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CACFP Administrative Manual Section 15.2

Child and Adult Care Food Program Administrative Manual Section 15.2: Serious Deficiency Process.

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Terms, Definitions, and Acronyms

Section 15 Serious Deficiency Process

Section 15.2 Serious Deficiency Process for Day Care Home Providers

CACFP regulations define a DCH provider as seriously deficient when they are out of compliance with one or more aspects of the Program. The serious deficiency (SD) process has six parts:

  1. Identify the SD(s)—DCH Sponsor
  2. Issue a notice of SD—DCH Sponsor
  3. Corrective action documentation (CAD)—DCH provider
  4. Termination and disqualification—DCH Sponsor
  5. Appeal—DCH provider
  6. National Disqualified List (NDL)—USDA

Identification of Serious Deficiency

DCH sponsors have the authority to determine when a finding requires a DCH provider to be declared seriously deficient. The USDA’s SD, Suspension, and Appeals for State Agencies and Sponsoring Organizations Handbook, located on the USDA CACFP Handbooks Web pageExternal link opens in new window or tab., contains details for how sponsors identify a finding to declare a provider as SD.

DCH sponsors must determine if a provider is seriously deficient for any of the following:

  • Submitting false information on the application
  • Submitting false claims for reimbursement
  • Participating under more than one sponsor simultaneously
  • Failing to follow the CACFP meal pattern
  • Failing to keep required records
  • Demonstrating conduct or conditions that threaten the health or safety of a child(ren) in care, or the public health or safety
  • Having been convicted of any activity that occurred during the past seven years and indicated a lack of business integrity; a lack of business integrity includes fraud, antitrust violations, embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, receiving stolen property, making false claims, obstruction of justice, or any other activity indicating a lack of business integrity as defined by the state agency, or the concealment of such a conviction
  • Failing to participate in training
  • Demonstrating any other kind of nonperformance, as required by the sponsor or the state agency in the sponsor-provider agreement


Serious Deficiency Notification

Once the sponsor determines the provider is seriously deficient, the sponsor must issue a timely SD notice to the provider by a method of delivery that confirms receipt. A notice is considered received by the institution or responsible principal or responsible individual five days after being sent to the addressee’s last known mailing address, fax number, or email address. Any timeframes associated with a given notice start with the earliest form of transmission. A copy of the SD notice must also be sent to the CDE NSD Program Integrity Unit (PIU). The notice must:

  • Describe the SD finding(s) clearly
  • State the legal basis for each SD finding—cite the regulation(s) as well as specific provisions in the sponsor-provider agreement and/or regulations that support the SD finding(s)
  • Inform the provider that voluntary termination of the agreement after being determined seriously deficient will result in issuance of a Notice of Termination and Disqualification and placement on the NDL
  • Specify the corrective action(s) to be taken and the time allotted to correct the SD finding(s) (in accordance with 7 CFR, Section 226.16[l][3][i][C], corrective action[s] must be taken as soon as possible, but not to exceed 30 days)
  • State that failure to fully and permanently correct each SD finding will result in the proposed termination of the provider’s CACFP agreement and the proposed disqualification of the provider
  • Notify the provider that there are no rights to appeal a SD determination
  • Inform the provider that CACFP payments for valid claims will continue during the corrective action period


Corrective Action Documentation

The sponsor may allow the provider a maximum of 30 days from the receipt date of the SD notice to submit corrective action documentation. In most situations, however, providers will be able to implement permanent corrective actions in less time.

Providers must submit CAD that includes the following:

  • The provider’s full name, address, and date of birth
  • Each SD and the procedures to be implemented to correct the issue
  • The time frame for implementation of the procedures to correct the issue
  • The location where records will be kept associated with correcting the issue; per the USDA, the location of the provider’s CAD does not have to be specific—the provider can indicate that the CAD is maintained at their home address and ensure the CAD is available upon request

Successful Corrective Action of a Day Care Home Provider

In accordance with 7 CFR, Section 226.16(l)(3)(ii), if the provider corrects the SD finding(s) within the allotted time and to the sponsor’s satisfaction, the sponsor must send a notice of Successful Corrective Action, Temporary Deferral of SD to the provider using a method of delivery that confirms receipt of the notice. A copy of the deferment notice must also be sent to the PIU and must inform the provider that:

  • The sponsor temporarily deferred the SD determination
  • Corrective action(s) must be permanent
  • If corrective action(s) is/are not permanently corrected, the sponsor will immediately propose termination and disqualification of the provider
  • The provider may not transfer to another sponsor until the current sponsor completes an additional monitoring visit (no later than 180 days after the date of the deferment notice) verifying the provider implemented permanent corrective actions for the SD(s)
  • If any subsequent review finds that any of these SDs have not been fully and permanently corrected, the sponsor will immediately propose to terminate the provider’s agreement for cause and propose to disqualify the provider without any further opportunity for corrective action

