Attachment B. State Administrative Expense Funds Regulations 7 CFR Part 235

Attachment B State Administrative Expense Funds Regulations 7 CFR Part 235
7 CFR Part 235 (up to date as of 7/25/2022)
State Administrative Expense Funds

7 CFR Part 235

This content is from the eCFR and is authoritative but unofficial.

Title 7 - Agriculture
Subtitle B - Regulations of the Department of Agriculture
Chapter II - Food and Nutrition Service, Department of Agriculture
Subchapter A - Child Nutrition Programs

Part 235 State Administrative Expense Funds
§ 235.1 General purpose and scope.
§ 235.2 Definitions.
§ 235.3 Administration.
§ 235.4 Allocation of funds to States.
§ 235.5 Payments to States.
§ 235.6 Use of funds.
§ 235.7 Records and reports.
§ 235.8 Management evaluations and audits.
§ 235.9 Procurement and property management standards.
§ 235.10 [Reserved]
§ 235.11 Other provisions.
§ 235.12 Information collection/recordkeeping - OMB assigned control numbers.

PART 235 - STATE ADMINISTRATIVE EXPENSE FUNDS
Authority: Secs. 7 and 10 of the Child Nutrition Act of 1966, 80 Stat. 888, 889, as amended (42 U.S.C. 1776, 1779).
Source: 41 FR 32405, Aug. 3, 1976, unless otherwise noted.

§ 235.1 General purpose and scope.
This part announces the policies and prescribes the regulations necessary to carry out the provisions of section 7
of the Child Nutrition Act of 1966, as amended. It prescribes the methods for making payments of funds to State
agencies for use for administrative expenses incurred in supervising and giving technical assistance in connection
with activities undertaken by them under the National School Lunch Program (7 CFR part 210), the Special Milk
Program (7 CFR part 215), the School Breakfast Program (7 CFR part 220), the Child and Adult Care Food Program
(7 CFR part 226) and the Food Distribution Program (7 CFR part 250).
(Sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776))
[44 FR 51185, Aug. 31, 1979, as amended by Amdt. 17, 55 FR 1378, Jan. 16, 1990; 60 FR 15461, Mar. 24, 1995]

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7 CFR 235.2

§ 235.2 Definitions.
For the purpose of this part, the term:
2 CFR part 200, means the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for
Federal Awards published by OMB. The part reference covers applicable: Acronyms and Definitions
(subpart A), General Provisions (subpart B), Post Federal Award Requirements (subpart D), Cost
Principles (subpart E), and Audit Requirements (subpart F). (NOTE: Pre-Federal Award Requirements and
Contents of Federal Awards (subpart C) does not apply to the National School Lunch Program).
Act

means the Child Nutrition Act of 1966, as amended.

CND means the Child Nutrition Division of the Food and Nutrition Service of the U.S. Department of Agriculture.
Department means the U.S. Department of Agriculture.
Distributing agency means a State agency which enters into an agreement with the Department for the
distribution of donated foods pursuant to part 250 of this title.
FNS

means the Food and Nutrition Service of the U.S. Department of Agriculture.

FNSRO means the appropriate Food and Nutrition Service Regional Office of the Food and Nutrition Service of
the U.S. Department of Agriculture.
Fiscal year means a period of 12 calendar months beginning October 1, 1976, and October 1 of each calendar
year thereafter and ending with September 30 of the following calendar year.
Institution means a child or adult care center or a sponsoring organization as defined in part 226 of this chapter.
Large school food authority means, in any State:
(1) All school food authorities that participate in the National School Lunch Program (7 CFR part 210)
and have enrollments of 40,000 children or more each; or
(2) If there are less than two school food authorities with enrollments of 40,000 or more, the two largest
school food authorities that participate in the National School Lunch Program (7 CFR part 210) and
have enrollments of 2,000 children or more each.
Nonprofit means exempt from income tax under section 501(c)(3) of the Internal Revenue Code of 1986.
OIG

means the Office of the Inspector General of the Department.

SAE

means federally provided State administrative expense funds for State agencies under this part.

School means the term as defined in §§ 210.2, 215.2, and 220.2 of this chapter, as applicable.
School Food Authority means the governing body which is responsible for the administration of one or more
schools and which has the legal authority to operate a breakfast or a lunch program therein. The term
“School Food Authority” also includes a nonprofit agency or organization to which such governing body
has delegated authority to operate the lunch or breakfast program in schools under its jurisdiction,
provided the governing body retains the responsibility to comply with breakfast or lunch program
regulations.
Secretary means the Secretary of Agriculture.
State means any of the 50 States, District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands,
Guam, and, as applicable, American Samoa and the Commonwealth of the Northern Marianas.
7 CFR 235.2 “State” (enhanced display)

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7 CFR 235.2 “State agency”

State agency means
(1) the State educational agency or
(2) such other agency of the State as has been designated by the Governor or other appropriate
executive or legislative authority of the State and approved by the Department to administer
programs under part 210, 215, 220, 226 or 250 of this title. Unless otherwise indicated, “State
agency” shall also mean Distributing agency as defined in this section,, when such agency is
receiving funds directly from FNS under this part.
State educational agency means, as the State legislature may determine:
(1) The chief State school officer (such as the State Superintendent of Public Instruction, Commissioner
of Education, or similar officer), or
(2) a board of education controlling the State department of education.
USDA implementing regulations include the following: 2 CFR part 400, Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal Awards; 2 CFR part 415, General Program
Administrative Regulations; 2 CFR part 416, General Program Administrative Regulations for Grants and
Cooperative Agreements to State and Local Governments; and 2 CFR part 418, New Restrictions on
Lobbying.
(Sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); sec. 205, Pub. L. 96-499, The Omnibus Reconciliation Act of
1980, 94 Stat. 2599; secs. 807 and 808, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1772, 1784, 1760); Pub. L. 79-396,
60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 Stat. 885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84 Stat. 207 (42
U.S.C. 1759)
[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 48957, Aug. 21, 1979; 44 FR 51185, Aug. 31, 1979; Amdt. 9, 48 FR 19355, Apr.
29, 1983; Amdt. 14, 51 FR 27151, July 30, 1986; 54 FR 2991, Jan. 23, 1989; Amdt. 17, 55 FR 1378, Jan. 16, 1990; 60 FR 15461,
Mar. 24, 1995; 64 FR 50743, Sept. 20, 1999; 71 FR 39519, July 13, 2006; 72 FR 63792, Nov. 13, 2007; 81 FR 50194, July 29, 2016;
81 FR 66494, Sept. 28, 2016]

