CHILD AND ADULT CARE FOOD PROGRAM INTEGRITY.

SEC. 243. CHILD AND ADULT CARE FOOD PROGRAM INTEGRITY. (a) Definition of Institution; Exclusion of Seriously Deficient Institutions.—Section 17(a) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(a)) is amended— (1) by striking “(a) The Secretary” and inserting the following: “(a) Grant Authority and Institution Eligibility.— “(1) Grant authority.—The Secretary”; (2) by striking the second and third sentences and inserting the following: “(2) Definition of institution.—In this section, the term ‘institution’ means— “(A) any public or private nonprofit organization providing nonresidential child care or day care outside school hours for school children, including any child care center, settlement house, recreational center, Head Start center, and institution providing child care facilities for children with disabilities; “(B) any other private organization providing non-residential child care or day care outside school hours for school children for which the organization receives compensation from amounts granted to the States under title XX of the Social Security Act (42 U.S.C. 1397 et seq.) (but only if the organization receives compensation under 114 STAT. 414 that title for at least 25 percent of its enrolled children or 25 percent of its licensed capacity, whichever is less); “(C) any public or private nonprofit organization acting as a sponsoring organization for one or more of the organizations described in subparagraph (A) or (B) or for an adult day care center (as defined in subsection (o)(2)); “(D) any other private organization acting as a sponsoring organization for, and that is part of the same legal entity as, one or more organizations that are— “(i) described in subparagraph (B); or “(ii) proprietary title XIX or title XX centers (as defined in subsection (o)(2)); “(E) any public or private nonprofit organization acting as a sponsoring organization for one or more family or group day care homes; and “(F) any emergency shelter (as defined in subsection (t)).”; (3) by striking “Except as provided in subsection (r),” and inserting the following: “(3) Age limit.—Except as provided in subsection (r),”; (4) by striking “The Secretary may establish separate guidelines” and inserting the following: “(4) Additional guidelines.—The Secretary may establish separate guidelines”; (5) by striking “For purposes of determining” and all that follows through “an institution” and inserting the following: “(5) Licensing.—In order to be eligible, an institution”; and (6) by striking “standards; and” and inserting “standards.”; (7) by striking “(2) no institution” and inserting the following: “(6) Eligibility criteria.—No institution”; and (8) in paragraph (6) (as so designated)— (A) in subparagraph (B), by inserting “, or has not been determined to be ineligible to participate in any other publicly funded program by reason of violation of the requirements of the program” before “, for a period”; (B) in subparagraph (C)— (i) by inserting “(i)” after “(C)”; and (ii) by adding at the end the following: “(ii) in the case of a sponsoring organization, the organization shall employ an appropriate number of monitoring personnel based on the number and characteristics of child care centers and family or group day care homes sponsored by the organization, as approved by the State (in accordance with regulations promulgated by the Secretary), to ensure effective oversight of the operations of the child care centers and family or group day care homes; and”; (C) in subparagraph (D), by striking the period and inserting a semicolon; and (D) by adding at the end the following: “(E) in the case of a sponsoring organization, the organization has in effect a policy that restricts other employment by employees that interferes with the responsibilities and duties of the employees of the organization with respect to the program; and 114 STAT. 415 “(F) in the case of a sponsoring organization that applies for initial participation in the program on or after the date of the enactment of this subparagraph and that operates in a State that requires such institutions to be bonded under State law, regulation, or policy, the institution is bonded in accordance with such law, regulation, or policy.”. (b) Institution Approval and Applications.— (1) In general.—Section 17(d) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)) is amended by striking the subsection designation and all that follows through the end of paragraph (1) and inserting the following: “(d) Institution Approval and Applications.— “(1) Institution approval.— “(A) Administrative capability.