Unsuccessful Corrective Action of a Day Care Home Provider

In accordance with 7 CFR, Section 226.16 (l)(3)(iii), if a provider fails to permanently correct the SD(s) in the time allotted for corrective action or any time after the original SD notice was deferred, the sponsor must issue a Notice of Proposed Termination and Proposed Disqualification to the provider. The sponsor must use a method of delivery that confirms receipt of the notice and submit a copy of the notice to the PIU. The notice must:

  • State that the sponsor is proposing to terminate the DCH provider’s agreement and to disqualify the provider from the CACFP
  • Reference the SD notice and state why corrective action was not acceptable (or state that the provider failed to submit a corrective action document within the time allotted)
  • Allow the DCH provider to appeal the decision proposing termination
  • Offer the provider the opportunity for an administrative review (AR) and include a copy of AR procedures (7 CFR, Section 226.6[l][2])
  • Notify the provider that voluntary termination of the provider’s CACFP agreement will result in termination for cause and disqualification from the CACFP
  • Notify the provider that voluntary termination of the CACFP agreement after receipt of the proposed termination/disqualification notice will still result in the proposed disqualification
  • Notify the provider that they may continue to participate in the CACFP through the appeal deadline or, if an appeal is requested, until the hearing officer issues a decision

If the provider submits a CAD to the sponsor prior to or with a request for appeal, the sponsor may consider the CAD. If the sponsor determines that the CAD permanently corrects the SD findings, the sponsor may rescind the proposed termination and proposed disqualification actions and temporarily defer the SD determination.

A hearing official must be independent and impartial. Although the AR official may be an employee or board member of the sponsor, the hearing official must have no involvement in the action that is the subject of the AR or have a direct personal or financial interest in the outcome of the AR (7 CFR, Section 226.6[l][5][iv]).

If the request for appeal has been forwarded to the sponsor’s hearing officer, and the provider submits documentation to the hearing officer that the hearing officer identifies as an acceptable CAD, the hearing officer may refer the documentation back to the sponsor for their review and approval. If the sponsor accepts the provider’s documentation, the sponsor must notify the hearing officer in writing that the sponsor accepts the provider’s CAD. The hearing officer will then issue a letter to the sponsor and the provider that dismisses the appeal.

If the hearing officer determines that the sponsor’s findings are unsubstantiated or, without input from the sponsor, determines that the provider’s CAD permanently corrects the SD, the hearing officer may overturn the sponsor’s proposed actions. If the hearing officer determines that the sponsor has properly implemented the SD process and the provider has not provided adequate proof to overturn the proposed actions, the hearing officer must uphold the proposed actions.

In accordance with 7 CFR, Section 226.6(l)(5)(ii), “[t]he day care home may retain legal counsel, or may be represented by another person.” Therefore, if the provider is represented in an appeal by another person, the hearing official must be sure that all correspondence and communication pertaining to the appeal is done through the individual representing the provider. The hearing official must base their decision on the documents and testimony provided by the sponsor and the provider, on the applicable federal regulations, and on the applicable CDE and USDA guidance governing the CACFP. The hearing official must not issue a decision in favor of the provider based solely on the provider’s “promise” or “agreement” to abide by CACFP requirements. The hearing official’s decision must be issued to the sponsor and the provider within 30 days from the receipt date of the hearing request. The hearing official’s decision must include the documents reviewed, the legal basis, and the facts that support the decision. The decision issued by the hearing official is the final determination afforded to the provider (7 CFR, sections 226.6[l][5][v] and [vii]). A copy of the hearing official’s decision must be sent to the PIU.


Temporary Deferral of Serious Deficiency, Proposed Termination, and Proposed Disqualification After Provider Wins Appeal

If the hearing official overturns the sponsor’s proposed termination and proposed disqualification actions, the sponsor must issue one of the following:

  • Temporary Deferral of SD, Proposed Termination, and Proposed Disqualification (after provider wins appeal)
  • Temporary Deferral of SD, Suspension, Proposed Termination, and Proposed Disqualification: Imminent Threat to Health or Safety (after provider wins appeal)

The letter must be sent to the provider using a method of delivery that confirms receipt of the notice, and a copy of the notice must be sent to the PIU.

If the hearing official overturns the sponsor’s proposed termination and proposed disqualification actions and, in the future, the sponsor determines that the provider committed the same or a similar SD, the sponsor cannot move directly to proposed termination and proposed disqualification. Rather, the sponsor must implement the SD process from the beginning.


