Promoting Stronger Program Integrity and Oversight in the CACFP

Why It Matters

State agencies play an important role in protecting the integrity of the CACFP and flagging potential instances of fraud, waste or abuse. State agencies provide direct oversight of independent centers and sponsoring organizations to ensure program funds are used properly. State agencies must implement the serious deficiency and suspension processes to address serious program mismanagement or misuse of funds. However, it is also important that State agencies provide flexibility for instances of unintentional human error.

In NCA’s response to the 2023 proposed rule Serious Deficiency Process in the Child and Adult Care Food Program and Summer Food Service Program, we stated that the serious deficiency process:

• should be used for truly serious and/or systemic management problems.
• should be applied fairly and consistently across all States.
• should NOT be used for findings resulting from inadvertent human error or unintentional administrative error, even if repeated.
• should be focused on serious mismanagement, abuse, and fraud by institutions and facilities participating in the program.
• should be limited to federal regulations only and not state-specific requirements.

The serious deficiency process is a crucial mechanism for addressing fraud, waste and abuse of the program, but there must be a clear differentiation between findings that rise to the level of serious deficiency and those that result from human error.

 

USDA Memo to State Directors

Dear State Directors,

In her first week at the U.S. Department of Agriculture (USDA), Secretary Brooke Rollins sent each of you a letter highlighting her priorities for the nutrition programs. In this letter, she noted her commitment to taking swift action to minimize instances of fraud, waste, and program abuse and encouraged States to choose policy options that protect both participants and the taxpayer. Under her leadership, and to fulfill that commitment, the Food and Nutrition Service (FNS) seeks your partnership in strengthening program integrity.

It is critically important for USDA’s nutrition assistance programs to serve American taxpayers as efficiently as possible. In the Child and Adult Care Food Program (CACFP), program integrity efforts ensure resources are invested wisely to maximize the benefit for eligible children and adults who receive care at participating child care centers, day care homes, and adult day care centers. Recent high-profile fraud cases have demonstrated the urgent need for stronger safeguards to restore and maintain public confidence in these programs. Although most program operators seek to comply with program rules in good faith, fraud—even when infrequent —undermines public confidence in government programs and jeopardizes their ability to serve the individuals who are in greatest need of assistance. Accordingly, FNS is committed to supporting State agency efforts to combat fraud, waste, and abuse. State agencies should make every effort to increase oversight of the CACFP through the strategies outlined below.

Use the onboarding process to help prevent bad actors from participating in CACFP. The onboarding process, along with routine renewing institution assessment, is the first line of defense in preventing bad actors from becoming participating institutions in the Program. In addition to current business integrity efforts, FNS encourages State agencies to:

• Complete background checks on new institutions’ principals for a more thorough review of their business history and standing. Deny an institution’s application if that institution’s principals received a conviction or civil judgment that indicates a lack of business integrity in the last seven years.
• Regularly reassess and revalidate an institution’s information included on the application using the most up-to-date approval criteria. Terminate agreements that fail to meet the criteria.

Training is a critical component of program integrity. To ensure institutions understand Program requirements and potential consequences of noncompliance, State agencies should prioritize sponsor training. FNS is committed to issuing a series of webinars and tipsheets containing resources to aid State agencies in identifying and handling serious deficiencies. Additionally, FNS encourages State agencies to:

• Review training schedules and materials to ensure timely, thorough, and effective training to all institutions.
• Train sponsoring organizations throughout the fiscal year. While State agencies have historically conducted trainings at or around the beginning of the fiscal year, this can lead to both inefficiencies and knowledge gaps as many sponsoring organizations experience a high level of staff turnover.

Monitoring, investigation, and corrective action are crucial for managing institutions. State agency oversight efforts remain critical for ensuring compliance with Program requirements. Routine monitoring helps State agencies identify the types and levels of abuse and errors across institutions and quickly respond by taking corrective actions, as appropriate. State agencies are required to monitor CACFP institutions at least once every three years3 and more frequently for high-risk institutions. State agencies must ensure that high-risk sponsoring organizations are prioritized for reviews. In addition, FNS recommends State agencies:

• Reassess methods for monitoring and investigations, including high-risk indicators, with a goal of surpassing the minimum.
• Ensure that written monitoring policies are up to date. This includes reviewing the criteria for monitoring sponsoring organizations for compliance, the criteria for determining which sponsoring organizations and independent centers will receive routine monitoring, and the procedures for routine monitoring visits.

States must use the serious deficiency and suspension process as required. It is the responsibility of the State agency to ensure sponsoring organizations are fulfilling their administrative responsibilities and maintaining records relating to the payment, review, and training of facilities under their sponsorship. FNS reminds State agencies of the following:

• State agencies must declare an institution seriously deficient if the State finds serious Program violations or issues of noncompliance at any time during the institution’s participation in CACFP. Use of the Serious Deficiency process is not optional.
• If the serious deficiencies involve the submission of a false or fraudulent claim for reimbursement, the State agency must use the steps outlined in regulations5 to swiftly remove fraudulent sponsoring organizations from the Program.

Carefully review reimbursement claims for signs of program abuse. State agencies must subject all reimbursement claims to a minimum set of edit checks to guard against fraud. These include basic checks to ensure sponsoring organizations only claim reimbursement for approved meal types, and that meal claims do not exceed a maximum based on enrollment and operating days. FNS encourages State agencies to monitor claims for other early warning signs indicating mismanagement or possible abuse. These can include:

• Monitoring growth over time. State agencies should be sensitive to any sudden increase in meal claims, or sustained growth over a longer period, that is inconsistent with growth observed in other sponsoring organization’s claims.
• Comparing meal claims to other data for plausibility. State agencies should flag for follow-up review any claims that appear disproportionate to known sources of demand for child care services. This may include nearby school enrollment data or historic meal claims for the local area in question.

 

Read the full USDA memo: Promoting Stronger Program Integrity and Oversight in the Child and Adult Care Food Program.