Proposed Rule: Serious Deficiency Process in the CACFP & SFSP
February 21, 2024
USDA released a proposed rule for updating the Serious Deficiency process in the CACFP and SFSP. This rulemaking proposes to:
- Change the finding of serious deficiency from occurring at the start of the serious deficiency process to the point of termination.
- Trigger the serious deficiency process with a finding of a “serious management problem,” rather than a “serious deficiency.”
- Allow program operators the opportunity to correct serious management problems.
- Remove, rather than merely defer, a determination of serious deficiency if the serious management problem is “fully corrected.”
- Update the timeline for when a recurring serious management problem results in a Serious Deficiency determination. Once full correction is achieved recurring serious management problems will not immediately result in a Serious Deficiency determination.
- Extend the serious deficiency process to unaffiliated centers and adult day care centers in the CACFP, as well as to program operators in the SFSP.
- Add new and update current definitions.
USDA is accepting comments until May 21, 2024.
The USDA hosted a webinar about the proposed updates to the Serious Deficiency process on March 7, 2024. This webinar is available to view on demand for free.
Why it Matters
The serious deficiency process was created to help protect the integrity of child nutrition programs. However, current regulations for serious deficiency leave program operators without the opportunity to remove serious deficiency determination, even when they have successfully implemented a corrective action plan. Instead, program operators can only have serious deficiency determinations temporarily deferred, so any recurring issue immediately leads to termination and disqualification. Updates proposed in this rulemaking would adjust the serious deficiency process so that program operators can fully correct any serious management issues and return to good standing. FNS is also proposing multiple updates to improve the clarity and understanding of the serious deficiency process.
Stages of Proposed Serious Deficiency Process
Stage 1: A serious management problem is identified and the program operator is notified.
Stage 2: Program operator submits a corrective action plan (CAP), which is then approved by the sponsor or state agency.
- Day care homes and unaffiliated centers must submit a CAP within 30 days of notice.
- Sponsoring organizations and independent centers must submit CAP within:
- up to 30 days for a false claim or unlawful practice,
- up to 90 days for correction of other problems, or
- more than 90 days for management system or process changes.
- SFSP sponsoring organizations must submit a CAP within 10 days of notice.
Stage 3: The CAP is implemented, the program operator returns to good standing, and the operator is reviewed to ensure there are no new or recurring serious management problems.
- Day care homes and unaffiliated centers are reviewed at the same frequency as usual (3 times a year). After three consecutive reviews their serious deficiency status will be reconsidered.
- Sponsoring organizations and independent centers must be fully reviewed once every 2 years and at least 24 months apart.
- SFSP sponsoring organizations must have two consecutive full reviews each year for two years and at least 12 months apart.
Stage 4: If there are no new or repeat serious management problems found during the required review process, the problems are considered fully corrected and the serious deficiency is vacated.
Summary Proposed Changes for Serious Deficiency
| Existing Process | Proposed Changes | |
| Establish a Serious Deficiency Process for SFSP and Extending the Process to CACFP Unaffiliated Sponsored Centers | No serious deficiency process in regulations for SFSP sponsors and CACFP unaffiliated sponsored centers. | Establishes a serious deficiency process for SFSP sponsors.
Extends the serious deficiency process to CACFP unaffiliated sponsored centers. |
| Serious Deficiency Determination in CACFP & SFSP | A CACFP institution or day care home is reviewed by the administering agency. The administering agency identifies findings that rise to the level of serious deficiencies.
Findings that trigger the serious deficiency process in CACFP are known as serious deficiencies. Findings characterized as administrative weaknesses are known as ‘significant operational problems’ in SFSP. |
A CACFP institution, CACFP day care home or SFSP sponsor is declared seriously deficient at the point of termination from the program.
Findings that trigger the serious deficiency process in CACFP and SFSP are defined as serious management problems. Replace the term “significant operational problems” in SFSP regulations with the term “serious management problems” to ensure consistency. |
| Identifying Serious Management Problems | Current SFSP and CACFP regulations list out types of serious deficiencies. | Remove the list of serious deficiencies in CACFP and SFSP regulations.
The analysis process outlined in the Serious Deficiency Handbook is codified and requires administering agencies to conduct an analysis to identifying serious management problems. |
| Corrective Action Plan (CAP) | Once serious deficiencies are identified, the administering agency issues a notice of serious deficiency and an opportunity to submit a corrective action plan (CAP). The administering agency must approve the CAP and the CAP must be implemented for the serious deficiency to be temporarily deferred.
If the CAP is not submitted, approved, and implemented, the administering agency must move to termination and disqualification procedures. |
Once serious management problems are identified, the administering agency issues a notice of serious deficiency and an opportunity to submit a corrective action plan (CAP). The administering agency must approve the CAP and the CAP must be implemented for the serious deficiency to be vacated.
If the CAP is not submitted, approved, and implemented, the administering agency must move to termination and disqualification procedures. |
| Full Correction for CACFP Sponsors and Independent Centers | If a CAP is approved and implemented, the CACFP institution’s serious deficiencies are considered fully and permanently corrected and the serious deficiency status is temporarily deferred.
