Transfer of Agency Ownership

This Management Bulletin provides information on the transfer of ownership of private (non-public) agencies participating in the Child Nutrition Programs administered by the California Department of Education (CDE). Agencies must immediately notify the CDE’s Nutrition Services Division (NSD) prior to a change of ownership to avoid loss of meal reimbursement.

When a change in ownership occurs, the agency no longer has a valid food program agreement with the CDE. Therefore, an overpayment, retroactive to the effective date of the change in ownership, will be assessed if the agency continues to claim reimbursement for meals under the prior owner’s agreement without notifying the CDE. Both the prior owner and the new owner will be held liable for the overpayment.

There is no need to notify CDE if a private corporation changes major stockholders (with no change in the Federal Employer Identification Number). The CDE does not consider this to be a change in ownership because the major stockholders assume the liabilities as well as the assets of the corporation. However, the CDE requests that the new chairman of the board sign the agreement to participate and provide the CDE with the updated listing of board officers.

In order for a new owner (either a sole proprietorship, partnership, or corporation) to claim meal reimbursement:

• The previous owner must cancel the current food program agreement, and the new owner must complete and submit an application to participate in the program.
• The application must be processed and approved before reimbursement for meals can be claimed under the new agreement.
• All outstanding accounts receivable under the prior ownership must be paid in full. The CDE will not approve the new owner’s application for program participation if an outstanding accounts receivable exists under the prior ownership.
• And, if applicable, a license in the new owner’s name (or documentation that the licensing agency has been notified of the ownership change and will transfer the license) must be submitted with the new application to participate.

To avoid an overpayment or loss of reimbursement, the CDE recommends that the previous owner notify the CDE at least 60 days in advance of the sale of the agency and that the new owner submit an application to participate at least 45 days prior to the anticipated date of the assumption of ownership.

Please share this information with appropriate management and business personnel including the facility owner(s) and board members.

If your agency is contemplating a change in ownership, please contact your Nutrition Services Division, Program Administration Specialist at 916-445-0850 or 800-952-5609.