Agreement Termination and Disqualification

In accordance with 7 CFR, Section 226.16(l)(3)(v), if the provider does not submit a timely request for appeal, or if the hearing official upholds the sponsor’s proposed actions, the sponsor must immediately terminate the provider’s agreement to participate in the CACFP and disqualify the provider from future CACFP participation. If the hearing official upholds the sponsor’s proposed actions, the sponsor must issue to the provider one of the following:

  • Notice of Termination and Disqualification (after sponsor wins appeal)
  • Notice of Termination and Disqualification: Imminent Threat to Health or Safety (after sponsor wins appeal)

The letter must be sent to the provider using a method of delivery that confirms receipt of the notice, and a copy of the notice must be sent to the PIU.

The date of the termination and disqualification will be the date of the hearing official’s decision.

If the provider did not request an appeal, the sponsor must issue to the provider one of the following:

  • Notice of Termination and Disqualification (following failure to appeal)
  • Notice of Termination and Disqualification: Imminent Threat to Health or Safety (following failure to appeal)

The letter must be sent to the provider using a method of delivery that confirms receipt of the notice, and a copy of the notice must be sent to the PIU. The effective date will be the day after the appeal deadline.


Terminating Providers in the Child Nutrition Information and Payment System

The sponsor must access the CNIPS and terminate the provider on the date the sponsor: (1) determines a provider is terminated; or (2) receives the hearing officer’s decision to uphold the sponsor’s proposed termination action.

Sponsors must complete the following steps in the CNIPS to ensure that the provider is immediately identified as terminated and disqualified, which prevents the provider from joining another sponsor during any lapse of time before the sponsor notifies the CDE of the termination:

  • Access the CNIPS
  • Select Applications
  • Select Application Packet—DCH Sponsor
  • Select Provider Application(s)
  • Select Provider
  • Select Details
  • Drop Provider
  • Enter the cancellation date in the empty text box (this date is either the day after the appeal deadline or, in the case of an appeal, the date the hearing officer issues the decision)
  • Enter the cancellation code (select Provider Terminated)
  • Enter the cancellation reason (SD)
  • Select Save


Removal from the National Disqualified List

In accordance with 7 CFR, Section 226.6(c)(7)(v), once the provider is included on the NDL, the provider (responsible individual) remains on the list until such time as the CDE, in consultation with the USDA, determines that the SD that led to the provider’s placement on the list has been corrected, or until seven years have lapsed since he or she was disqualified from participation. However, if the provider failed to repay debts owed under the program, he or she will remain on the list until the debts are paid. The following process is used to remove a provider from the NDL prior to seven years:

  • The disqualified provider must submit a written request to be removed from the NDL to the sponsor that terminated and disqualified the provider. The request must include a CAD, detailing how and by when the provider will ensure compliance with federal regulations and program guidance. Note: If the sponsor does not accept the provider’s written request, the sponsor must respond to the provider in writing detailing why they denied the request.
  • If the sponsor agrees that the submitted documentation permanently corrects the SD(s), the sponsor must forward a written request to the PIU asking for the provider’s removal from the NDL. The request must include a copy of the provider’s written request and CAD.
  • If the CDE agrees with the sponsor’s request to remove the provider from the NDL, the CDE will forward a written request to the USDA Western Region Office (WRO) asking that the provider be removed from the NDL. The CDE’s request must include the sponsor’s written request and the provider’s written request and CAD.

    • Note: If the CDE does not accept the sponsor’s written request, the CDE will notify the sponsor in writing, detailing why the request is denied.

  • If the WRO does not accept the CDE’s request, the WRO will notify the CDE in writing, detailing why the request is denied.
  • If the WRO agrees with the CDE’s request to remove the provider from the NDL, the WRO will forward a request to the USDA National office. The request will include the CDE’s written request, the sponsor’s written request, and the provider’s written request and CAD.
  • If the National office does not accept the WRO’s request, the National office will notify the WRO in writing, detailing why the request is denied. The WRO will notify the CDE in writing, and the CDE will notify the sponsor in writing.
  • If the National office agrees with the WRO’s request to remove the provider from the NDL, the provider will be removed from the NDL and the National office will notify the WRO in writing.
  • The WRO will notify the CDE in writing, the CDE will notify the sponsor in writing, and the sponsor will notify the provider in writing.
  • Once the provider has been removed from the NDL, the provider may apply for participation in the CACFP.

References: 7 CFR, Section 226.16(l)(2); MB CACFP-05-2015: Updates to the SD Process—DCH Providers; USDA-CACFP-06-2010: SD Process—Day Care Homes Providers; NSD-CACFP-03-2008: DCH Provider Transfer Policy; USDA SD, Suspension, and Appeals for State Agencies and Sponsoring Organizations Handbook

Questions:   Nancy Charpentier | ncharpentier@cde.ca.gov | 916-327-2991
Last Reviewed: Tuesday, August 21, 2018
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