CACFP Administrative Manual Section 6.2CACFP Administrative Manual Section 6.2: Centers Allowable Expenses.
Section 6: Financial Management
Section 6.2 Centers Allowable Expenses
The USDA, FNS Instruction 796-2, Revision 4 and Title 2, Code of Federal Regulations (2 CFR), Part 200 establish guidelines for the financial management of CACFP reimbursement funds. These guidelines include, but are not limited to, information on CACFP allowable costs, and the level of approval required for such costs. All costs, including food, require prior approval before the cost is incurred. Some expenses require specific prior written approval by the CDE or the FNS, depending on the nature of the cost.
For expenses that require prior approval, the CDE must approve the cost on the appropriate budget line in the CNIPS. Agencies must submit budget revisions in the CNIPS and obtain CDE approval prior to exceeding a budget line in the approved annual budget.
Specific Prior Written Approval
CACFP allowable costs that require specific prior written approval must be approved in writing by the CDE or the FNS. Agencies interested in using CACFP funds to make purchases that require specific prior written approval must contact their program specialist for guidance on the approval process. A list of CACFP specialists by county is on the CDE CACFP Contact Web page.
Capital Expenditure Approved List—School Food Authorities Only
Effective February 23, 2017, for SFAs on the CACFP, specific prior written approval is not required for equipment ($5,000 or more per unit) that is detailed on the USDA Capital Expenditure Approved List. This list is located on the CDE Capital Expenditure Approved List Web page.
CACFP reimbursement is supplemental funding that is intended to enhance a center’s food service operation, so that a center may provide better-quality food to more participants. Consequently, most centers will use their reimbursement for a limited number of CACFP expenses. The CDE strongly recommends that agencies exhaust their reimbursement on food and food service supplies. If there is CACFP reimbursement that remains after exhausting these categories, agencies can consider expensing other allowable expenses.
The following list of allowable expenses is confined to a small number of typical expenses that coincide with the cost categories of the center budgets in the CNIPS. Centers must include program expenses in the appropriate CNIPS budget categories. Please refer to the FNS Instruction 796-2, Revision 4 and 2 CFR, Part 200 for full details on each of these cost categories, the level of approval required for these costs, and documentation requirements.
All costs must be:
- Necessary and reasonable;
- Allocated for CACFP use only;
- Allowable under local, state, and federal laws and regulations;
- Charged consistently through the application of U.S. Generally Accepted Accounting Principles; and
- Adequately documented.
Administrative costs are expenses incurred by an agency in planning, organizing, and managing the CACFP. Center sponsors with two or more sites must not spend more than 15 percent of their CACFP program year’s reimbursement on administrative expenses. The following is a partial listing of allowable CACFP administrative expenses which coincide with budget categories in the CNIPS.
- Administrative Labor and Benefits: This expense is for salaries and wages, employment taxes, and some employee benefits for employee time that is related to administrative duties. The labor and benefits expense lines are separate in the CNIPS budget. Agencies must enter them as separate categories. Examples of administrative duties include: certifying meal benefit forms, monitoring sites, training staff, and preparing claims.
Time and attendance reports, and relevant payment records for taxes and benefits, must support the costs charged to the CACFP. If an employee does not work 100 percent of their time for the CACFP, then a Personnel Activity Report (PAR) is required. Please refer to the PARs section below for more information.
- Indirect Costs: These are costs that agencies have incurred for common or joint objectives, but cannot readily identify or assign to the CACFP. Center sponsors must include indirect costs on the Administrative Other line of their CNIPS budget; independent centers must include indirect costs on the Other line of their CNIPS budget.
Agencies must ensure that their CNIPS budget reflects the indirect costs incurred. This means that agencies must include in the CNIPS budget the total indirect costs actually charged to the CACFP account; additional approved budget revisions may be necessary to assure this.
- SFAs: SFAs must charge the lesser of their indirect cost rate (as approved by the CDE) or the statewide average indirect cost rate. For more information, please refer to the CDE California Statewide Average Indirect Cost Rates Web page. If the SFA is not exempt from submitting a budget (see Section 6.1 for details), then the SFA must include in the CNIPS budget the indirect costs charged to the CACFP.
- Non-SFAs: Non-SFAs must submit a letter from their federal cognizant agency noting their approved indirect cost rate.