—Subject to subparagraph (B) and except as provided in subparagraph (C), the State agency shall approve an institution that meets the requirements of this section for participation in the child and adult care food program if the State agency determines that the institution— “(i) is financially viable; “(ii) is administratively capable of operating the program (including whether the sponsoring organization has business experience and management plans appropriate to operate the program) described in the application of the institution; and “(iii) has internal controls in effect to ensure program accountability. “(B) Approval of private institutions.— “(i) In general.—In addition to the requirements established by subparagraph (A) and subject to clause (ii), the State agency shall approve a private institution that meets the requirements of this section for participation in the child and adult care food program only if— “(I) the State agency conducts a satisfactory visit to the institution before approving the participation of the institution in the program; and “(II) the institution— “(aa) has tax exempt status under the Internal Revenue Code of 1986; “(bb) is operating a Federal program requiring nonprofit status to participate in the program; or “(cc) is described in subsection (a)(2)(B). “(ii) Exception for family or group day care homes.—Clause (i) shall not apply to a family or group day care home. “(C) Exception for certain sponsoring organizations.— “(i) In general.—The State agency may approve an eligible institution acting as a sponsoring organization for one or more family or group day care homes or centers that, at the time of application, is not participating in the child and adult care food program only if the State agency determines that— 114 STAT. 416 “(I) the institution meets the requirements established by subparagraphs (A) and (B); and “(II) the participation of the institution will help to ensure the delivery of benefits to otherwise unserved family or group day care homes or centers or to unserved children in an area. “(ii) Criteria for selection.—The State agency shall establish criteria for approving an eligible institution acting as a sponsoring organization for one or more family or group day care homes or centers that, at the time of application, is not participating in the child and adult care food program for the purpose of determining if the participation of the institution will help ensure the delivery of benefits to otherwise unserved family or group day care homes or centers or to unserved children in an area. “(D) Notification to applicants.—Not later than 30 days after the date on which an applicant institution files a completed application with the State agency, the State agency shall notify the applicant institution whether the institution has been approved or disapproved to participate in the child and adult care food program.”. (2) Site visits.—Section 17(d)(2)(A) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)(2)(A)) is amended— (A) in clause (i), by striking “; and” and inserting a semicolon; (B) by redesignating clause (ii) as clause (iii); and (C) by inserting after clause (i) the following: “(ii)(I) requires periodic unannounced site visits at not less than 3-year intervals to sponsored child care centers and family or group day care homes to identify and prevent management deficiencies and fraud and abuse under the program; “(II) requires at least one scheduled site visit each year to sponsored child care centers and family or group day care homes to identify and prevent management deficiencies and fraud and abuse under the program and to improve program operations; and “(III) requires at least one scheduled site visit at not less than 3-year intervals to sponsoring organizations and nonsponsored child care centers to identify and prevent management deficiencies and fraud and abuse under the program and to improve program operations; and”. (3) Conforming amendment.—Section 17(d)(2)(B) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)(2)(B)) is amended by striking “subsection (a)(1)” and inserting “subsection (a)(5)”. (4) Program information.— (A) In general.—Section 17(d) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)) is amended by adding at the end the following: “(3) Program information.— “(A) In general.—On enrollment of a child in a sponsored child care center or family or group day care home participating in the program, the center or home (or its sponsoring organization) shall provide to the child's parents or guardians— 114 STAT. 417 “(i) information that describes the program and its benefits; and “(ii) the name and telephone number of the sponsoring organization of the center or home and the State agency involved in the operation of the program. “(B) Form.—The information described in subparagraph (A) shall be in a form and, to the maximum extent practicable, language easily understandable by the child’s parents or guardians.”. (B) Effective date.