program has been terminated for cause, any funds paid to the State agency or a sponsor or any recoveries by FNS from the State agency or by the State agency from a sponsor shall be in accordance with the legal rights and liabilities of the parties.
(c) Termination for convenience. FNS and the State agency may agree to terminate the State agency's participation in the Program in whole, or in part, when both parties agree that the continuation of the Program would not produce beneficial results commensurate with the further expenditure of funds. The two parties shall agree upon the termination conditions, including the effective date, and in the case of partial termination, the portion to be terminated. The State agency shall not incur new obligations for the terminated portion after the effective date, and shall cancel as many outstanding obligations as possible. The Department shall allow full credit to the State agency for the Federal share of the noncancellable obligation properly incurred by the State agency prior to termination. A State agency may terminate a sponsor's participation in the manner provided for in this paragraph.
(d) Maintenance of effort. Expenditure of funds from State and local sources for the maintenance of food programs for children shall not be diminished as a result of funds received under the Act and a certification to this effect shall become part of the agreement provided for in § 225.3(c).
(e) Program benefits. The value of benefits and assistance available under the Program shall not be considered as income or resources of recipients and their families for any purpose under Federal, State or local laws, including, but not limited to, laws relating to taxation, welfare, and public assistance programs.
(f) State requirements. Nothing contained in this part shall prevent a State agency from imposing additional operating requirements which are not inconsistent with the provisions of this part, provided that such additional requirements shall not deny the Program to an area in which poor economic conditions exist, and shall not result in a significant number of needy children not having access to the Program. Prior to imposing any additional requirements, the State agency must receive approval from FNSRO.
(g) Fraud penalty. Whoever embezzles, willfully misapplies, steals, or obtains by fraud any funds, assets, or property that are the subject of a grant or other form of assistance under this part, whether received directly or indirectly from the Department, or whoever receives, conceals, or retains such funds, assets, or property to his use or gain, knowing such funds, assets, or property have been embezzled, willfully misapplied, stolen or obtained by fraud shall, if such funds, assets, or property are of the value of $100 or more, be fined not more than $25,000 or imprisoned not more than five years, or both, or if such funds, assets, or property are of a value of less than $100, shall be fined not more than $1,000 or imprisoned for not more than one year, or both.
(h) Claims adjustment authority. The Secretary shall have the authority to determine the amount of, to settle, and to adjust any claim arising under the Program, and to compromise or deny such claim or any part thereof. The Secretary shall also have the authority to waive such claims if the Secretary determines that to do so would serve the purposes of the Program. This provision shall not diminish the authority of the Attorney General of the United States under section 516 of title 28, U.S. Code, to conduct litigation on behalf of the United States.
(i) Data collection related to sponsors.
(1) Each State agency must collect data related to sponsors that have an agreement with the State agency to participate in the program for each of Federal fiscal years 2006 through 2009, including those sponsors that participated only for part of the fiscal year. Such data shall include:
(i) The name of each sponsor;
(ii) The city in which each participating sponsor was headquartered and the name of the state;
(iii) The amount of funds provided to the participating organization, i.e., the sum of the amount of federal funds reimbursed for operating and administrative cost; and
(iv) The type of participating organization, e.g., government agency, educational institution, non-profit organization/secular, non-profit organization/faith-based, and “other.”
(2) On or before August 31, 2007, and each subsequent year through 2010, State agencies must report to FNS data as specified in paragraph (i)(1) of this section for the prior Federal fiscal year. State agencies must submit this data in a format designated by FNS.
(j) Program evaluations. States, State agencies, sponsors, sites and contractors must cooperate in studies and evaluations conducted by or on behalf of the Department, related to programs authorized under the Richard B. Russell National School Lunch Act and the Child Nutrition Act of 1966, as amended.
(k) Fines.
(1) A sponsor that is a school food authority may be subject to fines. The State agency may establish an assessment when it has determined that the sponsor or its site has:
(i) Failed to correct severe mismanagement of the Program;
(ii) Disregarded a Program requirement of which the sponsor or its site had been informed; or
(iii) Failed to correct repeated violations of Program requirements.
(2) FNS may direct the State agency to establish a fine against any sponsor when it has determined that the sponsor or its site has committed one or more acts under paragraph (k)(1) of this section.
(3) Funds used to pay a fine established under this paragraph must be derived from non-Federal sources. In calculating an assessment, the State agency must calculate the fine based on the amount of Program reimbursement earned by the sponsor or its site for the most recent fiscal year for which full year data is available, provided that the fine does not exceed the equivalent of:
(i) For the first fine, 1 percent of the amount of meal reimbursement earned for the fiscal year;
(ii) For the second fine, 5 percent of the amount of meal reimbursement earned for the fiscal year; and
(iii) For the third or subsequent fine, 10 percent of the amount of meal reimbursement earned for the fiscal year.
(4) The State agency must inform FNS at least 30 days prior to establishing the fine under this paragraph. The State agency must send the sponsor written notification of the fine established under this paragraph and provide a copy of the notification to FNS. The notification must:
(i) Specify the violations or actions which constitute the basis for the fine and indicate the amount of the fine;
(ii) Inform the institution that it may appeal the fine and advise the sponsor of the appeal procedures established under § 225.13;
(iii) Indicate the effective date and payment procedures should the sponsor not exercise its right to appeal within the specified timeframe.
(5) Any sponsor subject to a fine under paragraph (k)(1) of this section may appeal the State agency's determination. In appealing a fine, the sponsor must submit to the State agency any pertinent information, explanation, or evidence addressing the Program violations identified by the State agency. Any sponsor seeking to appeal the State agency determination must follow State agency appeal procedures.
(6) The decision of the State agency review official is final and not subject to further administrative or judicial review. Failure to pay a fine established under this paragraph may be grounds for suspension or termination.
(7) Money received by the State agency as a result of a fine established under this paragraph against a sponsor and any interest charged in the collection of these fines must be remitted to FNS, and then remitted to the United States Treasury.
(l) Updates to data sources. By January 1 each year, or as soon as is practicable, FNS will issue any necessary updates to approved data sources listed under the definition of “rural” in § 225.2 to be used for rural site designations in that program year. FNS will make this information available and referenceable in a simplified format.
[54 FR 18208, Apr. 27, 1989, as amended at 55 FR 13471, Apr. 10, 1990; 64 FR 72488, Dec. 28, 1999; 71 FR 39518, July 13, 2006; 72 FR 24183, May 2, 2007; 76 FR 37982, June 29, 2011; 78 FR 13450, Feb. 28, 2013; 81 FR 66492, Sept. 28, 2016; 88 FR 57850, Aug. 23, 2023; 88 FR 90355, Dec. 29, 2023]
Persons seeking information about this Program should contact their State administering agency or the appropriate FNSRO. The FNS website has contact information for State agencies at https://www.fns.usda.gov/contacts and FNSRO at https://www.fns.usda.gov/fns-regional-offices.
[88 FR 57850, Aug. 23, 2023]
| 7 CFR section where requirements are described | Current OMB control No. |
|---|---|
| 225.3-225.4. | 0584-0280 |
| 225.6-225.10 | 0584-0280 |
| 225.12-225.13 | 0584-0280 |
| 225.15-225.18 | 0584-0280 |
[61 FR 25554, May 22, 1996]