§ 235.3 Administration.
(a) Within the Department, FNS shall act on behalf of the Department in the administration of the program for
payment to States of State administrative expense funds covered by this part. Within FNS, CND shall be
responsible for administration of the program.
(b) Each State agency desiring to receive payments under this part shall enter into a written agreement with
the Department for the administration of the child nutrition programs in accordance with the applicable
requirements of this part, 7 CFR parts 210, 215, 220, 225, 226, 245, 15, 15a, 15b, and 2 CFR part 200,
subpart D and USDA implementing regulations 2 CFR part 400 and part 415. Each agreement shall cover
the operation of the Program during the period specified therein and may be extended at the option of the
Department.
(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776))
[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 48957, Aug. 21, 1979; Amdt. 14, 51 FR 27151, July 30, 1986; 71 FR 39519, July
13, 2006; 81 FR 66493, Sept. 28, 2016]

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7 CFR 235.4

§ 235.4 Allocation of funds to States.
(a) Nondiscretionary SAE Funds. For each fiscal year, FNS shall allocate the following:
(1) To each State which administers the National School Lunch, School Breakfast or Special Milk
Programs an amount equal to one (1) percent of the funds expended by such State during the
second preceding fiscal year under sections 4 and 11 of the National School Lunch Act, as amended,
and sections 3, 4 and 17A of the Child Nutrition Act of 1966, as amended. However, the total amount
allocated to any State under this paragraph shall not be less than $200,000 or the amount allocated
to the State in the fiscal year ending September 30, 1981, whichever is greater. On October 1, 2008
and each October 1 thereafter, the minimum dollar amount for a fiscal year for administrative costs
shall be adjusted to reflect the percentage change between the value of the index for State and local
government purchases, as published by the Bureau of Economic Analysis of the Department of
Commerce, for the 12-month period ending June 30 of the second preceding fiscal year, and the
value of that index for the 12-month period ending June 30 of the preceding fiscal year.
(2) To each State which administers the Child and Adult Care Food Program an amount equal to the
sum of: Twenty percent of the first $50,000; ten percent of the next $100,000; five percent of the next
$250,000; and two and one-half percent of any remaining funds expended within the State under
section 17 of the National School Lunch Act, as amended, during the second preceding fiscal year.
FNS may adjust the amount of any such allocation in accordance with changes in the size of the
Child and Adult Care Food Program in a State.
(3) For each of fiscal years 2005 through 2007 no State shall receive less than its fiscal year 2004
allocation for administrative costs for all child nutrition programs.
(b) Discretionary SAE Funds. For each fiscal year, FNS shall provide the following additional allocations:
(1) Allocate $30,000 to each State which administers the Child and Adult Care Food Program (7 CFR
part 226).
(2) $30,000 to each State which administers the Food Distribution Program (part 250 of this chapter) in
schools and/or institutions which participate in programs under parts 210, 220, and 226 of this
chapter; provided that the State meets the training requirements set forth in § 235.11(g).
(3) Amounts derived by application of the following four-part formula to each State agency which is
allocated funds under paragraph (a) of this section:
(i)

One equal share of forty (40) percent of the funds designated by FNS for the reviews conducted
under § 210.18 of this title.

(ii) The ratio of the number of School Food Authorities participating in the National School Lunch
or Commodity School Programs under the jurisdiction of the State agency to such School Food
Authorities in all States times twenty (20) percent of the funds designated by FNS for reviews
conducted under § 210.18 or of this title.
(iii) The ratio of the number of free and reduced price meals served in School Food Authorities
under the jurisdiction of the State agency during the second preceding fiscal year to the number
of free and reduced price meals served in all States in the second preceding fiscal year times
twenty (20) percent of the funds designated by FNS for reviews conducted under § 210.18 of
this title.

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7 CFR 235.4(b)(3)(iv)