—In the case of a child that is enrolled in a sponsored child care center or family or group day care home participating in the child and adult care food program under section 17 of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766) before the date of the enactment of this Act, the center or home shall provide information to the child’s parents or guardians pursuant to section 17(d)(3) of that Act, as added by subparagraph (A), not later than 90 days after the date of the enactment of this Act. (5) Allowable administrative expenses for sponsoring organizations.—Section 17(d) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)), as amended by paragraph (4)(A), is amended by adding at the end the following: “(4) Allowable administrative expenses for sponsoring organizations.—In consultation with State agencies and sponsoring organizations, the Secretary shall develop, and provide for the dissemination to State agencies and sponsoring organizations of, a list of allowable reimbursable administrative expenses for sponsoring organizations under the program.”. (c) Termination or Suspension of Participating Organizations.—Section 17(d) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(d)), as amended by subsection (b)(5), is amended by adding at the end the following: “(5) Termination or suspension of participating organizations.— “(A) In general.—The Secretary shall establish procedures for the termination of participation by institutions and family or group day care homes under the program. “(B) Standards.—Procedures established pursuant to subparagraph (A) shall include standards for terminating the participation of an institution or family or group day care home that— “(i) engages in unlawful practices, falsifies information provided to the State agency, or conceals a criminal background; or “(ii) substantially fails to fulfill the terms of its agreement with the State agency. “(C) Corrective action.—Procedures established pursuant to subparagraph (A)— “(i) shall require an entity described in subparagraph (B) to undertake corrective action; and “(ii) may require the immediate suspension of operation of the program by an entity described in subparagraph (B), without the opportunity for corrective action, if the State agency determines that there is imminent threat to the health or safety of a participant at the 114 STAT. 418 entity or the entity engages in any activity that poses a threat to public health or safety. “(D) Hearing.—An institution or family or group day care home shall be provided a fair hearing in accordance with subsection (e)(1) prior to any determination to terminate participation by the institution or family or group day care home under the program. “(E) List of disqualified institutions and individuals.— “(i) In general.—The Secretary shall maintain a list of institutions, sponsored family or group day care homes, and individuals that have been terminated or otherwise disqualified from participation in the program. “(ii) Availability.—The Secretary shall make the list available to State agencies for use in approving or renewing applications by institutions, sponsored family or group day care homes, and individuals for participation in the program.”. (d) Recovery of Amounts From Institutions.—Section 17(f)(1) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(f)(1)) is amended— (1) by striking “(f)(1) Funds paid” and inserting the following: “(f) State Disbursements to Institutions.— “(1) In general.— “(A) Requirement.—Funds paid”; and (2) by adding at the end the following: “(B) Fraud or abuse.— “(i) In general.—The State may recover funds disbursed under subparagraph (A) to an institution if the State determines that the institution has engaged in fraud or abuse with respect to the program or has submitted an invalid claim for reimbursement. “(ii) Payment.—Amounts recovered under clause (i)— “(I) may be paid by the institution to the State over a period of one or more years; and “(II) shall not be paid from funds used to provide meals and supplements. “(iii) Hearing.—An institution shall be provided a fair hearing in accordance with subsection (e)(1) prior to any determination to recover funds under this subparagraph.”. (e) Limitation on Administrative Expenses for Certain Sponsoring Organizations.—Section 17(f)(2) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(f)(2)) is amended by adding at the end the following: “(C) Limitation on administrative expenses for certain sponsoring organizations.— “(i) In general.—Except as provided in clause (ii), a sponsoring organization of a day care center may reserve not more than 15 percent of the funds provided under paragraph (1) for the administrative expenses of the organization. “(ii) Waiver.—A State may waive the requirement in clause (i) with respect to a sponsoring organization 114 STAT. 419 if the organization provides justification to the State that the organization requires funds in excess of 15 percent of the funds provided under paragraph (1) to pay the administrative expenses of the organization.”. (f) Limitations on Ability of Family or Group Day Care Homes to Transfer Sponsoring Organizations.