The apportionment to each of those States shall be in an amount which bears the same ratio to the total of such funds as the number of free or reduced-price lunches served in accordance with § 210.9 in those States in the preceding fiscal year bears to the total number of free or reduced-price lunches so served in all those States in the preceding fiscal year. Of the remaining amount made available for special cash-for-food assistance under section 11 of the Act for any fiscal year, not less than 50 percent shall be apportioned among the States, other than Puerto Rico, the Virgin Islands, Guam, and American Samoa, on the basis of two factors, (1) the number of free or reduced-price lunches served in accordance with § 210.9 in the preceding fiscal year and (2) the assistance need rate. These factors shall be applied in the following manner: First, determine an index for each State by multiplying factors (1) and (2) of this paragraph; second, divide this index by the sum of the indices for all such States; and, third, apply the figure thus obtained to the total funds to be apportioned. Any funds so initially apportioned to a State under section 11 of the Act which cannot be used for special cash-for-food assistance together with the remainder of the funds available under section 11 shall be further apportioned on the same basis as the initial apportionment to such States which justify the need for additional funds on the basis of operating experience.

(f) A share of the special cash-forfood assistance funds apportioned to any State shall be withheld by C&MS for the nonprofit private schools of that State, if the State Agency does not administer the Program in such schools. The funds so withheld by C&MS shall be an amount which bears the same ratio to the special cash-for-food assistance funds apportioned to the State as the number of free and reduced-price lunches served in accordance with § 210.9 in the preceding fiscal year by all nonprofit private schools participating in the Program in the State bears to the number of free and reducedprice lunches so served during the year by all schools participating in the Program in the State.

(g) Supplemental funds made available from Section 32 funds (Act of August 24, 1935, as amended) are to be tentatively allocated as follows: (1) Three percent shall be allocated to Puerto Rico, the Virgin Islands, Guam, and

American Samoa, the amount to be allocated to each of those States being an amount which bears the same ratio to the total funds for such States as the number of children aged 3 to 17, inclusive, in each bears to the total number of children of such ages in all of them; and (2) the remaining funds shall be allocated to States other than Puerto Rico, the Virgin Islands, Guam, and American Samoa, in an amount for each State which bears the same ratio to such remaining funds as (i) the number of children in that State aged 3 to 17, inclusive, in families with incomes of less than $3,000 per annum, and (ii) the number of children in that State aged 3 to 17, inclusive, in families receiving an annual income in excess of $3,000 per annum from payments under the program of aid to families with dependent children pursuant to a State plan approved under title IV of the Social Security Act bears to the total number of such children in all such States.

(h) A share of the supplemental funds so allocated to any State shall be withheld by C&MS for the nonprofit private schools of that State, if the State agency does not administer the program in such schools. The withholding of funds for and the disbursement thereof to nonprofit private schools shall be effected in accordance with section 10 of the National School Lunch Act, as amended, exclusive of the matching provision thereof. [Amdt. 4, 30 F.R. 15402, Dec. 15, 1965, as amended by Amdt. 9, 33 F.R. 18006, Dec. 4, 1968]

(a) The general cash-for-food assistance funds apportioned to any State shall be made available by means of Letters of Credit issued by C&MS to appropriate Federal Reserve Banks in favor of the State Agency. Such Letters of Credit shall be designed to provide funds for the State Agency for the operation of the Program in such amounts and at such times as the funds are needed to reimburse schools. As soon as practicable after funds are made available to C&MS, C&MS shall prepare a Letter of Credit for each State with which it has an approved agreement. Such Letters of Credit shall contain 10 cumulative monthly limitations, except that for American Samoa, Guam, Puerto Rico and the Virgin Islands, the Letter of Credit shall contain 8 cumulative monthly limitations. These cumulative limita

tions shall be in accordance with the monthly pattern of participation in each State, as measured by the number of lunches served, based upon the most recent year for which final participation data are available. The first amount authorized shall be for July and August operations, and the final amount authorized shall be for May and June operations except that for American Samoa, Guam, Puerto Rico and the Virgin Islands, the final amount authorized shall be for March, April, May, and June operations. Notwithstanding the foregoing provisions, if funds have been authorized by Congress for the operation of the Program under a continuing resolution, Letters of Credit shall reflect only the amounts authorized for the effective period of the resolution, with appropriate monthly limitations. The State Agency shall obtain funds needed to reimburse schools through presentation by designated State officials of a Payment Voucher on Letter of Credit (Treasury Department Form TUS 5401) to a local commercial bank for transmission to the appropriate Federal Reserve Bank, in accordance with procedures prescribed by C&MS and approved by the United States Treasury Department. The State Agency shall draw only such funds as are needed to pay claims certified for payment and shall use such funds without delay to pay the claims. State Agencies shall report information on the status of Program funds on a monthly basis to C&MS on a form provided for it. Notwithstanding the foregoing provision for the use of Letters of Credit, Program funds shall be made available to the State Agency in the District of Columbia by means of Treasury Department checks on the same monthly basis as is prescribed for payments made by Letters of Credit.