(iv) Equal shares of twenty (20) percent of the funds designated by FNS for reviews conducted
under § 210.18 of this title for each School Food Authority under the jurisdiction of the State
agency participating in the National School Lunch or Commodity School Programs which has
an enrollment of 40,000 or more; Provided, however, That for State agencies with fewer than
two School Food Authorities with enrollments of 40,000 or more, an equal share shall be
provided to the State agency, for either, or both, of the two largest School Food Authorities
which have enrollments of more than 2,000; and Provided, further, That State agencies with only
one School Food Authority, regardless of size, shall be provided with one equal share. For each
fiscal year, the amount of State Administrative Expense Funds designated by FNS for reviews
conducted under § 210.18 of this title and subject to allocation under this paragraph shall be
equal to or greater than the amount designated by FNS for program management
improvements for the fiscal year ending September 30, 1980.
(4) Funds which remain after the allocations required in paragraphs (a)(1), (a)(2), (b)(1), (b)(2) and (b)(3)
of this section, and after any payments provided for under paragraph (c) of this section, as
determined by the Secretary, to those States which administer the Food Distribution Program (part
250 of this chapter) in schools and/or institutions which participate in programs under parts 210,
220, or 226 of this chapter and to those States which administer part 226 of this chapter. The
amount of funds to be allocated to each State for the Food Distribution Program for any fiscal year
shall bear the same ratio to the total amount of funds made available for allocation to the State for
the Food Distribution Program under this paragraph as the value of USDA donated foods delivered to
the State for schools and institutions participating in programs under parts 210, 220 and 226 of this
chapter during the second preceding fiscal year bears to the value of USDA donated foods delivered
to all the States for such schools and institutions during the second preceding fiscal year. The
amount of funds to be allocated to each State which administers the Child and Adult Care Food
Program for any fiscal year shall bear the same ratio to the total amount of funds made available for
allocation to all such States under this paragraph as the amount of funds allocated to each State
under paragraph (a)(2) of this section bears to the amount allocated to all States under that
paragraph.
(c) SAE Funds for the Child and Adult Care Food Program. If a State elects to have a separate State agency
administer the adult care component of the Child and Adult Care Food Program, such separate State
agency shall receive a pro rata share of the SAE funds allocated to the State under paragraphs (a)(2),
(b)(1), and (b)(4) of this section which is equal to the ratio of funds expended by the State for the adult
care component of the Child and Adult Care Food Program during the second preceding fiscal year to the
funds expended by the State for the entire Child and Adult Care Food Program during the second
preceding fiscal year. The remaining funds shall be allocated to the State agency administering the child
care component of the Child and Adult Care Food Program.
(d) SAE Start-up Cost Assistance for State Administration of Former ROAPs. For any State agency which
agrees to assume responsibility for the administration of food service programs in nonprofit private
schools or child and adult care institutions that were previously administered by FNS, an appropriate
adjustment in the administrative funds paid under this part to the State shall be made by FNS not later
than the succeeding fiscal year. Such an adjustment shall consist of an amount of start-up cost
assistance, negotiated with the State agency, of no less than $10,000 and not exceeding $100,000, per
State.

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7 CFR 235.4(e)

(e) SAE Funding Reduction Upon State Agency Termination of a Food Service Program. For any State agency
which terminates its administration of any food service program for which State administrative expense
funds are provided under this part, a reduction in the amount of such funds, negotiated with the State
agency, shall be made by FNS.
(f)

SAE Funds for ROAPs. FNS shall have available to it the applicable amounts provided for in paragraphs
(a)(1), (a)(2), and (b)(1) of this section, and part 225 of this title, when it is responsible for the
administration of a program or programs within a State.

(g) Reallocation. Funds allotted to State agencies under this section shall be subject to the reallocation
provisions of § 235.5(d).
(h) Withholding SAE funds. The Secretary may withhold some or all of the funds allocated to the State agency
under this section if the Secretary determines that the State agency is seriously deficient in the
administration of any program for which State administrative expense funds are provided under this part
or in the compliance of any regulation issued pursuant to those programs. On a subsequent
determination by the Secretary that State agency administration of the programs or compliance with
regulations is no longer seriously deficient and is operated in an acceptable manner, the Secretary may
allocate some or all of the funds withheld.
(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); sec.
7(a), Pub. L. 95-627, 92 Stat. 3622 (42 U.S.C. 1751); Pub. L. 96-499, secs. 201 and 204, 94 Stat. 2599; secs. 805,
812, 814 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1754, 1759a, 1774 and 1776); E.O. 12372 (July 14,
1982, 47 FR 30959); sec. 401(b) Intergovernmental Cooperation Act of 1968 (31 U.S.C. 6506(c))
[44 FR 48957, Aug. 21, 1979]

Editorial Note: For FEDERAL REGISTER citations affecting § 235.4, see the List of CFR Sections Affected, which
appears in the Finding Aids section of the printed volume and at www.govinfo.gov.

§ 235.5 Payments to States.
(a) Method of payment. FNS will specify the terms and conditions of the State agency's annual grant of SAE
funds in conjunction with the grant award document and will make funds available for payment by means
of a Letter of Credit issued in favor of the State agency. The total amount of a State agency's grant shall
be equal to the sum of the amounts allocated to such agency under § 235.4 plus or minus any
adjustments resulting from the reallocation provisions under paragraph (d) of this section plus any
transfers under § 235.6(a) and/or § 235.6(c) of this part. The amount of SAE funds made available for
payment to a State agency in any fiscal year shall be determined by FNS upon approval of the State
agency's administrative plan under paragraph (b) of this section and any amendments to such plan under
paragraph (c) of this section. Funds shall not be made available before the State agency's plan or
amendment to such plan, as applicable, has been approved by FNS. However, if the plan has not been
approved by October 1 of the base year, FNS may advance SAE funds to the State agency, in amounts
determined appropriate by FNS, pending approval of the plan.
(b) Administrative plan.
(1) Each State agency shall submit, subject to FNS approval, an initial State Administrative Expense plan
based upon guidance provided by FNS. This base year plan shall include:
(i)

The staffing pattern for State level personnel;

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7 CFR 235.5(b)(1)(ii)

