Skip to main content
California Department of Education Logo

Cafeteria Funds/Accounts-Reminders and Resources

Nutrition Services Division Management Bulletin

Purpose: Policy, Beneficial Information

To: All Public/Non-Public Schools, Districts, County Offices, Charter Schools, Group Homes, Juvenile Halls, Camps, and All Other Agencies Participating in the National School Lunch and School Breakfast Programs


  • California School Nutrition Association
  • California Association of School Business Officials
  • California Charter School Association
  • Association of California School Administrators
  • California School Boards Association

Number: NSD-SNP-05-2012

Attention: Food Service Directors, Superintendents, Business Officials, Administrators, Executive Directors, Members

Date: May 2012

Subject: Cafeteria Funds/Accounts—Reminders and Resources

Reference: Title 7, Code of Federal Regulations (CFR), sections 210.2, 210.9, 210.14; Title 2, CFR, Part 200; U.S. Department of Agriculture, Food and Nutrition Service – Cafeteria Fund Loan Guidance; California School Accounting Manual; California Education Code sections 38080–38103 et seq., and 41010; USDA Indirect Cost Guidance Manual

The California Department of Education (CDE) Nutrition Services Division (NSD) is issuing this Management Bulletin (MB) to remind School Food Authorities (SFAs) (Local Educational Agencies [LEAs] participating in School Nutrition Programs [SNPs]) of the laws and regulations that govern revenues accruing to cafeteria funds/accounts. This MB also highlights some improper practices that the CDE has encountered, which can result in audit findings for SFAs as a result of the misuse or mischarging of cafeteria funds, and highlights suggested “best practices.”

The California Department of Education’s Authority Over School Nutrition Programs

As the State Educational Agency for federal School Nutrition Programs, the CDE is required to ensure that SFAs participating in federal School Nutrition Programs comply with all applicable California State and federal laws and regulations. Some of the pertinent federal regulations concerning the CDE’s responsibilities can be found in Title 7, Code of Federal Regulations (7 CFR) as follows:

  • 7 CFR Section 210.19(a)(1) Assurance of Compliance for Finances requires each state agency to:

    ...ensure that school food authorities comply with the requirements to account for all revenues and expenditures of their nonprofit school food service. School food authorities shall meet the requirements for the allowability of nonprofit school food service expenditures in accordance with this part and, 2 CFR part 200, subpart D and USDA implementing regulations 2 CFR part 400 and part 415, as applicable...


    ...In the event that net cash resources [emphasis added] exceed 3 months' average expenditures for the school food authority's nonprofit school food service…the State agency may require the school food authority to reduce the price children are charged for lunches, improve food quality or take other action designated to improve the nonprofit school food service. In the absence of any such action, the State agency shall make adjustments in the rate of reimbursement under the Program.

  • 7 CFR Section 210.19(a)(3) Program Compliance requires each state agency to ensure school food authorities comply with the applicable federal regulations. The state agency shall ensure compliance through audits, administrative reviews, technical assistance, training guidance materials, or by other means.
  • 7 CFR Section 210.19(a)(4) Investigations requires each state agency to promptly investigate complaints received or irregularities noted in connection with the operation of the food service program, and to take appropriate action to correct any irregularities. State agencies are required to maintain evidence of such investigations and actions. The U.S. Department of Agriculture (USDA) and the Office of Inspector General (OIG) may make reviews or investigations at the request of the State agency or where the USDA or OIG determines reviews or investigations are appropriate.
  • 7 CFR Section 210.24 Withholding Payments In accordance with 2 CFR 200.338 through 200.342, requires the state agency to withhold Program payments to any SFA that has failed to comply with the provisions of this part. Program payments shall be withheld until the SFA takes corrective action satisfactory to the state agency, or gives evidence that such corrective action will be taken, or until the state agency terminates their Program Agreement.
School Food Authority Responsibilities Related to Cafeteria Accounts

California’s Legislature recently added language to the state’s annual budget, which allowed fund transfers from one district/agency fund to another with the intention of allowing districts to maintain solvency. However, the Legislature did so without full knowledge of federal fiscal requirements and regulations.  When the Legislature gave SFAs this type of flexibility to move funds around, it caused some confusion. State legislation does not supersede federal law governing the use of cafeteria funds. Regardless of existing/proposed state statute(s), federal regulations clearly prohibit SFAs from using or transferring money from the cafeteria fund for non-food service expenditures.

