CACFP Administrative Manual Section 15.2

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Terms, Definitions, and Acronyms

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 seven 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 program violations or issues of noncompliance with CACFP rules require 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 page contains details for how sponsors identify violations to declare a provider as SD as well as template letters for all required notices in the SD process. 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

DCH sponsors should consider the following questions in deciding if the violation should be a serious deficiency:

• The severity of the problem. Is the noncompliance on a minor or substantial scale? Are the violations a recurring problem? Are the problems systematic?


• The degree of provider responsibility. Can the sponsoring organization determine whether the violations were inadvertent errors of an otherwise responsible DCH provider? Is there evidence of negligence or conscious indifference to regulatory requirements? Is there evidence of deception or intentional noncompliance?


• The provider’s history of participation. Are problems of noncompliance frequently recurring?


• The nature of the requirements that relate to the problem. Are the violations a clear violation of the program requirements? Has the provider failed to implement new CACFP policies appropriately?


• The degree to which the problem impacts program integrity. Are the violations undermining the intent or purpose of the CACFP?

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 CDSS CACFP Branch's 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 Plan

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

Providers must submit a CAP that includes the following:

• The provider’s full name, address, and date of birth


• Details for each of the serious deficiencies


• What are the serious deficiencies and the procedures that were implemented to address the serious deficiencies?
• Who addressed the serious deficiencies? List DCH personnel responsible for each task
• When was the procedure for addressing the serious deficiencies implemented? Provide a timeline for implementing the procedure (if necessary).
• Where is the CAP documentation retained?
• How will the provider ensure that the CAP corrects the deficiency and continues to be implemented?



A successful CAP has enough detail explaining what will be done, how it will be done, when it will be done, and by whom it will be done. The CAP also describes where the changes will be housed, for example, maintained in the DCH provider’s administrative procedures manual.

DCH providers must include additional supporting documentation with the CAP which may include copies of income eligibility forms, enrollment forms, enrollment rosters, menus, Child Nutrition labels or manufacturers’ product analysis sheets or recipes, attendance records, meal count forms, itemized food receipts, etc.

Outcome of Corrective Action Plan Review

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 deferral 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 plan within the time allotted)


• Offer the provider the opportunity for an administrative review (appeal) of the decision proposing termination and include a copy of appeal 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



Administrative Review (Appeal)

If the provider submits a CAP to the sponsor prior to or with a request for appeal, the sponsor may consider the CAP. If the sponsor determines that the CAP 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 appeal 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 appeal or have a direct personal or financial interest in the outcome of the appeal (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 CAP, 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 CAP. 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 CDSS 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


• Temporary Deferral of SD, Suspension, Proposed Termination, and Proposed Disqualification: Imminent Threat to Health or Safety



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 should proceed directly to proposed termination and proposed disqualification.

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.

The CDSS will send the termination notice and DCH provider information to the USDA Food and Nutrition Service (FNS) for placement on the National Disqualified List (NDL).

If the DCH provider corrects the serious deficiencies and pays in full any debts owed, the DCH provider may request to be removed from the NDL. See the Removal from the NDL section of this page for more information.

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 CDSS 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 NDL for seven years or until any outstanding debt is fully repaid, whichever is longer. When both the seven years has passed, and any debt, if applicable, is repaid the DCH provider will be automatically removed from the NDL and may again apply to participate in the CACFP.

DCH providers currently on the NDL who have completed acceptable corrective action and payed off any debts may submit a request for early removal from the NDL. See below for instructions regarding three different situations in which a provider is requesting removal from the NDL.

1. Terminating sponsor requesting NDL removal for a provider that they were responsible for terminating and disqualifying:


1. 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 CAP 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.


2. If the sponsor agrees that the submitted documentation permanently corrects the serious deficiency, the sponsor must forward a written request to the CDSS, asking that the provider be removed from the NDL. The request must include a copy of the provider’s written request and CAP.


3. If the CDSS or the USDA does not accept the sponsor’s written request, the CDSS will notify the sponsor in writing detailing why the request is denied.


4. If the CDSS and the USDA agree to remove the provider from the NDL, the provider will be removed from the NDL. The CDSS will notify the sponsor in writing, and the sponsor must notify the provider in writing.


5. Once the provider has been removed from the NDL, the provider may apply for participation in the CACFP.


2. New potential sponsor requesting NDL removal for a provider that they were not responsible for terminating and disqualifying:


1. The new potential sponsor wishing to add a provider that has been terminated and disqualified by another sponsor must contact the CDSS. The CDSS will provide the new potential sponsor with documentation from the terminating sponsor related to the provider’s serious deficiencies.


2. If, after review of the serious deficiency documentation, the new potential sponsor is interested in adding the terminated provider to their program, the potential sponsor must require that the provider submit a CAP. Note: If the CAP submitted by the provider is not considered acceptable by the new potential sponsor, they must notify the provider in writing.


3. If the new potential sponsor accepts the provider’s CAP, they will forward a written request to the CDSS asking that the provider be removed from the NDL. The request must include a copy of the provider’s CAP.


4. If the CDSS or the USDA does not accept the sponsor’s written request, the CDSS will notify the potential sponsor in writing detailing why the request is denied.


5. If the CDSS and the USDA agree to remove the provider from the NDL, the provider will be removed from the NDL. The CDSS will notify the sponsor in writing, and the sponsor must notify the provider in writing.


6. Once the provider has been removed from the NDL, the provider may apply for participation in the CACFP.


3. Provider currently living in California was terminated and disqualified by a sponsor in another state and wants to be removed from the NDL to join a new sponsor:


1. The new potential sponsor wishing to add a provider that has been terminated and disqualified by a sponsor in another state must contact the CDSS. The CDE will contact the USDA’s Western Regional Office to request information on the serious deficiencies that led to the provider’s termination and disqualification in another state.


2. The CDSS will forward the information provided by the USDA to the new potential sponsor. If, after review of the serious deficiency documentation, the new potential sponsor is interested in adding the terminated provider to their program, the new potential sponsor must require that the provider submit a CAP. Note: If the CAP submitted by the provider is not considered acceptable by the new potential sponsor, the sponsor must notify the provider in writing.


3. If the new potential sponsor accepts the provider’s CAP, the sponsor will forward a written request to the CDSS asking the provider be removed from the NDL. The request must include a copy of the provider’s CAP.


4. If the CDSS or the USDA does not accept the sponsor’s written request, the CDSS will notify the sponsor in writing detailing why the request is denied.


5. If the CDSS and the USDA agree to remove the provider from the NDL, the provider will be removed from the NDL. The CDSS will notify the sponsor in writing, and the sponsor must notify the provider in writing.


6. Once the provider has been removed from the NDL, the provider may apply for participation in the CACFP.



Please note: A sponsor is not required to seek removal of a terminated and disqualified provider from the NDL prior to seven years. sponsors may evaluate a request on a case-by-case basis or implement a policy that is communicated to enrolled providers which states that their organization will not consider early removals from the NDL.

A provider who wishes to be removed from the NDL but does not have either the terminating sponsor or a potential new sponsor’s support will not have the opportunity to be removed from the NDL prior to seven years. The CDSS will not take requests for removal from the NDL directly from the provider.

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




This institution is an equal opportunity provider.
Esta institución es un proveedor que ofrece igualdad de oportunidades.