(ii) A budget for the forthcoming fiscal year showing projected amounts (combined SAE and State
funds) by cost category;
(iii) The total amount of budgeted funds to be provided from State sources;
(iv) The total amount of budgeted funds to be provided under this part;
(v) The State agency's estimate of the total amount of budgeted funds (combined SAE and State
funds) attributable to administration of the School Nutrition Programs (National School Lunch,
School Breakfast and Special Milk Programs), Child and Adult Care Food Program, and/or Food
Distribution Program in schools and child and adult care institutions and to each of the major
activity areas of the State agency; and
(vi) The State agency's estimate of the total Child and Adult Care Food Program audit funds to be
used for the forthcoming fiscal year.
(2) These activity areas shall be defined and described by the State agency in accordance with guidance
issued by FNS and may include such activities as program monitoring, technical assistance, Federal
reporting/claims processing, policy implementation, and allocation of foods to recipient agencies.
(3) Except in specific instances where determined necessary by FNS, State agencies shall not be
required to maintain expenditure records by activity area or program. State agencies shall refer to 2
CFR part 200, subpart E and USDA implementing regulations 2 CFR part 400 and part 415.
(4) FNS shall approve a State agency's plan, or any amendment to such plan under paragraph (c) of this
section, if it determines that the plan or amendment is consistent with program administrative needs
and SAE requirements under this part.
(5) To the extent practicable, State agencies shall implement their approved plans (as amended). FNS
shall monitor State agency implementation of the plans through management evaluations, State
agency reports submitted under this part, audits, and through other available means.
(6) FNS may expand plan requirements for individual State agencies in order to address specific
administrative deficiencies which affect compliance with program requirements and which have
been identified by FNS through its monitoring activities.
(c) Amendments to the administrative plan. A State agency may amend its plan at any time to reflect changes
in funding or activities, except that, if such changes are substantive as defined in the June 5, 1997
guidance, and any amendments or updates to this guidance, the State agency shall amend its plan in
accordance with guidance provided by FNS. Plan amendments shall provide information in a format
consistent with that provided in the State agency's plan, but shall only require FNS approval if it results in
a substantive change as defined by FNS.
(d) Reallocation of funds. Annually, between March 1 and May 1 on a date specified by FNS, of each year,
each State agency shall submit to FNS a State Administrative Expense Funds Reallocation Report
(FNS-525) on the use of SAE funds. At such time, a State agency may release to FNS any funds that have
been allocated, reallocated or transferred to it under this part or may request additional funds in excess of
its current grant level. Based on this information or on other available information, FNS shall reallocate, as
it determines appropriate, any funds allocated to State agencies in the current fiscal year which will not be
expended in the following fiscal year and any funds carried over from the prior fiscal year which will not be
expended in the current fiscal year. Reallocated funds shall be made available for payment to a State
agency upon approval by FNS of the State agency's amendment to the base year plan which covers the

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7 CFR 235.5(e)

reallocated funds, if applicable. Notwithstanding any other provision of this part, a State agency may, at
any time, release to FNS for reallocation any funds that have been allocated, reallocated or transferred to
it under this part and are not needed to implement its approved plan under this section.
(e) Return of funds.
(1) In Fiscal Year 1991, up to 25 per cent of the SAE funds allocated to each State agency under § 235.4
may remain available for obligation and expenditure in the second fiscal year of the grant. In
subsequent fiscal years, up to 20 percent may remain available for obligation and expenditure in the
second fiscal year. The maximum amount to remain available will be calculated at the time of the
formula allocation by multiplying the appropriate percentage by each State agency's formula
allocation as provided under § 235.4(a) through (c). At the end of the first fiscal year, the amount
subject to the retention limit is determined by subtracting the amount reported by the State agency
as Total Federal share of outlays and unliquidated obligations on the fourth quarter Standard Form
FNS 777, Financial Status Report, from the total amount of SAE funds made available for that fiscal
year (i.e., the formula allocation adjusted for any transfers or reallocations). However, funds provided
under § 235.4(d) are not subject to the retention limit. Any funds in excess of the amount that
remains available to each State agency shall be returned to FNS.
(2) At the end of the fiscal year following the fiscal year for which funds were allocated, each State
agency shall return any funds made available which are unexpended.
(3) Return of funds by the State agency shall be made as soon as practicable, but in any event, not later
than 30 days following demand by FNS.
[Amdt. 14, 51 FR 27151, July 30, 1986, as amended by Amdt. 17, 55 FR 1378, Jan. 16, 1990; 60 FR 15462, Mar. 24, 1995; 64 FR
50743, Sept. 20, 1999]

§ 235.6 Use of funds.
(a) Funds allocated under this part and 7 CFR part 225 shall be used for State agency administrative costs
incurred in connection with the programs governed by 7 CFR parts 210, 215, 220, 225, 226, and 250 of this
title. Except as provided under § 235.6(c), funds allocated under § 235.4, paragraphs (a) and (b) and 7
CFR part 225 shall be used for the program(s) for which allocated, except that the State agency may
transfer funds allocated for any such program(s) to other such program(s). Subject to the provisions of
this paragraph, a State agency may also transfer SAE funds that are not needed to implement its
approved plan § 235.5(b) to another State agency within the State that is eligible to receive SAE funds
under this part. Up to 25 per cent of funds allocated under § 235.4(a) through (c) for Fiscal Year 1991 and
up to 20 per cent of funds allocated in subsequent fiscal years to a State agency may, subject to the
provisions of § 235.5 of this part, remain available for obligation and expenditure by such State agency
during the following fiscal year.
(a-1) State administrative expense funds paid to any State may be used by State agencies to pay salaries,
including employee benefits and travel expenses for administrative and supervisory personnel, for support
services, for office equipment, and for staff development, particularly for monitoring and training of food
service personnel at the local level in areas such as food purchasing and merchandizing. Such funds shall
be used to employ additional personnel, as approved in the applicable State plan to supervise, improve
management, and give technical assistance to school food authorities and to institutions in their initiation,
expansion, and conduct of any programs for which the funds are made available. State agencies may also
use these funds for their general administrative expenses in connection with any such programs,
including travel and related expenses. Additional personnel or part-time personnel hired are expected to
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7 CFR 235.6(b)