(b) The special cash-for-food assistance funds apportioned to any State Agency for any fiscal year shall be made available in accordance with the method set forth in this section for general cashfor-food assistance, and to the extent practicable shall be in accordance with the same schedules.

(b-1) The supplemental funds allocated to any State agency for any fiscal year shall be made available in accordance with the method set forth in this section for general cash-for-food assistance funds, and, to the extent practicable, shall be made available in accordance with the same schedules. Initially,

supplemental funds in an amount not to exceed 60 percent of the State's tentative allocation shall so be made available. Final apportionments and increases in amounts made available, up to the amount of the tentative allocation, shall be made on the basis of justifications of the need for additional funds submitted by the States.

(c) The State Agency shall return to C&MS any Federal funds paid to it under the Program which are unobligated at the end of each fiscal year. Such return shall be made as soon as practicable but in any event not later than 30 days following demand made by FDAO. The State Agency shall also pay to C&MS any interest paid or credited on Federal funds paid to it under the Program.

[28 F.R. 1248, Feb. 8, 1963, as amended by Amdt. 3, 29 F.R. 14619, Oct. 27, 1964; Amdt. 4, 30 F.R. 15402, Dec. 15, 1965; Amdt. 9, 33 F.R. 18006, Dec. 4, 1968]

(a) During any fiscal year, payments made by C&MS to each State Agency, or the aggregate payment made by C&MS to nonprofit private schools in any State, shall be upon the condition that each dollar thereof shall be matched by three dollars of funds from sources within the State: Provided, however, That if the per capita income of any State is less than the per capita income of the United States, the matching requirement for any fiscal year shall be decreased by the percentage which the State per capita income is below the per capita income of the United States.

(b) Funds from sources within the State shall include: (1) Funds expended for the Program, including Program administration, by the State or its political subdivisions or by or on behalf of any school, from children's payments or from any other source of State or local funds, except funds expended for land or the acquisition, construction or alteration of buildings; and (2) the value of commodities, services, supplies, facilities, and equipment donated to the Program, except the value of commodities donated by FDAO or the value of land or the rental value of buildings used in connection with the Program. The value of donations eligible for matching shall be certified by the State Agency or by the nonprofit private schools administered by F'DAO.

(c) It shall be the responsibility of the State Agency, or FDAO where applicable,

to determine whether the matching requirements of the Act are being met. In the event it appears that the matching requirements will not be met, the State Agency or FDAO shall take corrective action to assure compliance with these requirements.

(d) In the event any State fails to match the full amount of the Federal funds advanced to it, the State shall return to C&MS the amount of the Federal funds which it failed to match.

(e) In any State where the aggregate payment of Federal funds to private schools administered by FDAO is not matched, any individual school not matching the Federal funds paid to it shall return to C&MS its pro rata share of the amount of the Federal funds determined by C&MS not to have been matched.

(f) Notwithstanding the provisions of the foregoing paragraphs of this section, no matching of funds shall be required with respect to special cash-for-food assistance.

[28 F.R. 1248, Feb. 8, 1963, as amended by Amdt. 4, 30 F.R. 15402, Dec. 15, 1965]

§ 210.7 Use of funds.

(a) Federal funds available as cashfor-food assistance shall be used only to reimburse schools in connection with lunches served to children of high school grade or under in accordance with the provisions of this part during the fiscal year for which such funds are appropriated.

(b) Income accruing to the lunch program of any school shall be used only for Program purposes: Provided, however, That such income shall not be used to purchase land, to acquire or construct buildings, or to make alterations of existing buildings: And provided further, That only funds from sources other than Federal or children's payments for lunches shall be used to finance out-ofState travel of school lunch personnel or the purchase of automotive equipment. [28 F.R. 1249, Feb. 8, 1963]

§ 210.8 Requirements for participation.

(a) Any school not participating in the Program in the previous fiscal year shall make written application for participation to the State Agency, or FDAO where applicable.