Some of the pertinent federal regulations related to cafeteria accounts can be found in 7 CFR as follows:

  • 7 CFR Section 210.14(a) Non-Profit Food Service requires the following:

    School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. Expenditures of nonprofit school food service revenues shall be in accordance with the financial management system established by the State agency under Section 210.19(a) of this part. [Emphasis added.]
    Improper Practice: Please note that NSD’s Field Service Consultants have encountered instances where SFAs improperly spent Cafeteria Fund monies for purposes other than school food service operations and improvements, with unallowable payments made to school clubs, associated student organizations, athletic programs, parent organizations, school staff meetings or social occasions, or school remodeling or construction. Such expenditures are not allowable.
  • 7 CFR Section 210.2 defines Revenue, when applied to nonprofit school food service, as:

    All monies received by or accruing to the nonprofit school food service in accordance with the State agency’s established accounting system including, but not limited to, children’s payments, earnings on investments, other local revenues, State revenues, and Federal cash reimbursements.

  • 7 CFR Section 210.9(b)(1) Agreement with State Agency requires SFAs to:
  1. Maintain a nonprofit school food service and observe the limitations on the use of nonprofit school food service revenues...
  2. Limit its net cash resources [emphasis added] to an amount that does not exceed 3 months average expenditures for its nonprofit school food service or such other amount as may be approved in accordance with § 210.19(a)...
  3. Maintain a financial management system as prescribed under § 210.14(c)...
  4. Comply with the requirements of the Department’s regulations regarding financial management (2 CFR Part 200)...

  • 7 CFR Section 210.2 defines Net Cash Resources as:

    …all monies, as determined in accordance with the State agency’s established accounting system, that are available to or have accrued to a school food authority’s nonprofit school food service at any given time, less cash payable. Such monies may include, but are not limited to, cash on hand, cash receivable, earnings on investments, cash on deposit and the value of stocks, bonds or other negotiable securities.

    Best Practice: As a reminder (see above), if SFAs have surplus net cash resources of over three months’ operating expenditures, the CDE can require the SFA to reduce its meal prices, improve food quality, make other improvements to the food program, and/or reduce the SFA’s reimbursement. However, the CDE would prefer to have the SFA try to reduce their excess/surplus funds by implementing a budget agreement, in collaboration with NSD’s Resource Management Unit (RMU).
Net Cash Resources—Action and Spending Plans

As described above, 7 CFR Part 210 requires SFAs to maintain a cafeteria fund and defines the term “Net Cash Resources.” If an SFA’s net cash resources consistently exceed three months' average expenditures, the CDE strongly recommends that the SFA immediately submit a “budget agreement” to the CDE’s RMU for approval in order to reduce the cafeteria fund to an allowable level and avoid the CDE requiring the SFA to reduce meal prices, or having to make adjustments to the rate of reimbursement provided to the SFA.

In addition to the federal guidance outlined above, the California Education Code (EC) provides definitions and restrictions concerning an SFA’s proper use of school cafeteria funds/accounts, which include, but are not limited to, the following:

  • EC Section 38091 requires that the cafeteria fund shall be used only for those expenditures authorized by the governing board as necessary for the operation of school cafeterias. The remainder of EC Section 38091 conflicts with 7 CFR 210.14(a) and 2 CFR Part 200, which are more restrictive, and therefore apply.
  • EC Section 38093 states, “All receipts of the cafeteria, or cafeterias, as the case may be, derived from the sale of food shall be deposited in the account and shall be expended only for the maintenance of the cafeteria, or cafeterias...”
  • EC Section 38101(a) states, “The governing board of a school district may authorize expenditures from the cafeteria fund or cafeteria account only for those charges from the fund or account that are defined in the California School Accounting Manual.”
  • EC Section 38101(b) states, “A food service program shall not be charged more than once for expenditures for the same service. If a food service program is being charged for a service as a direct cost, the school district shall not also allocate that cost as a direct support cost or indirect cost.” EC Section 38080 defines "cafeteria" as synonymous with the term "food service.”
  • EC Section 38101(c) states, “For purposes of this section, an "indirect cost" shall be limited to the lesser of the school district's prior year indirect cost rate as approved by the department or the statewide average approved indirect cost for the second prior fiscal year.”
  • EC Section 38101(d) states, “Charges to, or transfers from, a food service program shall indicate when the charge or transfer was made and shall be accompanied by a written explanation of the purpose of, and basis for, the expenditure.”
  • EC Section 38101(e) states, “This section does not authorize a school district to charge a food service program any charges prohibited by state or federal law or regulation.”
  • EC Section 41010 states, “The accounting system used to record the financial affairs of any school district shall be in accordance with the definitions, instructions, and procedures published in the California School Accounting Manual as approved by the State Board of Education and furnished by the Superintendent of Public Instruction.”
Federal Regulations Do Not Allow School Food Authorities to Maintain a Cafeteria Fund Equipment Reserve

