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Cafeteria Funds—Allowable Uses

Nutrition Services Division Management Bulletin

Purpose: Policy, Beneficial Information

To: All School Nutrition Program Operators

Attention: Program Operators, School Business Officials, Superintendents, and School Administrators

Number: SNP-05-2020

Date: February 2020

Reference: Title 7, Code of Federal Regulations, Part 210; Title 2, Code of Federal Regulations, Part 200; California Education Code; California School Accounting Manual; U.S. Department of Agriculture Policy Memorandum SP 31-2014

Supersedes: Management Bulletins SNP-07-2013; NSD-SNP-05-2012

Subject: Cafeteria Funds—Allowable Uses

This management bulletin (MB) supersedes the California Department of Education (CDE) MB NSD-SNP-07-2013: Cafeteria Funds—Allowable Uses, and MB NSD-SNP-05-2012: Cafeteria Funds/Accounts—Reminders and Resources. The purpose of this MB is to reiterate the U.S. Department of Agriculture’s (USDA) requirements and provide updated guidance on allowable and unallowable expenditures from the nonprofit school food service account (cafeteria fund). Additional MB guidance for indirect costs (SNP-07-2020) and construction costs (SNP-08-2020) are available on the CDE Cafeteria Fund Guidance web page at


As the state agency for federal School Nutrition Programs (SNP), the CDE is required to ensure that school food authorities (SFA) participating in the federal SNP comply with all applicable state and federal laws and regulations.

SFAs are governed by state and federal laws and regulations that limit the use of expenditures and revenues from the cafeteria fund. Program operators participating in the National School Lunch, School Breakfast, and Special Milk Programs must establish a restricted account, this is generally known as the cafeteria fund. All federal, state, and local revenues, payments, and program reimbursement from Child Nutrition Programs (CNP) must be deposited in the cafeteria fund. Such funds must be used solely for the operation and improvement of CNPs, and comply with federal regulations and state laws.

Factors Affecting Allowability of Costs

Costs must meet the following general criteria established in Title 2, Code of Federal Regulations (2 CFR), Part 200, in order to be allowable under federal awards. Costs must:

  • Be necessary and reasonable for the performance of the federal award and be allocable
  • Conform to any limitations or exclusions set forth in 2 CFR and the federal award
  • Be consistent with uniform policies and procedures for federally financed and other activities
  • Be accorded consistent treatment as a direct or indirect cost
  • Be determined in accordance with generally accepted accounting principles, and be adequately documented to support accounting and cost records
  • Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program

Understanding the rules for determining the allowability and allowability of costs to the cafeteria fund is critical for compliance with federal and state laws and regulations. Both federal regulations and state laws require all procurements—without regard to dollar value—to be conducted in a manner that promotes maximum open and free competition. An SFA that fails to follow the required procurement procedures will cause the expenditure to be unallowable. Guidance for procurement is available on the CDE Procurement in School Nutrition Programs web page at

Capital Expenditure

The USDA approved the CDE’s preapproved list of capital assets typically purchased by SFAs. The list of preapproved equipment is available on the CDE Capital Expenditure Approved List web page at Any equipment on this list has CDE approval, and SFAs may purchase those equipment items following proper federal, state, and local procurement procedures without submitting a request for approval.

Maintenance and repair costs to buildings and equipment which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in an efficient operating condition, are allowable. Such costs must comply with the allowable cost attributes and support food service. Additional information about the allowability of building and maintenance repair costs is available in the SNP Allowable Cost Table of this Management Bulletin (The table is no longer available, please see management bulletin SNP-08-2020 Cafeteria Funds—Construction for more information at SFAs may contact the Resource Management Unit (RMU) by sending an email to if they are unsure whether their maintenance and repair costs will require prior CDE approval.

Advertising, promotion, public relations, and marketing of the SNP’s activities and services to students, parents, and families, is an allowable expense. The SFA must be able to demonstrate that these costs are necessary for the performance or improvement of the nonprofit school food service operation. Allowable advertising, promotion, public relations, and marketing activities may include the following:

  1. Recruitment of personnel for the performance of SNPs.
  2. Procurement of goods and services for SNPs.
  3. Advertising for the disposal of scrap or surplus materials acquired in the performance of the SNPs.
  4. Program outreach necessary to meet the requirements of the SNPs. Such costs may include the enhancement of the eating environment (e.g., signage to promote the meal pattern and Smarter Lunchroom initiatives), and program outreach by print or electronic media.

