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CACFP Administrative Manual Section 15.1

Child and Adult Care Food Program Administrative Manual Section 15.1: Serious Deficiency Process for Centers and Day Care Home Sponsors.

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Terms, Definitions, and Acronyms

Section 15 Serious Deficiency Process

Section 15.1 Serious Deficiency Process for Centers and Day Care Home Sponsors

CACFP regulations define an agency as seriously deficient when they are out of compliance with one or more aspects of the program. The serious deficiency (SD) process has six steps:

  • Determination of the SD—NSD
  • Issue a notice of SD—NSD
  • Corrective action documentation (CAD)—Agency
  • Termination and disqualification—NSD
  • Appeal—Agency
  • National Disqualified List (NDL)—USDA

Key definitions are as follows:

  • Responsible Principal–An individual who holds a management position within or is an officer of an agency. These management officials also bear responsibility for the poor performance of non-supervisory employees who may have caused the SD. For more information, refer to Section 1.2.
  • Disqualified–An agency, principal, or individual may be disqualified from participation in the CACFP as the result of the SD process.
  • NDL–The USDA maintains this national list of agencies, principals, and individuals who are ineligible for program participation.

Determination of Serious Deficiency

NSD reviewers determine that an agency is seriously deficient based upon the severity and longevity of the compliance issues. The program regulations list the following examples of SDs as they apply to centers and DCH sponsors. This list is not considered to be all-inclusive.

  • Agency or responsible principals are on the NDL
  • Being convicted in the past seven years for any activity that indicates a lack of business integrity as a sponsor, responsible principal, or responsible individual
  • Being declared ineligible to participate in any other publicly funded program due to violation of that program’s requirements as a sponsor, responsible principal, or responsible individual
  • Failure by a sponsoring organization to properly train or monitor sponsored facilities in accordance with 7 CFR, Section 226.16(d) (see Section 13.1)
  • Inadequate records to document compliance with program requirements (see Section 14)
  • Noncompliance with financial or administrative responsibilities
  • Noncompliance with one or more of the three performance standards (see Section 1.6)
  • Noncompliance with procurement requirements (see Section 7.1)
  • Submission of false information on any application or update materials
  • Centers Only:
    • Claiming of meals that were not served to participants
    • Claiming of meals that do not meet the meal pattern
    • Claiming reimbursement for meals served by a for-profit CC center or a for-profit SA center during a calendar month in which less than 25 percent of the children (enrolled or licensed capacity, whichever is less) were eligible for free or reduced-price meals or were Title XX beneficiaries
    • Claiming reimbursement for meals served by a for-profit ADC center during a calendar month in which less than 25 percent of is enrolled adult participants were Title XIX or Title XX beneficiaries
    • Contracting with a vendor who is not in compliance with local, state, and federal regulations
    • Failing to adjust meal orders to conform to variations in the number of participants
  • DCH Sponsors Only:
    • Failing to properly implement and administer the provider termination and administrative review provisions
    • Failure to properly classify DCHs as tier I or tier II in accordance with 7 CFR, Section 226.15(f)
    • Using provider funds to pay for sponsors’ administrative costs
  • SOUCs and DCH Sponsors Only:
    • Failing to disburse payments to sponsored providers in accordance with 7 CFR, sections 226.16(g) through 226.16(h) of the sponsor’s management plan


Corrective Action Documentation

An agency must submit CAD by an established deadline to fully and permanently correct SDs. Once the CAD is received, the NSD reviewer will examine what has been submitted and determine whether it is complete. If the reviewer approves the CAD, the agency is no longer seriously deficient and is restored to good standing in the program. The NSD will inform the agency of this determination in writing.

If, on the other hand, the reviewer finds the CAD to be unacceptable, the NSD will inform the agency of the intent to terminate and disqualify from the program participation.

Note: If an agency has a longer corrective action timeframe (60 to 90 days or more), the agency may first be required to submit CAD that indicates the steps to be taken to implement the required action. In that case, the NSD will evaluate the plan for completeness and later conduct a follow-up visit to ensure that implementation has occurred.

Termination and Disqualification

Like the notice of SD, the notice of intent to terminate and disqualify an agency outlines specific information. The notice must state:

  • The NSD proposes to terminate and disqualify the agency from CACFP participation
  • The basis for the proposed action
  • If the agency voluntarily terminates its program participation, the NSD will follow through with the termination and disqualification
  • The agency has the right to appeal the proposed action (and the notice must include the appeal procedures)
  • Program payments will continue during the appeal

Agency Appeal

An agency may choose not to appeal. In that case, the agency’s program agreement will be terminated and the agency will be disqualified from federal food program participation for a period of up to seven years. It also will be placed on the USDA NDL.

If the agency chooses to appeal, the action will have one of two outcomes:

  • The NSD’s proposal to terminate and disqualify is sustained, with the agency’s program agreement terminated and the agency disqualified from CACFP participation for a period of up to seven years. The NSD will place the agency and its responsible principals on the NDL. Other individuals may be placed on the NDL if such action is warranted.
  • The agency’s appeal is successful, whereby the SD status and the proposed termination and disqualification are temporarily deferred and the agency is restored to good standing in the program.

National Disqualified List

The last step in the SD process is the placement of the agency and the responsible principals on the NDL which is maintained by the USDA. State agencies are obligated to check the NDL before allowing an agency and its principals to participate in the program.

References: 7 CFR, sections 226.6(c)(3), 226.6(c)(4), 226.6(k), 226.6(m), and 226.23(h); MB 02-202: NDL; USDA SD, Suspension, & Appeals for State Agencies and Sponsoring Organizations Handbook

Questions:   Nancy Charpentier | ncharpentier@cde.ca.gov | 916-327-2991
Last Reviewed: Thursday, August 16, 2018
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