PDF ood & FNS INSTRUCTION N - Food and Nutrition Service

Food & Nutrition Service

FNS INSTRUCTION

U.S. DEPARTMENT OF AGRICULTURE 3101 PARK CENTER DRIVE

ALEXANDRIA, VA 22302-1500

ACTION BY: INFORMATION FOR:

Regional Directors Special Nutrition Programs

Regional Offices State Agencies

NUMBER

796-2 Rev. 4

FINANCIAL MANAGEMENT CHILD AND ADULT CARE FOOD PROGRAM

TABLE OF CONTENTS Page

I

PURPOSE .................................................................................................................. 1

II AUTHORITY ............................................................................................................ 1

III ABBREVIATIONS ................................................................................................... 2

IV SCOPE ....................................................................................................................... 3

V DEFINITIONS........................................................................................................... 3

VI MONITORING NONPROFIT FOOD SERVICE STATUS..................................... 5

A Public and Private Nonprofit Institutions Not Excluded ..................................... 5 B Cost Based Reimbursement Not Excluded ........................................... 5 C Determining Nonprofit Food Service Status........................................................ 5 D Excessive Nonprofit Food Service Account Balances......................................... 7

VII BASIC GUIDELINES FOR DETERMINING ALLOWABILITY OF COSTS ...... 9

A General Criteria.................................................................................................... 9 B Allocation of Costs .............................................................................................. 11 C Direct and Indirect Costs ..................................................................................... 12 D Operating and Administrative Costs ................................................................... 13

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VIII STANDARDS FOR ALLOWABLE COSTS ........................................................... 15

A Cost Principles ..................................................................................................... 15 B Disclosure ............................................................................................................ 15 C Special Considerations in Determining Allowability .......................................... 16 D Generally Allowable Costs .................................................................................. 16 E Prior Approval ..................................................................................................... 16 F Specific Prior Written Approval .......................................................................... 16 G Unallowable Costs ............................................................................................... 17 H Program Costs ...................................................................................................... 17 I Selected Items of Cost ......................................................................................... 17

IX BASIC GUIDELINES FOR CACFP PAYMENTS AND USE OF FUNDS............ 76

A Reimbursement Methods ..................................................................................... 76 B Applicable Reimbursement Methods................................................................... 76 C Advance Payments............................................................................................... 81 D Other Factors........................................................................................................ 83 E Records ................................................................................................................ 92

X FOOD DONATION................................................................................................... 96

A General ................................................................................................................. 96 B Recordkeeping ..................................................................................................... 96 C Cash-in-Lieu of USDA Foods ............................................................................. 96 D Donated Food Processing .................................................................................... 96

XI IMPLEMENTATION................................................................................................ 97

XII OFFICE OF MANAGEMENT AND BUDGET APPROVAL ................................ 97

EXHIBITS

A Glossary

B Food Cost

C Index

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FNS INSTRUCTION 796-2 REV. 4

D Suggested Format for Recording Equipment and Depreciation

E Suggested Format for the Cost of Goods Used

F Suggested Format for a Purchase Record

G Suggested Format for Inventory Reconciliation

H Suggested Format for an Inventory Record

I. Costs Requiring Additional Approvals

J. Questions and Answers

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Food & Nutrition Service

FNS INSTRUCTION 796-2 REV. 4

FNS INSTRUCTION

U.S. DEPARTMENT OF AGRICULTURE 3101 PARK CENTER DRIVE

ALEXANDRIA, VA 22302-1500

NUMBER

796-2 Rev. 4

ACTION BY:

Regional Directors Special Nutrition Programs

INFORMATION FOR: Regional Offices State Agencies

FINANCIAL MANAGEMENT CHILD AND ADULT CARE FOOD PROGRAM

I

PURPOSE

CACFP funds are provided to assist State agencies through grants and other means to initiate and maintain nonprofit food service Programs for eligible children and adult participants in nonresidential institutions that provide care. This Instruction establishes Program standards, principles and guidelines for financial management to:

A Assure that costs charged to the nonprofit food service are for food service provided principally to enrolled, eligible participants; and where applicable, that costs claimed for reimbursement under the CACFP are necessary and reasonable for effective and efficient operation of the nonprofit food service, and are otherwise allowable under the Federal cost principles and this Instruction;

B Provide financial management guidance to State agencies pursuant to 7 CFR ?226.7(m) for CACFP financial management systems;

C Provide guidance to institutions in developing the financial information needed to comply with the requirements of the CACFP; and

D Provide guidance so that to the extent practicable, all institutions of similar type doing the same work will be subject to the same requirements.

II AUTHORITY

The CACFP is authorized by Section 17 of the Richard B. Russell National School Lunch Act, as amended. Program regulations issued by the Department are found in 7 CFR Part 226. USDA codifications of government-wide pronouncements include:

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A The uniform requirements for the administration of grants are found in:

1 7 CFR Part 3015, Uniform Federal Assistance Regulations;

2 7 CFR Part 3016, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments; and

3 7 CFR Part 3019, Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations.

B The principles for determining applicable costs and factors affecting their allocation to grant Programs are provided in:

1 2 CFR Part 225, Cost Principles for State, Local, and Indian Tribal Governments (formerly OMB Circular A-87);

2

2 CFR Part 230, Cost Principles for Nonprofit Organizations

(formerly OMB Circular A?122); and

3 48 CFR Part 31, Contract Cost Principles and Procedures.

C Audit requirements are contained in OMB Circular A-133, codified by USDA at 7 CFR Part 3052, Audits of States, Local Governments and Nonprofit Organizations.

D National Policy requirements are contained in the following pronouncements:

1

2 CFR Part 180 as adopted and modified by USDA regulations at

2 CFR Part 417 Government-wide Debarment and Suspension (Non-procurement);

2 7 CFR Part 3018, New Restrictions on Lobbying;

E Requirements on records to be kept by employers are found at 29 CFR Part 516.

III ABBREVIATIONS

ADP - Automated Data Processing CACFP - Child and Adult Care Food Program CFR - Code of Federal Regulations EFT - Electronic Funds Transfer

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FAR - Federal Acquisition Regulations (48 CFR Part 31) DCH ? Day care home FLSA - Fair Labor Standards Act (codified at 29 CFR Part 516) FNS - Food and Nutrition Service FNSRO - Food and Nutrition Service Regional Office FSMC - Food Service Management Company GSA - General Services Administration IRS - Internal Revenue Service OMB - Office of Management and Budget SA ? State agency SEA ? State Education Agency U.S. - United States U.S. GAAP ? Accounting Principles Generally Accepted in the United States of America USDA - United States Department of Agriculture

IV SCOPE

This Instruction represents one of the requisite elements that must be used by the State agency in establishing the financial management system required by the Program regulations (7 CFR ?226.7(m)) to identify allowable Program costs and establish standards for institutional recordkeeping and reporting. State agencies are further required to provide guidance on financial management requirements to each institution (Ibid.) and each institution is required to maintain records demonstrating compliance with the State agency's financial management requirements (7 CFR ?226.15(e)(6)). State agencies may either (a) designate the use of this Instruction, or (b) incorporate this Instruction into the State agency's financial management system.

The provisions of this Instruction apply to all CACFP institutions, including public and private nonprofit sponsoring organizations, as well as, eligible child and adult care centers.

V DEFINITIONS

Exhibit A, attached, contains a glossary of terms that are frequently used in this Instruction.

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