meet professional qualifications and to be paid at salary scales of positions of comparable difficulty and
responsibility under the State agency. Personnel may be used on a staff year equivalent basis, thus
permitting new personnel and existing staff to be cross-utilized for most effective and economical
operation under existing and new programs. State agencies may also use these funds for the purposes of
State director annual continuing education/training as described in § 235.11(g)(3); however, costs
associated with obtaining college credits to meet the hiring standards in § 235.11(g)(1) and (2) are not
allowable.
(a-2) State Administrative Expense Funds paid to any State agency under § 235.4(b)(3) shall be available
for reviews conducted under § 210.18 activities associated with carrying out actions to ensure adherence
to the program performance standards.
(b) State administrative expense funds shall be used consistent with the cost principles and constraints on
allowable and unallowable costs and indirect cost rates as prescribed in 2 CFR part 200, subpart E and
USDA implementing regulations 2 CFR part 400 and part 415.
(c) In addition to State Administrative Expense funds made available specifically for food distribution
purposes under § 235.4 (b)(2) and (b)(4), State Administrative Expense funds allocated under § 235.4
(a)(1), (a)(2), (b)(1), (b)(3), and (d), and under (b)(4) for the Child and Adult Care Food Program may be
used to assist in the administration of the Food Distribution Program (7 CFR part 250) in schools and
institutions which participate in programs governed by parts 210, 220, and 226 of this title when such
Food Distribution Program is administered within the State agency and may also be used to pay
administrative expenses of a distributing agency, when such agency is other than the State agency and is
responsible for administering all or part of such Food Distribution Program.
(d) FNS shall allocate, for the purpose of providing grants on an annual basis to public entities and private
nonprofit organizations participating in projects under section 18(c) of the National School Lunch Act, not
more than $4,000,000 in each of Fiscal Years 1993 and 1994. Subject to the maximum allocation for such
projects for each fiscal year, at the beginning of each of Fiscal Years 1993 and 1994, FNS shall allocate,
from funds available under § 235.5(d) that have not otherwise been allocated to States, an amount equal
to the estimates by FNS of the funds to be returned under paragraph (a) of this section, but not less than
$1,000,000 in each fiscal year. To the extent that amounts returned to FNS are less than estimated or are
insufficient to meet the needs of the projects, FNS may allocate amounts to meet the needs of the
projects from funds available under this section that have not been otherwise allocated to States. FNS
shall reallocate any of the excess funds above the minimum level in accordance with § 235.5(d).
(e) Where State Administrative Expense Funds are used to acquire personal property or services the
provisions of §§ 235.9 and 235.10 must be observed.
(f)

Each State agency shall adequately safeguard all assets and assure that they are used solely for
authorized purposes.

(g) Whoever embezzles, willfully misapplies, steals, or obtains by fraud any funds, assets, or property
provided under this part, whether received directly or indirectly from the Department, shall:
(1) If such funds, assets, or property are of a value of $100 or more, be fined not more than $25,000 or
imprisoned not more than five years or both; or
(2) If such funds, assets, or property are of a value of less than $100, be fined not more than $1,000 or
imprisoned not more than one year or both.

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7 CFR 235.6(h)

(h) Whoever receives, conceals, or retains to his use or gain funds, assets, or property provided under this
part, whether received directly or indirectly from the Department, knowing such funds, assets, or property
have been embezzled, willfully misapplied, stolen, or obtained by fraud, shall be subject to the same
penalties provided in paragraph (h) of this section.
(i)

Full use of Federal funds. States and State agencies must support the full use of Federal funds provided
to State agencies for the administration of Child Nutrition Programs, and exclude such funds from State
budget restrictions or limitations including hiring freezes, work furloughs, and travel restrictions.

(Sec. 14, Pub. L. 95-166, 91 Stat. 1338, 1339, 1340 (42 U.S.C. 1751, 1753, 1759a, 1761, 1766, 1772-1775, 1776,
1786); sec. 7(a), Pub. L. 95-627, 92 Stat. 3621, 3622 (42 U.S.C. 1751, 1776))
[41 FR 32405, Aug. 3, 1976]

Editorial Note: For FEDERAL REGISTER citations affecting § 235.6, see the List of CFR Sections Affected, which
appears in the Finding Aids section of the printed volume and at www.govinfo.gov.

§ 235.7 Records and reports.
(a) Each State agency shall keep records on the expenditure of State administrative expense funds provided
under this part and part 225 of this title. Such records shall conform with the applicable State plan for use
of State administrative expense funds. The State agency shall make such records available, upon a
reasonable request, to FNS, OIG, or the U.S. Comptroller General and shall maintain current accounting
records of State administrative expense funds which shall adequately identify fund authorizations,
obligations, unobligated balances, assets, liabilities, outlays and income. The records may be kept in their
original form or on microfilm, and shall be retained for a period of three years after the date of the
submission of the final Financial Status Report, subject to the exceptions noted below:
(1) If audit findings have not been resolved, the records shall be retained beyond the three-year period as
long as required for the resolution of the issues raised by the audit.
(2) Records for nonexpendable property acquired with State Administrative Expense Funds shall be
retained for three years after its final disposition.
(b) Each State agency shall submit to FNS a quarterly Financial Status Report (FNS-777) on the use of State
administrative expense funds provided for each fiscal year under this part. Reports shall be postmarked
and/or submitted to FNS no later than 30 days after the end of each quarter of the fiscal year and, in case
of funds carried over under § 235.6(a), each quarter of the following fiscal year until all such funds have
been obligated and expended. Obligations shall be reported for the fiscal year in which they occur. Each
State agency shall submit a final Financial Status Report for each fiscal year's State administrative
expense funds. This report shall be postmarked and/or submitted to FNS no later than 30 days after the
end of the fiscal year following the fiscal year for which the funds were initially made available. Based on
guidance provided by FNS, each State agency shall also use the quarterly FNS-777 to report on the use of
State funds provided during the fiscal year. Each State agency shall also submit an annual report
containing information on School Food Authorities under agreement with the State agency to participate
in the National School Lunch or Commodity School programs.
(c) State agencies operating those programs governed by parts 210, 215, 220 and 226 and those State
agencies which are distributing agencies eligible for SAE funds shall participate in surveys and studies of
programs authorized under the National School Lunch Act, as amended, and the Child Nutrition Act of
1966, as amended, when such studies and surveys are authorized by the Secretary of Agriculture. The
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7 CFR 235.8