The California Legislature created EC Section 38102 to allow school districts to establish and maintain a cafeteria fund reserve, derived from the sale of food in the cafeteria, in an amount determined by the governing school board, and used solely for the purchase, lease, maintenance, or replacement of cafeteria equipment. However, federal regulations do not allow for a separate cafeteria fund for equipment or any other purpose (7 CFR, Section 210.2). The federal regulations require SFAs to establish a restricted account in which all of the revenue from all food service operations conducted by the SFA are deposited and retained. In addition, as mentioned above, the cafeteria fund may not exceed three month’s average operating expenses; therefore, a “reserve” is likely not feasible for most SFAs.

Charging Costs to the Cafeteria Fund

The California School Accounting Manual (CSAM) outlines California’s official school accounting system and assists SFAs in managing their funding. EC Section 41010 requires school districts to use systems to record their financial affairs that comply with the CSAM’s definitions, instructions, and procedures. Pursuant to EC Section 41010, SFAs must follow CSAM instructions with regard to charging costs to their cafeteria fund, especially when dealing with the following procedures:

  • Procedure 905, Documenting Salaries and Wages—all employee payroll costs directly charged to the cafeteria fund must be supported by personnel activity reports or semi-annual certifications in accordance with 2 CFR Part 200.
  • Procedure 915, Indirect Cost Rate—Indirect costs must be claimed based on actual program expenditures rather than on budget estimates, and LEAs can only charge the lesser of the LEA’s approved indirect cost rate or the statewide average for food service.

The CSAM can be ordered, viewed, or downloaded from the CDE CSAM Guidance Web page at

Additionally, the following federal regulations and guidance provide information related to charging costs to the cafeteria fund:

  • 2 CFR: Grants and Agreements, Part 200
    • Establish uniform administrative rules for federal grants and cooperative agreements and sub awards and cover allowable costs, program income, procurement, monitoring and reporting, financial reporting, etc.
    • Serves as a guide in determining allowable food service costs. The basic guidelines for a cost... “To be allowable under Federal awards, [the] costs must be necessary and reasonable for proper and efficient performance and administration of federal awards.”
Handling Fees on Warehoused Goods

Generally, for SFAs that maintain general stores, warehouses, or stockrooms from which schools withdraw equipment, food, and/or supplies, items requisitioned from general stores or stockrooms must be charged at their actual net cost under any recognized method of pricing inventory withdrawals, consistently applied.

Overhead costs for receiving, storing, and delivering goods requisitioned from a warehouse are allowable if charged in one of the following three ways. If a cafeteria program maintains its own warehouse, it incurs the overhead costs directly. If a cafeteria program that is part of a local educational agency (LEA) uses the LEA’s warehouse, it incurs the overhead costs either through the LEA’s indirect cost rate or through an overhead charge added by the LEA to the cost of goods requisitioned from the warehouse. Adding overhead to the cost of goods is permissive, not required.

Procedures 405 and 775 of the CSAM prescribe how an LEA should calculate overhead and account for it. The accounting methods in these procedures ensure that overhead costs reflect neither a profit nor a loss, and preclude any possibility of the cafeteria program being charged twice, once directly and again indirectly, for the costs of warehousing [2 CFR, Part 200].

Borrowing Money from the Cafeteria Fund

Federal guidance imposes limitations on borrowing money from the cafeteria fund. An SFA may only loan money from its nonprofit food service account as long as the loan does not jeopardize the integrity of its food service program and the loan meets all of the prerequisite criteria set forth in federal guidance.