—Section 17(f)(3) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(f)(3)) is amended by striking subparagraph (D) and inserting the following: “(D) Limitations on ability of family or group day care homes to transfer sponsoring organizations.— “(i) In general.—Subject to clause (ii), a State agency shall limit the ability of a family or group day care home to transfer from a sponsoring organization to another sponsoring organization more frequently than once a year. “(ii) Good cause.—The State agency may permit or require a family or group day care home to transfer from a sponsoring organization to another sponsoring organization more frequently than once a year for good cause (as determined by the State agency), including circumstances in which the sponsoring organization of the family or group day care home ceases to participate in the child and adult care food program.”. (g) State-wide Demonstration Projects Involving Private For-Profit Organizations That Provide Nonresidential Day Care Services.— (1) In general.—Section 17(p) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(p)) is amended— (A) in the first sentence of paragraph (1), by striking “2 statewide demonstration projects” and inserting “Statewide demonstration projects in three States”; and (B) in paragraph (3)— (i) by inserting “in” after “subsection”; (ii) in subparagraph (A), by striking “and” at the end; (iii) in subparagraph (B), by striking the period at the end and inserting “, and”; and (iv) by adding at the end the following: “(C) one other State— “(i) with fewer than 60,000 children below 5 years of age; “(ii) that serves more than the national average proportion of children potentially eligible for assistance provided under the Child Care and Development Fund (as indicated in data published by the Department of Health and Human Services in October 1999); “(iii) that exempts all families from cost sharing requirements under programs funded by the Child Care and Development Fund; and “(iv) in which State spending represents more than 50 percent of total expenditures made under the Child Care and Development Fund.”. (2) Effective date.—The Secretary may carry out demonstration projects in the State described in section 17(p)(3)(C) of the Richard B. Russell National School Lunch Act, as added 114 STAT. 420 by paragraph (1)(B)(iv), beginning not earlier than October 1, 2001. (h) Technical and Training Assistance for Identification and Prevention of Fraud and Abuse.—Section 17(q) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(q)) is amended— (1) by redesignating paragraph (2) as paragraph (3); and (2) by inserting after paragraph (1) the following: “(2) Technical and training assistance for identification and prevention of fraud and abuse.—As part of training and technical assistance provided under paragraph (1), the Secretary shall provide training on a continuous basis to State agencies, and shall ensure that such training is provided to sponsoring organizations, for the identification and prevention of fraud and abuse under the program and to improve management of the program.”. (i) Program for At-Risk School Children.—Section 17(r) of the Richard B. Russell National School Lunch Act (42 U.S.C. 1766(r)) is amended— (1) in paragraph (2), by inserting “meals or” before “supplements”; (2) in paragraph (4)— (A) in the heading, by striking “Supplement” and inserting “Meal and supplement”; (B) in subparagraph (A)— (i) by striking “only for” and all that follows through “(i) a supplement” and inserting “only for one meal per child per day and one supplement per child per day”; (ii) by striking “; and” and inserting a period; and (iii) by striking clause (ii); (C) in subparagraph (B), by striking “Rate.—A supplement” and inserting the following: “Rates.— “(i) Meals.—A meal shall be reimbursed under this subsection at the rate established for free meals under subsection (c). “(ii) Supplements.—A supplement”; and (D) in subparagraph (C), by inserting “meal or” before “supplement”; and (3) by adding at the end the following: “(5) Limitation.—The Secretary shall limit reimbursement under this subsection for meals served under a program to institutions located in six States, of which four States shall be Pennsylvania, Missouri, Delaware, and Michigan and two States shall be approved by the Secretary through a competitive application process.”. (j) Withholding of Funds for Failure to Provide Sufficient Training, Technical Assistance, and Monitoring.—Section 7(a)(9)(A) of the Child Nutrition Act of 1966 (42 U.S.C. 1776(a)(9)(A)) is amended by inserting after “the Richard B. Russell National School Lunch Act (42 U.S.C. 1751 et seq.)” the following: “(including any requirement to provide sufficient training, technical assistance, and monitoring of the child and adult care food program under section 17 of that Act (42 U.S.C. 1766))”.