aforementioned State agencies shall encourage individual School Food Authorities, child and adult care
institutions, and distributing agencies (as applicable) to participate in such studies and surveys.
Distribution of State Administrative Expense funds to an individual State agency is contingent upon that
State agency's cooperation in such studies and surveys.
(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); 93
Stat. 837, Pub. L. 96-108 (42 U.S.C. 1776); secs. 804, 816, 817 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C.
1753, 1756, 1759, 1771, 1773 and 1785); sec. 7(a), Pub. L. 95-627, 92 Stat. 3622, 42 U.S.C. 1751)
[41 FR 32405, Aug. 3, 1976, as amended at 43 FR 37173, Aug. 22, 1978; 44 FR 48958, Aug. 21, 1979; 45 FR 8563, Feb. 8, 1980;
Amdt. 9, 48 FR 195, Jan. 4, 1983; Amdt. 11, 48 FR 27892, June 17, 1983; Amdt. 12, 49 FR 18989, May 4, 1984; Amdt. 14, 51 FR
27152, July 30, 1986; Amdt. 17, 55 FR 1378, Jan. 16, 1990; 60 FR 15463, Mar. 24, 1995; 81 FR 66493, Sept. 28, 2016]

§ 235.8 Management evaluations and audits.
(a) Unless otherwise exempt, audits at the State level shall be conducted in accordance with 2 CFR part 200,
subpart F and Appendix XI, Compliance Supplement and USDA implementing regulations 2 CFR part 400
and part 415.
(b) While OIG shall rely to the fullest extent feasible upon State sponsored audits, it shall, whenever
considered necessary,
(1) perform on-site test audits, and
(2) review audit reports and related working papers of audits performed by or for State agencies.
(c) Each State agency shall provide FNS with full opportunity to conduct management evaluations of all
operations of the State agency under this part and shall provide OIG with full opportunity to conduct
audits of all such operations. Each State agency shall make available its records, including records of the
receipt and expenditure of funds, upon a reasonable request by FNS, OIG, or the U.S. Comptroller General.
(Sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); secs. 804, 805, 812, 814, 816, 817 and 819, Pub. L. 97-35, 95
Stat. 521-535 (42 U.S.C. 1753, 1754, 1756, 1759, 1759a, 1771, 1773, 1774, 1776, and 1785))
[41 FR 32405, Aug. 3, 1976, as amended at 44 FR 51186, Aug. 31, 1979; Amdt. 7, 47 FR 18567, Apr. 30, 1982; Amdt. 9, 48 FR 195,
Jan. 4, 1983; 54 FR 2991, Jan. 23, 1989; 71 FR 39519, July 13, 2006; 81 FR 66493, Sept. 28, 2016]

§ 235.9 Procurement and property management standards.
(a) Requirements. State agencies shall comply with the requirements of 2 CFR part 200, subpart D and USDA
implementing regulations 2 CFR part 400 and part 415 concerning the procurement of supplies,
equipment and other services with State Administrative Expense Funds.
(b) Contractual responsibilities. The standards contained in 2 CFR part 200, subpart D and USDA
implementing regulations 2 CFR part 400 and part 415 do not relieve the State agency of any contractual
responsibilities under its contract. The State agency is the responsible authority, without recourse to FNS,
regarding the settlement and satisfaction of all contractual and administrative issues arising out of
procurements entered into in connection with the Program. This includes, but is not limited to source
evaluation, protests, disputes, claims, or other matters of a contractual nature. Matters concerning
violation of law are to be referred to the local, State or Federal authority that has proper jurisdiction.

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7 CFR 235.9(c)

(c) Procurement procedure. The State agency may use its own procurement procedures which reflect
applicable State laws and regulations, in accordance with 2 CFR part 200, subpart D and USDA
implementing regulations 2 CFR part 400 and part 415.
(d) Property acquired with State administrative expense funds. State Agencies shall comply with the
requirements of 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part
415 in their utilization and disposition of property acquired in whole or in part with State Administrative
Expense Funds.
(Pub. L. 79-396, 60 Stat. 231 (42 U.S.C. 1751); Pub. L. 89-642, 80 Stat. 885-890 (42 U.S.C. 1773); Pub. L. 91-248, 84
Stat. 207 (42 U.S.C. 1759))
[Amdt. 9, 48 FR 19355, Apr. 29, 1983, as amended at 71 FR 39519, July 13, 200; 81 FR 66493, Sept. 28, 2016]

§ 235.10 [Reserved]
§ 235.11 Other provisions.
(a) State funds. Expenditures of funds from State sources in any fiscal year for the administration of the
National School Lunch Program, School Breakfast Program, Special Milk Program, Child and Adult Care
Food Program shall not be less than that expended or obligated in fiscal year 1977. Failure of a State to
maintain this level of funding will result in the total withdrawal of SAE funds. State agencies shall follow
the provisions of 2 CFR part 200, subpart E and USDA implementing regulations 2 CFR part 400 and part
415 in identifying and documenting expenditures of funds from State revenues to meet the State funding
requirement of this paragraph.
(b) Sanctions imposed.
(1) FNS may recover, withhold or cancel payment of up to one hundred (100) percent of the funds
payable to a State agency under this part, whenever it is determined by FNS that the State agency
has failed to comply with the requirements contained in this part and in parts 210, 215, 220 and 226
of this title and in part 250 of this title as it applies to the operation of the Food Distribution Program
in schools and child and adult care institutions.
(2) In addition to the general provisions found in paragraph (b)(1) of this section, FNS may, for any fiscal
year, recover, withhold or cancel payment of up to thirty-three and one-third (331⁄3) percent of the
funds payable to, and to be used by, a State agency under § 235.4(a)(1) and § 235.4(b)(3) for
administration of school nutrition programs in FNS determines that a State agency is deficient in one
or more of the following:
(i)

Implementing the requirements in § 210.18;