Specifically, a loan from the cafeteria fund must be treated as a commercial loan and, before the SFA can transfer the funds, there must be a written bona-fide loan agreement between the SFA and food service officials with specific repayment terms such as dates, amounts, and interest payments. The rate of interest charged must be commensurate with the rate that would be paid if the loan was obtained from a commercial source and be no less than the amount of interest the food service department would have earned by keeping the money deposited in an interest-bearing local account. For additional USDA loan guidance, please see the CDE’s Cafeteria Fund Loan Guidance Web page at

Applicability of This Information

While this MB is directed to all School Nutrition Program sponsors, the information regarding the EC and the CSAM applies only to public school districts and county offices of education. Unless specifically stated as such within applicable EC sections, the EC does not currently apply to charter schools, residential childcare institutions, juvenile detention facilities, probation camps, and private schools. Federal regulations apply to all School Nutrition Program sponsors.

Further Information

Below is a list of additional guidance and resources pertaining to the use of cafeteria funds. Please share this MB and information with your district/agency management, finance, and business personnel.

If you have questions regarding this MB or cafeteria fund policy or regulations, please contact the School Nutrition Programs Unit at 800-952-5609 or you can submit your questions to

If you have questions about the CSAM or how to account for particular charges to the cafeteria fund, please contact the School Fiscal Services Division, Financial Accountability and Information Services Unit by phone at 916-322-1770 or by e-mail at

Additional Guidance and Resources Pertaining to the Use of Cafeteria Funds

The CSNA has approved this seminar for 10 CEUs.