(a-1) Each school participating in the Program shall develop a policy statement covering the criteria used in the attendance units under its jurisdiction in de

termining the eligibility of children for a free or reduced price lunch. Such statement shall include a plan for collecting payments from paying children and accounting for free or reduced price lunches which will protect the anonymity of the children receiving free or reduced price lunches in order that such children shall not be identified as such to their peers. As a minimum, such criteria shall include the level of family income (including welfare grants), the number in the family unit, and the number of children in the family in attendance. Such policy statement shall be written, publicly announced and applied equitably to the children in all such attendance units.

(b) Applications shall include the name and address of the school and the following information: (1) The beginning date of lunch service under the Program; (2) the estimated average daily attendance or membership; (3) the lunch price to be charged children; (4) the estimated daily number of free or reduced price lunches to be served; and (5) the amount of funds and the value of food on hand for the Program at the time of application.

(c) Selection of schools for participation in the Program shall be in accordance with the following:

(1) Schools shall be selected for participation in the general cash-for-food assistance phase of the Program on the basis of need and attendance.

(2) Schools shall be selected for participation in the special cash-for-food assistance phase of the Program on the basis of the following factors: (i) The economic condition of the area from which such schools draw attendance; (ii) the needs of pupils in such schools for free and reduced-price lunches; (iii) the percentage of free and reduced-price lunches being served in such schools to their pupils; (iv) the prevailing price of lunches in such schools as compared with the average prevailing price of lunches served in the State under the National School Lunch Act and (v) the need of such schools for additional assistance as reflected by the financial position of the school lunch program in such schools. (For the purposes of subdivision (v) of this subparagraph the need for additional assistance shall mean the need for reimbursement at rates above nine cents per Type A lunch.) The need for special assistance out of section 11 funds shall be reviewed annually.

(3) Except as provided in this subparagraph, no school which operates the food or milk service in any attendance unit under a contractual arrangement with a concessionaire or food service management company or under a similar arrangement shall be eligible for participation in the program with respect to such attendance unit, even though the school or such attendance unit obtains no profit from the operation of such food or milk service. The State agency, or CFPDO where applicable, may authorize a school to operate under the program, through fiscal year 1970, under a contract with a food service management company, on a pilot, experimental basis: Provided, That (i) such operation will extend food service to needy children not previously benefiting from the program, (ii) the contract with the food service management company is one which is substantially in conformity with the applicable prototype contract published in the FEDERAL REGISTER and (iii) the contract is approved by the State agency, or CFPDO where applicable, and the Department in advance of the beginning of the food service.

(d) Schools selected for participation shall enter into a written agreement with the State Agency or, in those States in which FDAO administers the Program in private schools, such private schools shall enter into an agreement with the Department. Such agreements shall be on a form approved by FDAO and shall provide that the school shall:

(1) Operate a nonprofit lunch program and observe the limitations on the use of program income set forth in § 210.7(b);

(2) Limit its operating balance to a level consistent with Program needs;

(3) Serve lunches which meet the minimum requirements prescribed in § 210.9 during a period designated as the lunch period by the school.

(4) Price the Type A lunch as a unit; (5) Supply lunches without cost or at reduced price to all children who are determined by local school authorities to be unable to pay the full price thereof; (6) Make no discrimination against any child because of his inability to pay the full price of the lunch;

(7) Claim reimbursement only for the type or types of lunches specified in the agreement;

(8) Submit claims for reimbursement in accordance with procedures estab

lished by the State Agency, or FDAO where applicable;

(9) Maintain, in the storage, preparation and service of food, proper sanitation and health standards in conformance with all applicable State and local laws and regulations;

(10) Purchase, in as large quantities as may be efficiently utilized in its lunch program, foods designated as plentiful by the State Agency, or FDAO where applicable;

(11) Accept and use, in as large quantities as may be efficiently utilized in its lunch program, such foods as may be offered as a donation by the Department;

(12) Maintain necessary facilities for storing, preparing and serving food;

(13) Maintain full and accurate records of its lunch program, including records with respect to the following:

(1) Lunch service. (a) Daily number of lunches served to children, by type of lunch.

(b) Daily number of lunches served free or at reduced price to children, by type of lunch.

(c) Daily number of adults eating in the lunchroom (unless the income from food sales to adults is maintained as a separate account under subdivision (ii) (c) of this subparagraph).

(ii) Program income (receipts). (a) From children's payments.

(b) From Federal school lunch reimbursement.

(c) From all other sources, including Federal reimbursement under the Special Milk Program and the School Breakfast Program.

