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Late Payment Charges and Allowable Costs


Important Notice: CACFP Program Moved to CDSS

The Early Childhood Development Act of 2020 (Senate Bill (SB) 98, Chapter 24, Statutes of 2020) authorized the transfer of child care and development programs administered by the California Department of Education to the California Department of Social Services (CDSS) effective July 1, 2021. The content on this page may not be current and involves the Child and Adult Care Food Program (CACFP) that has moved to CDSS. Visit the CDSS CACFP web page External link opens in new window or tab. or call 1-833-559-2420 for more information.

Nutrition Services Division Management Bulletin

To: School Nutrition Program Sponsors, Child and Adult Care Food Program Sponsors, Summer Food Service Program Sponsors

Number: 02-109,  02-207,  02-712

Attention: Food Program Directors

Date: May 2002

Subject: Late Payment Charges and Allowable Costs to Child Nutrition Accounts

Reference: United States Department of Agriculture School Programs Policy Memo 02-05; Child and Adult Care Food Program (CACFP) Policy Memo 02-03; and Summer Food Service Program (SFSP) Policy Memo 02-02


This Management Bulletin (MB) provides the United States Department of Agriculture's (USDA) policy regarding "Late Payment Charges;" specifically whether these charges create prohibited "cost plus percentage of cost" contracts; and if these charges are prohibited from being paid for with child nutrition funds or accounts.

The "cost plus percentage of cost" contract means that a vendor or service provider quotes you a cost and adds on their fee as a percentage of those costs. This type of contract is prohibited. You must base contracts on a fee upon which both parties agree and not on your program’s participation or reimbursement amount. This requirement affects all Child Nutrition Program (CNP) sponsors, including schools, public entities, and private agencies.

Late payment charges do not create a "cost plus percentage of cost" contract. They do, however, represent unallowable costs as defined in Title 2, Code of Federal Regulations, part 200.

Therefore, CNP sponsors who accrue late payment charges may not apply these costs to their nonprofit CNP accounts. Late payments are prohibited expenditures from federal and non-federal CNP accounts. CNP sponsors must use other funds to pay late charges.

The USDA has directed us to take appropriate action if we find noncompliance to this policy during an administrative review or technical assistance visit.

Questions:   Resource Management Unit | 800-952-5609
Last Reviewed: Wednesday, December 28, 2022
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