Surety Bond Encyclopedia

Child and Adult Care Food Program Bond - Texas Dept. of Agriculture in Texas

Brief Summary

The CACFP performance bond is sized to your own enrollment and meal pattern, so there is no single number to look up. Work out the formula before you apply, use a surety that is listed in Treasury Circular 570, and you can clear this step of the TDA sponsor application without a back and forth over the bond.

Texas requires a performance bond from a Child and Adult Care Food Program sponsoring organization with less than three years of successful administrative and financial history, unless it is a governmental entity. Under 4 Texas Administrative Code 25.17 the bond equals total enrollment times the current free reimbursement rate for each meal type served times 90, added together across meal types. The bond runs to the Texas Department of Agriculture and must be written by a surety listed in U.S. Treasury Circular 570.

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How to Apply for a Child and Adult Care Food Program Bond:

Confirm you are applying as a CACFP sponsoring organization and are not a governmental entity.
Confirm you lack three years of successful administrative and financial history within the preceding seven years.
Calculate the bond: total enrollment x current free reimbursement rate x 90 for each meal type, then add the results.
Apply for the bond with a surety listed in U.S. Treasury Circular 570.
Have the surety complete TDA's Performance Bond form naming the Texas Department of Agriculture as obligee.
Submit the executed bond to TDA with your sponsoring organization application documents, and confirm the current filing steps with TDA before the bond is issued.

Detailed Information About the Texas Child and Adult Care Food Program Bond:

Who has to post the bond

The requirement falls on sponsoring organizations, not on every CACFP participant. 4 Texas Administrative Code 25.17 requires a sponsoring organization applying to participate in CACFP with less than three years of successful administrative and financial history to obtain and maintain a performance bond. The requirement ends once the sponsor can show a total of three years of successful administrative and financial history within the preceding seven years. Governmental entities are exempt.

TDA defines a sponsoring organization as one that owns two or more child care centers or adult day care centers, or a nonprofit that sponsors one or more centers that are not part of the same organization.

How the amount is figured

The initial bond amount is based on anticipated enrollment. For each meal type served, the rule uses this formula:

Total Enrollment x Current Free Reimbursement Rate for Meal Type x 90

The results for each meal type are added together. Because reimbursement rates change, the same enrollment can produce a different bond amount from one year to the next.

The bond has to grow with the program

This is the part sponsors miss. If enrollment or reimbursement increases by 50 percent over the original anticipated enrollment, the bond must be increased to match actual figures within 45 days. Each later 50 percent increase over the level at the last adjustment triggers another increase, again within 45 days. A sponsor may ask TDA in writing to lower the bond if enrollment or reimbursement drops.

The surety and the form

The bond must come from a company designated in U.S. Treasury Circular 570 as certified to issue bonds for federally funded programs. TDA publishes its own Performance Bond form naming the Texas Department of Agriculture as obligee. On that form the surety agrees to pay net obligations owed to TDA within thirty days of a demand letter, the bond covers unsatisfied net audit and monetary exceptions, and the surety may cancel as to future liability on sixty days written notice to the principal and TDA.

Getting out of the requirement

Once the sponsor has three years of successful administrative and financial history within the preceding seven years, it can ask TDA in writing for relief from the bond.

Eligibility and Requirements for a Texas Child and Adult Care Food Program Bond:

Surety designated in U.S. Treasury Circular 570 as certified for federally funded programs.
Texas Department of Agriculture named as obligee on the TDA Performance Bond form.
Bond amount set by the 4 TAC 25.17 enrollment and reimbursement formula.
Bond increased within 45 days after each 50 percent rise in enrollment or reimbursement.
Bond kept in force until TDA grants relief based on three years of successful history.

Texas Child and Adult Care Food Program Bond FAQs:

How much is the Texas CACFP performance bond?

There is no flat amount. For each meal type served, multiply total enrollment by the current free reimbursement rate for that meal type and by 90, then add the results together. That total is the initial bond under 4 Texas Administrative Code 25.17.

Who has to post it?

A sponsoring organization applying to participate in CACFP with less than three years of successful administrative and financial history within the preceding seven years. Governmental entities are exempt.

What happens if our enrollment grows?

If enrollment or reimbursement rises by 50 percent over the figure the bond was based on, the bond must be increased to match actual numbers within 45 days. The same test applies again after every adjustment.

Can any surety write this bond?

No. The surety must be designated in U.S. Treasury Circular 570 as certified to issue bonds for federally funded programs.

When can we stop carrying the bond?

Once the sponsor has three years of successful administrative and financial history within the preceding seven years, it may send TDA a written request for relief from the bonding requirement.