Conversely, certain marketing costs are expressly prohibited in federal regulations and thus are unallowable. Prohibited costs are those that are outside of the scope of activities previously listed or those that do not support the operation or improvement of SNPs. Examples of unallowable costs include the following:

  1. Meetings, conventions, and other events that are not related to SNPs, including:
    1. Meeting rooms, suites, and other special facilities
    2. Displays, demonstrations, and exhibits
    3. Salaries and wages of employees engaged in the facilitation of exhibits, demonstrations, and briefings
  2. Costs of promotional items and memorabilia, including models, gifts, and souvenirs
  3. Costs of advertising and public relations designed solely to promote activities unrelated to SNPs
Limited Allowability

Under any given federal award, the reasonableness and allowability of costs may be difficult to determine. In order to avoid potential disallowance or dispute, the SFA must seek the CDE’s prior written approval for these costs.

Capital expenditures that have a unit cost of $5,000 or more (the federal per-unit capitalization threshold) or a lower threshold set by local level regulations, must have prior written approval. Examples of these costs would include food delivery vehicles, food trucks, walk-in refrigerator or freezer, and rearrangement and alteration of facilities.

For equipment purchases, all existing utility connections must be adequate and within the area of installation per manufacturer’s requirements. If utility connections or service systems (e.g., ventilation, electrical) require an upgrade, these would be considered district costs that must be paid for using nonfederal funds.

Current policy requires CDE prior approval for nutrition education costs. However, the CDE is actively reviewing its existing practices to streamline the approval process of nutrition education costs. A future nutrition education update is forthcoming. Nutrition education involves a set of learning experiences aimed at developing knowledge and skills in nutrition related behavior. Some examples of these costs may include Harvest of the Month, farmers market activities, and school gardens. SFAs are encouraged to use the cafeteria fund to help implement these nutrition education efforts, while also promoting the nutrition program.

Unallowable Costs

Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the CDE’s prior written approval.

Adequate housing and integral building fixtures for cafeterias (e.g., kitchen facilities) are not allowable costs to the cafeteria account; rather, these are a district responsibility. Therefore, an upgrade or modification to a service system (e.g., air conditioners, heating systems, ventilation systems, sanitary systems, sewer systems, phone, and computer lines) is a district expense.

Bad Debt for unpaid meal charges is an unallowable cost to SNP. Unpaid meal charges are considered bad debt once the debt becomes uncollectible beyond a reasonable time frame. Meal charges become bad debt if not collected by the end of the fiscal year, unless the debt occurred within the last 90 days of the fiscal year, or the SFA has entered into a repayment plan with the household. SFAs must use nonfederal funding sources (e.g., Parent–Teacher Association or the district’s general fund) to repay the cafeteria fund for bad debt.

Costs Requiring Approval from the USDA and State Board of Education

Costs that are extraordinary in nature require the evaluation and prior approval of the USDA and the State Board of Education. An example of these costs include the purchase of land and buildings, or the construction of buildings.

Administrative Review

During an SFA’s administrative review, the CDE will verify the allowability of the SFA’s purchases and expenses including obtaining preapproval for certain expenditures. If any of these are identified as unallowable, the CDE will disallow the costs and require the SFA to repay the cafeteria fund from an allowable nonfederal source (e.g., general fund).

Request for Cost Approval: Procedure

For any capital expenditure requests using SNP funds with a unit cost of $5,000 or greater (or a lower threshold set by local level regulations) that are not included on the USDA Capital Expenditure Approved List, SFAs must request approval from the RMU by sending an email to with the following information:

The subject line should read, Capital Expenditure Request—indicate the type of cost or equipment and whether it is an emergency request (e.g., Emergency Replacement of Delivery Vehicle).

The body of the email message should:

  1. Describe the cost (e.g., equipment), including what it is and how it will support the operation or maintenance of the nonprofit school food service.
  2. Provide an estimated cost and state whether bids have been sought for the equipment.
  3. Explain how the old equipment that still has value will be disposed of, and acknowledge that any proceeds from the disposition of the equipment will be used to offset the cost of the replacement equipment.
  4. Acknowledge that any equipment purchased with cafeteria funds must be used exclusively (100 percent) by the nonprofit school food service (i.e., and not be shared with other programs unrelated to food service).
  5. Include your Child Nutrition Information and Payment System identification number, agency name, and contact information.
Contact Information

If you have any questions regarding this MB or cafeteria fund policy or regulations, please contact the RMU within the CDE Nutrition Services Division by email at

If you have questions about the California School Accounting Manual or how to account for charges to the cafeteria fund, please contact the School Fiscal Services Division, Financial Accountability, and Information Services Unit by email at

Questions:   Nutrition Services Division | 800-952-5609
Last Reviewed: Tuesday, November 7, 2023
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