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Recording of All Costs Through GAAP


Nutrition Services Division Management Bulletin

Purpose: Policy, Beneficial Information

To: Child and Adult Care Food Program Agencies

Attention: Food Program Director

Number: CACFP-06-2017

Date: July 2017

Reference: U.S. Department of Agriculture Food and Nutrition Service Instruction 796-2, Revision 4, Section VII (A)

Subject: Recording of All Costs Through Generally Accepted Accounting Principles

Supersede: Nutrition Services Division Management Bulletin 06-218


This Management Bulletin (MB) clarifies the U.S. Department of Agriculture (USDA) Food and Nutrition Service Instruction 796-2, Revision 4, Section VII (A) that requires Child and Adult Care Food Program (CACFP) agencies to account for all costs of operation through the consistent use of generally accepted accounting principles (GAAP). This MB also highlights the end of the program year (PY) requirement for all day care home sponsors to reflect costs on an accrual basis when submitting final claims.

GAAP are rules and procedures that govern accounting for financial transactions. GAAP are derived from a variety of sources, including the Governmental Accounting Standards Board and the Federal Accounting Standards Advisory Board. Agencies participating in the CACFP are required to follow GAAP.

Only allowable costs may be charged to the CACFP nonprofit food service account (NFSA). Some of the agency’s costs will be allowable operating or administrative costs of the CACFP while other costs are unallowable. These unallowable costs may be necessary and reasonable for operation and administration of the agency but are not allowed as CACFP NFSA costs, even when the majority of the agency’s revenue is from the CACFP.

Accounting for All Costs of Operation

There are in-kind services and contributions. The USDA has defined in-kind services as costs that are actual cash expenditures that have been paid by the agency, even though the CACFP may not have been billed for the CACFP share of the costs.

In-kind contributions represent donations to the agency from third parties, not costs incurred elsewhere within the agency. Under GAAP, both in-kind services and contributions must be accounted for in the agency’s financial records.

Day care home sponsors must account for both in-kind services and contributions in their annual administrative budgets as either direct or indirect costs. If a sponsor does not have an approved indirect cost rate, they should direct charge such costs in their financial records.

Accrual Basis, Cash Basis, or Modified Accrual Basis Accounting

Agencies can maintain accounting records by:

  • Accrual basis (recording expenses and income when incurred)
  • Cash basis (recording expenses and income when paid or received)
  • Modified accrual basis (recording certain expenses and income on an accrual basis while recording other costs and expenses on a cash basis)

Regardless of the basis used, the agency’s accounting system must treat costs consistently.

End of the Program Year Reporting
  • Day care home sponsors:

The final claim for reimbursement for the PY, the month of September, must reflect costs on an accrual basis. Appropriate precautions are required to ensure that the accrued costs and income reported on the final claim are not reported again in a future period.

  • Center agencies:

The accounting records must reflect costs on an accrual basis at the end of the PY. Appropriate precautions are required to ensure that the accrued costs and income are not reported again in any future PY records.

Contact Information

If you have any questions regarding this subject, please contact your assigned CACFP specialist. The two lists of CACFP specialists, a center specialist by county list, and a day care home sponsor specialist by sponsor name list, are available on the California Department of Education CACFP Contact Web page at http://www.cde.ca.gov/ls/nu/cc/cacfpcontact.asp. You can also contact Nancy Charpentier, CACFP Unit Office Technician (OT), by phone at 916-327-2991 or by e-mail at ncharpentier@cde.ca.gov, or Leslie Schar, Community Nutrition Programs Administration OT, by phone at 916-324-6153 or by e-mail at lschar@cde.ca.gov to be directed to your assigned CACFP specialist.

Questions:   Nutrition Services Division | 800-952-5609
Last Reviewed: Thursday, July 13, 2017
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