(ii) Conducting the number of reviews required in § 210.18 within the timeframes specified;
(iii) Covering the areas of review set forth in the § 210.18, carrying out corrective action, and
assessing and recovering claims as prescribed in §§ 210.18 and 210.19 of this title;
(iv) Conducting reviews with sufficient thoroughness to identify violations of the areas of review
identified in § 210.18;
(v) Meeting the reporting deadlines prescribed for the forms (FNS-10 and FNS-777) required under
§ 210.5(d) of this title; and
(vi) Meeting the professional standards required in paragraph (g) of this section.
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7 CFR 235.11(b)(3)

(3) Furthermore, FNS may for any fiscal year, recover, withhold or cancel payment of up to thirty-three
and one-third (331⁄3) percent of the funds payable to, and to be used by, a State agency under §
235.4(a)(2), § 235.4(b)(1) and § 235.4(b)(4) for administration of the Child and Adult Care Food
Program if FNS determines that a State agency is deficient in meeting the reporting deadlines
prescribed for the forms (FNS-44 and FNS-777) required under § 226.7(d) of this title.
(4) In establishing the amounts of funds to be recovered, withheld or cancelled under paragraph (b)(2)
and (b)(3) of this section, FNS shall determine the current or projected rate of funds usage by the
State agency for all funds subject to sanction, and after considering the severity and longevity of the
cumulative deficiencies, shall apply an appropriate sanction percentage to the amount so
determined. During the fiscal year under sanction, a State agency may not use funds not included in
the determination of funds usage to replace sanctioned funds. The maximum sanction percentage
that may be imposed against a State agency for failure within one or more of the five deficiency
areas specified in paragraph (b)(2) of this section for any fiscal year shall be thirty-three and onethird (331⁄3) percent of the funds payable under § 235.4(a)(1) and § 235.4(b)(3) for administration of
school nutrition programs for such fiscal year.
(5) Before carrying out any sanction against a State agency under this section, the following procedures
shall be implemented:
(i)

FNS shall notify the Chief State School Officer or equivalent of the deficiencies found and of its
intention to impose sanctions unless an acceptable corrective action plan is submitted and
approved by FNS within 60 calendar days.

(ii) The State agency shall develop a corrective action plan with specific timeframes to correct the
deficiencies and/or prevent their future recurrence. The plan will include dates by which the
State agency will accomplish such corrective action.
(iii) FNS shall review the corrective action plan. If it is acceptable, FNS shall issue a letter to the
Chief State School Officer or equivalent approving the corrective action plan, and detailing the
technical assistance that is available to the State agency to correct the deficiencies. The letter
shall advise the Chief State School Officer or equivalent of the specific sanctions to be imposed
if the corrective action plan is not implemented within timeframes set forth in the approved
plan.
(iv) Upon advice from the State agency that corrective action has been taken, FNS shall assess
such action and, if necessary, shall perform a follow-up review to determine if the noted
deficiencies have been corrected. FNS shall then advise the State agency if the actions taken
are in compliance with the corrective action plan or if additional corrective action is needed.
(v) If an acceptable corrective action plan is not submitted and approved within 60 calendar days,
or if corrective action is not completed within the time limits established in the corrective action
plan, FNS may impose a sanction by assessing a claim against the State agency or taking
action in accordance with 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR
part 400 and part 415 FNS shall notify the Chief State School Officer or equivalent of any such
action.
(vi) If, subsequent to the imposition of any sanction, FNS determines that the noted deficiencies
have been resolved and that the programs for which SAE funds were made available are being
operated in an acceptable manner, FNS may return to the State agency or restore to the State
agency's Letter of Credit (LOC) part or all of any sanctioned SAE funds.
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7 CFR 235.11(b)(6)

(6) In carrying out sanctions under this part for any fiscal year, FNS may reduce the amount of allocated
SAE funds payable to a State agency in whole or in part during such fiscal year and during following
fiscal years if necessary.
(7) Any State agency which has a sanction imposed against it in accordance with this paragraph shall
not be eligible to participate in any reallocation of SAE funds under § 235.5(d) of this part during any
fiscal year in which such sanction is being applied.
(c) Termination for convenience. FNS and the State agency may terminate the State agency's participation
under this part in whole, or in part, when both parties agree that continuation would not produce beneficial
results commensurate with the further expenditure of funds. The two parties shall agree upon the
termination conditions, including the effective date and, in the case of partial termination, the portion to
be terminated. The State agency shall not incur new obligations for the terminated portion after the
effective date, and shall cancel as many outstanding obligations as possible. FNS shall allow full credit to
the State agency for the Federal share of the noncancellable obligations, properly incurred by the State
agency prior to termination.
(d) In taking any action under paragraphs (b) or (c) of this section, FNS and the State agency shall comply
with the provisions of 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and
part 415 concerning grant suspension, termination and closeout procedures.
(e) State requirements. Nothing contained in this part shall prevent a State agency from imposing additional
operating requirements which are not inconsistent with the provisions of this part.
(f)

Administrative review process. When FNS asserts a sanction against a State agency under the provisions
of paragraph (b) of this section, the State agency may appeal the case and be afforded a review by an
FNS Administrative Review Officer of the record including any additional written submissions prepared by
the State agency.
(1) FNS shall provide a written notice and shall ensure the receipt of such notice when asserting a
sanction against a State agency.
(2) A State agency aggrieved by a sanction asserted against it may file a written request with the
Director, Administrative Review Staff, U.S. Department of Agriculture, Food and Nutrition Service,
3101 Park Center Drive, Alexandria, Va. 22302 for a review of the record. Such request must be
postmarked within 30 calendar days of the date of delivery of the sanction notice and the envelope
containing the request shall be prominently marked “REQUEST FOR REVIEW.” If the State agency
does not request a review within 30 calendar days of the date of delivery of the sanction notice, the
administrative decision on the sanction shall be final.
(3) Upon receipt of a request for review, FNS shall promptly provide the State agency with a written
acknowledgment of the request. The acknowledgment shall include the name and address of the
FNS Administrative Review Officer reviewing the sanction. The acknowledgment shall also notify the
State agency that any additional information in support of its position must be submitted within 30
calendar days of the receipt of the acknowledgment.
(4) When a review is requested, the FNS Administrative Review Officer shall review all available
information and shall make a final determination within 45 calendar days after receipt of the State
agency's additional information. The final determination shall take effect upon delivery of the written
notice of this final decision to the State agency.
(5) The final determination of the FNS Administrative Review Officer will be the Department's final
decision in the case and will not be subject to reconsideration.