(iii) Program expenditures for the School Lunch, Special Milk, and School Breakfast Programs. (Supported by invoices, receipts, or other evidence of expenditures.)

(a) For food.
(b) For labor.

(c) All other expenditures.

(iv) Value of donations to Program. (a) Donated food, exclusive of foods donated by the Department.

(b) Donated services.

(c) All donations other than food and services.

Such records shall be retained for a period of three years after the end of the fiscal year to which they pertain.

(14) Upon request, make all accounts and records pertaining to its lunch program available to the State Agency and to C&MS, for audit or administrative review, at a reasonable time and place.

(e) Schools operating a lunch program under an agreement as provided in paragraph (d) of this section may serve children from other schools whether or not such other schools operate lunch programs, and may make a claim for reimbursement in connection with lunches served all children. In States in which FDAO administers the program in nonprofit private schools, any public school operating a lunch program under such an agreement may serve children from a private school, or any private school operating a lunch program under such an agreement may serve children from a public school, and separate claims for reimbursement may be made in connection with lunches served children from each type of school: Provided, however, That both schools shall enter into a special agreement with the State Agency and with the Department covering the preparation and serving of lunches, the keeping of records, and the submission of claims and reports.

[28 F.R. 1249, Feb. 8, 1963, as amended by Amdt. 4, 30 F.R. 15403, Dec. 15, 1965; Amdt. 6, 32 F.R. 33, Jan. 5, 1967; Amdt. 8, 33 F.R. 15631, Oct. 23, 1968; Amdt. 10, 34 F.R. 807, Jan. 18, 1969]

§ 210.9 Requirements for lunches.

(a) (1) Except as otherwise provided in this section, a Type A lunch shall contain, as a minimum, each of the following food components in the amounts indicated:

(i) One-half pint of fluid whole milk as a beverage.

(ii) Two ounces (edible portion as served) of lean meat, poultry, or fish; or two ounces of cheese; or one egg; or onehalf cup of cooked dry beans or peas; or four tablespoons of peanut butter; or an equivalent quantity of any combination of the above-listed foods. To be counted in meeting this requirement, these foods must be served in a main dish or in a main dish and one other menu item.

(iii) A three-fourth cup serving consisting of two or more vegetables or fruits, or both. Full-strength vegetable or fruit juice may be counted to meet not more than one-fourth cup of this requirement.

(iv) One slice of whole-grain or enriched bread; or a serving of cornbread, biscuits, rolls, muffins, etc., made of whole-grain or enriched meal or flour.

(v) Two teaspoons of butter or fortified margarine.

(2) The State Agency, or the Consumer Food Programs District Office, C&MS, where applicable, may allow schools to serve to children in the elementary grades and preschool programs lesser quantities than are specified of the items listed in subparagraph (1) (ii), (iii), and (v) of this paragraph (a). Any such allowances must be based on the lesser food needs of younger children. If a sufficient supply of fluid whole milk cannot be obtained, the State Agency, or the Consumer Food Programs District Office, C&MS, where applicable, may authorize the service of the fluid whole milk equivalent in reconstituted evaporated or dry whole milk, or may approve reimbursement for lunches served without milk. If emergency conditions prevent a school normally having a supply of fluid whole milk from temporarily obtaining delivery thereof, the State Agency, or the Consumer Food Programs District Office, C&MS, where applicable, may approve reimbursement for lunches served without milk during the emergency period. If a sufficient supply of fluid whole milk is obtainable the State Agency, or the Consumer Food Programs District Office, C&MS, where applicable, may reimburse for lunches served without milk, provided each child is offered a Type A lunch with milk and no reduction is made in the price of the Type: A lunch.

(b) A Type C lunch is one-half pint of fluid whole milk. A school preparing food shall not be approved to serve a Type C lunch unless it is approved to serve a Type A lunch.

(c) In American Samoa, Puerto Rico, and the Virgin Islands the following variations from the lunch requirements are authorized: In the Type A and the Type C lunch the milk requirement may be met by serving either fluid whole milk, or reconstituted dry whole or nonfat dry milk. In the Type A lunch, a serving of rice or a starchy vegetable, such as ufi, tanniers, yams, plantains, sweet potatoes, or a serving of enriched or whole grain cereal products, such as macaroni, dumplings or noodles, may be substituted for the bread requirement; and the minimum amount of butter or fortified margarine may be reduced by one-half of the prescribed amount.

(d) Substitutions may be made in the foods listed in paragraph (a) (1) of this section if individual participating children are unable, because of medical or other special dietary needs, to consume