  1. 2008–Current: Annual training for School Food Service. The NSD has annually provided comprehensive Cafeteria Fund Guidance training sessions (PowerPoint and resource handouts) since 2008 at several CSNA Chapter Meetings, the Annual CSNA Conference (twice in 2011), and at the California Association of School Business Officials conference for school district administrators and food service directors. These cafeteria fund training materials are available upon request, and will soon be posted to the CDE’s School Nutrition Programs Guidance, Manuals, and Resources Web page at
  2. Management Bulletin (MB) USDA-SNP-22-2011: Indirect Cost Guidance Manual (September 2011) Provides information about and the Web link to USDA’s Indirect Cost Guidance Manual that provides proper procedures for how and when to charge indirect costs to an Local Education Agency’s (LEA) cafeteria fund (e.g., a LEA cannot retroactively charge indirect costs to its cafeteria fund).
  3. MB NSD-SNP-01-2009: School Food Authorities’ Responsibilities to Provide Meal Services to Students and Clarification Regarding the Use of Parent Groups, Student Groups, and Other Community Organizations to Provide Meal Service (December 2009) Provides specific guidance regarding cafeteria fund regulations.
  4. MB USDA-SNP-16-2009: Interest Earned on the Cafeteria Account/Fund (July 2009) Explains that interest is allowable revenue in cafeteria funds, and includes link to Title 7, Code of Federal Regulations (7 CFR), Definitions of Cafeteria Fund Revenue and Resource Management.
  5. MB NSD-SNP-05-2009: School Cafeteria Funds Frequently Asked Questions (June 2009) Provides specific guidance regarding the 2009–10 Budget Act, and related detailed information pertaining to the use of cafeteria funds (links to multiple other resources regarding Cafeteria Funds).
  6. Letter to County and District Chief Business Officials and Charter School Administrators regarding fiscal issues relating to budget reductions and flexibility provisions resulting from trailer bill, Senate Bill 4 of the 2009–10 Third Extraordinary Session (April 2009) Provides State Budget information through 2012–13, and broad guidance governing cafeteria fund uses.
  7. MB NSD-SNP-07-2008: Limitations on Transfer of Funds (July 2008) Includes comprehensive federal and state cafeteria fund regulations; also includes guidance on loans and penalties.
  8. MB NSD-SNP-03-2008: Potential Funding Opportunities for School Food Service Facilities (May 2008) [Note, the preceding Web address is no longer valid]. Provides opportunities for cafeteria facility funding, guidance on the use of cafeteria funds, and a link to the federal Office of Management and Budget (OMB) Circular A-87 that governs cafeteria fund expenditures.
  9. Joint Nutrition Services Division and School Fiscal Services Division (SFSD) Letter to County/District Superintendents, Business Officials, and School Food Service Directors regarding School Cafeteria Funds Regulations; Clarification of AB 1754. (November 2004) Provides additional instructions for LEAs, further clarifying appropriate use of cafeteria funds.
  10. Cafeteria Fund Loan Guidance from the U.S. Department of Agriculture (posted to CDE Web
    June 3, 2004, as a link to #11 above, and later added as link to MB NSD SNP-07-2008). Provides specific instructions as to when cafeteria fund loans can be used and how they must be repaid (with interest), and explains how the agreement for a loan must precede an actual fund transfer and be accompanied by documentation, such as a board policy.
  11. MB 03-125: Assembly Bill (AB) 1754: Use of Cafeteria Funds/Accounts (December 2003) [Note, the preceding Web address is no longer valid]. Provides additional and specific guidance that clarifies federal laws that govern cafeteria funds, which conflict with AB 1754.
  12. SFSD Letter regarding 2003–04 Budget: Flexibility Provisions to County/District Superintendents, Chief Business Officials, and Charter School Administrators (November 12, 2003) [Note, the preceding Web address is no longer valid] Explains the flexibility in AB 1754, and advises LEAs participating in school meal programs to exercise caution, “…so as to ensure program compliance and avoid a federal audit exception.”
  13. Ongoing: CDE Web Pages: Indirect Cost Guidance for LEAs [Note, the preceding Web address is no longer valid.] and These Web pages provide extensive annual guidance for LEAs including the list of indirect cost rates for each LEA; explanation of how indirect cost rates are calculated and applied; and the annual statewide maximum indirect cost rate for Child Nutrition Programs.
Questions:   Nutrition Services Division | 800-952-5609
Last Reviewed: Wednesday, October 2, 2019
Related Content
  • Cafeteria Fund Loan Letter
    This guidance provides districts with information and instructions pertaining to federal and State statutes and regulations that govern school cafeteria accounts, and clarifies section 39(a) of Assembly Bill (AB) 1754.
Recently Posted in Nutrition
  • Crediting Grains Using Ounce Equivalencies (added 21-Nov-2019)
    Guidance on determining the amount of creditable grains present in a food product, or recipe using ounce equivalencies.
  • Long Description for Figure 1: Grains Flowchart (added 21-Nov-2019)
    Long description of Figure 1 Flowchart 1 that is included in the Flowchart for Determining Creditable Grains in the Child and Adult Care Food Program tip sheet.
  • Long Description for Figure 2: Grains Flowchart (added 21-Nov-2019)
    Long description of Figure 2 Flowchart 2 that is included in the Flowchart for Determining Creditable Grains in the Child and Adult Care Food Program tip sheet.
  • Introducing Solids to Infants in the CNPs (added 21-Nov-2019)
    Provides guidance on assessing an infant's developmental readiness for solid foods, engaging communications with parents or guardians about offering solids, and understanding infant eating habits.
  • Serving Smoothies in the CACFP (added 21-Nov-2019)
    Provides smoothie recipes and guidance on crediting fruit, vegetable, milk, and yogurt smoothies served as part of reimbursable meals and snacks in the Child and Adult Care Food Program (CACFP).

  • Determining Whole Grain-rich Products in the CACFP (added 21-Nov-2019)
    Provides guidance for identifying whole grain-rich (WGR) items in the Child and Adult Care Food Program (CACFP).
  • Quarter-mile Site Proximity Reporting Requirements (added 19-Nov-2019)
    This management bulletin provides guidance on the quarter mile site proximity requirements for Seamless Summer Option (SSO) and Summer Food Service Program (SFSP) sponsors.
  • Recipe for Pasta Parmesan with Vegetables (added 19-Nov-2019)
    Parmesan and rotini pasta recipe with garden vegetables in a garlic butter sauce developed by the California Culinary Centers for school food service menu planning.
  • Recipe for BBQ Chicken (added 19-Nov-2019)
    Flavorful baked chicken recipe with a sweet barbeque (BBQ) glaze developed by the California Culinary Centers for school food service menu planning.
  • Recipe for Beef Torta Sandwich (added 19-Nov-2019)
    Spicy Mediterranean beef sandwich recipe on a whole grain roll with fresh jalapenos and cheese developed by the California Culinary Centers for school food service menu planning.