Agencies that have more than one source of funding, have shared costs that are not associated with one program, and have never obtained a negotiated indirect cost rate from their cognizant agency may be eligible to include a 10 percent indirect cost rate in their budget. If eligible, these agencies must submit verification from their cognizant agency that states that they never received an indirect cost rate in the past. For more information, please see MB CACFP-03-2016 and SFSP-03-2016: Indirect Costs in the Child and Adult Care Food Program and Summer Food Service Program located on the CDE CACFP MB Web page.
Operating costs are expenses incurred in serving meals to CACFP participants. The following is a partial listing of allowable CACFP operating expenses which coincide with budget categories in the CNIPS.
- Food: This expense may be for the cost of purchased food items for on-site meal preparation, the cost of vended meals from a food vendor, or a combination of both. Generally, food costs will be the largest or the only expense for which a center uses its program reimbursement.
- Food Service Supplies: This expense may be for the cost of purchasing plates (including paper), cups, utensils (including plastic), and paper goods.
- Food Service Labor and Benefits: This expense is for salaries and wages, employment taxes, and employee benefits for employees whose only duties are related to the food service. The food service labor and benefits expense lines are separate in the CNIPS budget. Agencies must enter them as separate categories. Examples of food service duties include: cooking food, completing menu production records, transporting food, and taking meal counts.
The costs charged to the CACFP must be supported by time and attendance reports and relevant payment records for taxes and benefits. If the employee does not work 100 percent of their time for the CACFP, then a PAR is required. Please refer to the PARs section below for more information.
- Equipment: Equipment is defined as an item of nonexpendable personal property with a useful life of more than one year and an acquisition cost of $5,000 or more per unit. Generally, CACFP reimbursement will not cover the acquisition cost of equipment. However, agencies that would like to purchase equipment with CACFP funds must provide their specialist with three equipment quotes and obtain specific prior written approval.
Equipment may also be an administrative expense. For example, a copier purchased for the CACFP would be considered an administrative expense, while a stove would be considered an operating expense. Independent centers must include food service equipment expenses on the Food Service Equipment budget line in the CNIPS; if the equipment is not for the food service, the expense must be included on the Other line of the budget. Depending on the purpose of the equipment, center sponsors must include equipment on the Administrative Other or Equipment budget line in the CNIPS.
- Rent/Lease: This cost is for the rent or lease of space or equipment used for the CACFP. Agencies that wish to use CACFP reimbursement on rent/lease must submit a rent/lease agreement along with a cost allocation plan and obtain CDE prior approval in the CNIPS.
Rent/lease for buildings is allocated based on the ratio of CACFP square footage to total building square footage. If the CACFP space is shared with multiple non-CACFP programs, then an additional allocation must be calculated based on CACFP time to total time used. An example of a rent/lease allocation is located on page 24 of the USDA Guidance for Management Plans and Budgets CACFP Handbook on the USDA CACFP Handbook Web page .
Rent/lease may also be an administrative cost. For example, office space for administrative staff would be considered an administrative cost while the rent/lease of kitchen space would be considered an operating expense.
Independent centers must include rent/lease expenses on the Rent/Lease budget line in the CNIPS. Depending on the purpose of the building or equipment rental, center sponsors must include rent/lease on the Administrative Other or Rent/Lease budget line in the CNIPS.
Personnel Activity Reports
Federal regulations require PARs or equivalent documentation to support the costs of salaries and wages charged for employees working on multiple activities or cost objectives. To establish the portion of costs that agencies may claim as a program labor cost, these reports must identify the total time the employee actually worked, not just the time spent on CACFP activities. Estimated working hours are not acceptable. Sponsors with two or more approved sites must ensure the PARs reports separate CACFP administrative and CACFP operating time. A sample PAR report and a PAR training webinar is in the Download Forms section of the CNIPS.
Other Expenses—Administrative or Operational
Centers have an Other line in their CNIPS budget to include expenses that are outside of the listed categories. Center sponsors have Administrative Other and Operating Other cost categories and must ensure that other costs are included and approved in the appropriate budget category.
Agencies interested in charging Other category expenses must provide their CACFP specialist with a list of expenses that are included in this category. Depending on the costs charged, the CDE may require additional documentation.
References: 2 CFR, Part 200; 7 CFR, sections 226.6, 226.7(g), 226.15(b), and 226.16(b)(1); MB CACFP-03-2017: Prior Approval for CACFP Allowable Costs and MB CACFP-06-2014: Streamlining CACFP At-risk Afterschool Meal Participation for SFAs; USDA FNS Instruction 796-2, Revision 4, and USDA Guidance for Management Plans and Budgets Handbook