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7 CFR 235.11(g)

(g) Professional standards. State agencies must meet the minimum hiring and training standards established
by FNS.
(1) Hiring standards for State directors of school nutrition programs. Beginning July 1, 2015, newly hired
State agency directors with responsibility for the administration of the National School Lunch
Program under part 210 of this chapter and the School Breakfast Program under part 220 of this
chapter must have:
(i)

Bachelor's degree, master's degree, or doctorate degree with an academic major in areas
including food and nutrition, food service management, dietetics, family and consumer
sciences, nutrition education, culinary arts, business, or a related field;

(ii) Extensive relevant knowledge and experience in areas such as institutional food service
operations, management, business, and/or nutrition education (experience in three or more of
these areas highly recommended); and
(iii) Additional abilities and skills needed to lead, manage and supervise people to support the
mission of Child Nutrition programs.
(iv) It is also strongly preferred that new hires possess:
(A) Both a bachelor's degree and a master's or doctorate degree with an academic major in
areas including food and nutrition, food service management, dietetics, family and
consumer sciences, nutrition education, culinary arts, business, or a related field;
(B) At least five years of experience leading people in successfully accomplishing major multifaceted projects related to child nutrition and/or institutional foodservice management;
and
(C) Professional certification in food and nutrition, food service management, school
business management or a related field as determined by FNS.
(2) Hiring standards for State directors of distributing agencies. Beginning July 1, 2015, newly hired
State agency directors with responsibility for the administration of the distribution of USDA donated
foods under part 250 of this chapter must have:
(i)

Bachelor's degree in any academic major;

(ii) Extensive relevant knowledge and experience in areas such as institutional food service
operations, management, business, and/or nutrition education; and
(iii) Additional abilities and skills needed to lead, manage and supervise people to support the
mission of Child Nutrition programs.
(iv) It is also strongly preferred that new hires possess at least five years of experience in
institutional food service operations.
(3) Continuing education/training standards for State directors of school nutrition programs and
distributing agencies. Each school year, all State directors with responsibility for the National School
Lunch Program under part 210 of this chapter and the School Breakfast Program under part 220 of
this chapter, as well as those responsible for the distribution of USDA donated foods under part 250
of this chapter, must complete a minimum of 15 hours of training in core areas that may include
nutrition, operations, administration, communications and marketing. Additional hours and topics
may be specified by FNS, as needed, to address Program integrity and other critical issues.
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7 CFR 235.11(g)(4)

(4) Provision of annual training. At least annually, State agencies with responsibility for the National
School Lunch Program under part 210 of this chapter and the School Breakfast Program under part
220 of this chapter, as well as State agencies with responsibility for the distribution of USDA donated
foods under part 250 of this chapter, must provide or ensure that State agency staff receive annual
continuing education/training.
(i)

Each State agency with responsibility for the National School Lunch Program under part 210 of
this chapter and the School Breakfast Program under part 220 of this chapter must provide a
minimum of 18 hours of continuing education/training to school food authorities. Topics
include administrative practices (including training in application, certification, verification, meal
counting, and meal claiming procedures); the accuracy of approvals for free and reduced price
meals; the identification of reimbursable meals at the point of service; nutrition; health and food
safety standards; the efficient and effective use of USDA donated foods; and any other
appropriate topics, as determined by FNS, to ensure program compliance and integrity or to
address other critical issues.

(ii) Each State agency with responsibility for the distribution of USDA donated foods under part
250 of this chapter must provide or ensure receipt of continuing education/training to State
distribution agency staff on an annual basis. Topics may include the efficient and effective use
of USDA donated foods; inventory rotation and control; health and food safety standards; and
any other appropriate topics, as determined by FNS, to ensure program compliance and
integrity or to address other critical issues.
(5) Records and recordkeeping. State agencies must annually retain records for a period of three years
to adequately demonstrate compliance with the professional standards for State directors of school
nutrition programs established in this paragraph.
(6) Failure to comply. Failure to comply with the professional standards in this paragraph may result in
sanctions as specified in paragraph (b) of this section.
(Sec. 14, Pub. L. 95-166, 91 Stat. 1338 (42 U.S.C. 1776); sec. 7, Pub. L. 95-627, 92 Stat. 3621 (42 U.S.C. 1776); secs.
805 and 819, Pub. L. 97-35, 95 Stat. 521-535 (42 U.S.C. 1773); sec. 7(a), Pub. L. 95-627, 93 Stat. 3622, 42 U.S.C.
1751)
[41 FR 32405, Aug. 3, 1976]

Editorial Note: For FEDERAL REGISTER citations affecting § 235.11, see the List of CFR Sections Affected, which
appears in the Finding Aids section of the printed volume and at www.govinfo.gov.

§ 235.12 Information collection/recordkeeping - OMB assigned control numbers.
7 CFR Section where
requirements are
described

Current OMB control No.

235.3(b)

0584-0067.

235.4

0584-0067.

235.5(b), (d)

0584-0067.

235.7(a), (b)

0584-0067.

235.9(c), (d)

0584-0067.

7 CFR 235.12 (enhanced display)

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7 CFR 235.12

7 CFR Section where
requirements are
described

Current OMB control No.

235.11

0584-0067.

210.7

0584-0067.

[80 FR 11096, Mar. 2, 2015]

7 CFR 235.12 (enhanced display)

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