If a repeat serious deficiency occurs, the state agency moves to termination and disqualification. There are no parameters set out in regulations around when a serious deficiency is considered repeat. Fully and permanently corrected is not defined in regulations. CACFP institutions with less than 100 facilities are reviewed once every 3 years. CACFP institutions with than100 facilities or more are reviewed once every 2 years. |
Establishes parameters for achieving full correction of serious management problems.
If a CAP is approved and implemented, the CACFP institution is reviewed more frequently and at least once every 2 years and at least 24 months apart. The institution remains on this 2-year cycle until it can demonstrate that it has achieved full correction. Once serious management problems are fully corrected, the serious management problems would be considered vacated, not deferred. Therefore, temporary deferment is no longer applicable. If new serious management problems are identified before the institution demonstrates full correction of the initial serious management problem, the institution will remain on a more frequent review cycle and it must demonstrate full correction of all serious management problems. If a serious management problem is repeated before the institution demonstrated full correction, the state agency must move to terminate and disqualify the institution. Serious management problems that occur after the institution has demonstrated full correction would not be considered repeat, and therefore would not lead to termination. Instead, the serious management problem would trigger the start of a new serious deficiency process, and therefore would be subject to more frequent reviews. |
| Full Correction for SFSP Sponsors | No serious deficiency process set out in regulations. | Follows the same framework as CACFP institutions with the exception of the frequency of reviews and timeframe for achieving full correction.
If a CAP is approved and implemented, the SFSP sponsor is reviewed more frequently and at least once every year. The sponsor remains on this yearly cycle until it can demonstrate that it has achieved full correction. Full correction is achieved when at least 2 full reviews, occurring at least once every year and at least 12 months apart, reveal no new or repeat serious management problems. |
| Full Correction for Family Day Care Homes and Unaffiliated Centers | Family day care homes follow the same regulations as sponsoring organizations and independent centers.
There is no serious deficiency process for CACFP unaffiliated sponsored centers set out in regulations. |
The path to full correction for day care homes and unaffiliated centers follows the same framework for CACFP institutions and SFSP sponsors, with the exception of frequency of reviews and timeframe for achieving full correction.
If a CAP is approved and implemented, the day care home or unaffiliated center is reviewed at the same frequency as existing regulations. Unlike the process for CACFP institutions and SFSP sponsors, unaffiliated centers and day care homes are not reviewed more frequently once a serious management problem is identified. Full correction is achieved when at least three consecutive full reviews reveal no new or repeat serious management problems. |
| Reciprocal Disqualification in all Child Nutrition Programs | No reciprocal disqualification process set out in regulations. | Establishes a reciprocal disqualification process that prohibits state agencies from approving an application for any program operator that is terminated for cause from a Child Nutrition Program (CNP) and placed on a National Disqualified List (NDL).
The state agency must deny application for any Child Nutrition Program if the applicant has been terminated for cause and the applicant is on the NDL for CACFP or SFSP. For any program operator with an existing program agreement, the administering agency must terminate and disqualify the program operator when it is determined that the program operator participating in a different CNP was terminated for cause. |
| Suspension | In CACFP, state agencies have discretion to implement the suspension process for false or fraudulent claims.
There is no suspension process in SFSP. |
State agencies MUST suspend a CACFP institution’s participation if the institution has submitted false or fraudulent claims.
Two options are proposed for consideration on suspension in SFSP. |
| Good Standing | There is no definition of ‘good standing’ in regulations. | Defines good standing. Good standing means the status of a program operator that meets its Program responsibilities, is current with its financial obligations, and if applicable, has fully implemented all corrective actions with the required period of time.
Full correction does not need to be achieved to return to ‘good standing,’ but all corrective actions must be fully implemented. |
| National Disqualified List | State agencies and sponsoring organizations may access the National Disqualified List (NDL). Sponsoring organizations obtain eAuthentication level one clearance and can view the NDL with all personally identifiable information (PII) removed. They cannot manipulate any data in the system. If the sponsoring organization finds a match, they may need to confirm with the state agency. | Extends NDL Access to SFSP Sponsors. This option would allow sponsor access for SFSP with eAuthentication level one access (the same process that currently exists for CACFP sponsoring organizations). |
| Multi-State Sponsoring Organizations (MSSOs) | State agencies and Regional Offices apply existing, but outdated, guidance when working with MSSOs. | Defines MSSOs in both CACFP and SFSP regulations. MSSO means a sponsor or sponsoring organization that operators more than one site or facility in more than one state.
Requires state agencies to ask all applicants if they are operating or intend to operate in another state. Addresses responsibilities of the cognizant state agency, which is the agency responsible for oversight of SFSP and CACFP in the state where the MSSO’s headquarters are located. Clarifies monitoring and program oversight for all state agencies that have sites or facilities participating under the auspices of an MSSO. |
Hear from USDA about the proposed changes to the Serious Deficiency Process at our free webinar on March 7th at 2:00 pm Eastern. We invite NCA members to join us immediately afterwards for an Ask Us Anything.
To read more about the proposed revisions, read Serious Deficiency Process in the Child and Adult Care Food Program and Summer Food Service Program. You can also reference USDA’s Explanation of Changes in the CACFP and SFSP Serious Deficiency Proposed Rule. Check out a flow chart of the proposed process with NCA recommendations.
To provide comments on the proposed rule, visit regulations.gov. NCA will be sharing model comments in May.