Cafeteria Fund Guidance

Resources

Federal and State Regulations

The Title 2, Code of Federal Regulations and Title 7, Code of Federal Regulations (7 CFR) governs the nonprofit school food service account (cafeteria fund). Program operators participating in the National School Lunch, School Breakfast, and Special Milk programs must establish a cafeteria fund (7 CFR, Section 210.9[b][1]). All federal, state, and local revenues, payments, and program reimbursement must be deposited into the cafeteria fund and are to be used solely for the operation and improvement of this service. In addition, School Nutrition Program (SNP) operators must comply with state and federal limitations on the use of cafeteria funds.

All federal regulations can be accessed from the U.S. Government Printing Office web page.

The California Education Code can be accessed from the California Legislation Information Code Search web page.

Additional Resources

The California School Accounting Manual can be downloaded from the California Department of Education Definitions, Instructions, and Procedures web page.

The Nutrition Services Division (NSD) SNP Administrative Review web page provides information, regulations, procedures, and updates on the SNP administrative review process.

The NSD SNP Procurement web page provides federal procurement regulations to program operators for contracting with food service management companies, vendors, or competitively procuring food.

For the most current information on indirect cost rates, please access the California Department of Education’s Indirect Cost Rates web page.

Policy

Below are direct links to Cafeteria Fund Management Bulletins. Bulletins are in descending order by release date.

2024

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2011

2000-2010

Related Content

Fiscal Issues Relating to Budget Reductions and Flexibility Provisions (DOC) (July 2009) 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. Provides State Budget information through 2012–13, and broad guidance governing cafeteria fund uses.

School Cafeteria Funds/Account Regulations; Clarification of AB 1754 (November 2004) Joint Nutrition Services Division and School Fiscal Services Division (SFSD) Letter to County/District Superintendents, Business Officials, and School Food Service Directors. 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.

Cafeteria Fund Loan Guidance from the U.S. Department of Agriculture (DOC) (posted to California Department of Education (CDE) Web June 3, 2004, as a link to above letter, 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.

Indirect Cost Rates (ICR) web page. The SFSD provides extensive annual guidance for local educational agencies (LEA), including the list of indirect cost rates for each LEA, explanation of how indirect cost rates are calculated and applied, and the annual state-wide maximum indirect cost rate for the Child Nutrition Programs.

School Nutrition Program Administrative Review in Resource Management (SNP AR)

The School Nutrition Program administrative review (AR) Resource Management section ensures the overall financial health of the program operator’s nonprofit school food service account, or cafeteria fund. Program operators will be reviewed on the following integral areas:

• Maintenance of the nonprofit school service account
• Paid Lunch Equity
• Revenue from nonprogram foods
• Indirect costs

Maintenance of the Nonprofit School Food Service Account

The Nutrition Services Division must ensure that revenues and expenses under the nonprofit school food service account are in accordance with Title 7, Code of Federal Regulations (7 CFR), Section 210.14. The nonprofit school food service expenses must be allowable, used only for the operation and improvement of the school food service, and net cash resources (NCR) may not exceed three months of average operating expenses.

During an AR, the California Department of Education (CDE) can request documentation related to capital expenditures, NCR, financial end-of-year reports, and procedures on charging costs to the nonprofit school food service account. If the CDE determines a comprehensive review is required, the program operator must submit detailed ledger reports including payroll or salary payment information. Any unallowable charges will be disallowed and the program operator must reimburse the nonprofit school food service account as part of a corrective action.

Paid Lunch Equity

Program operators must ensure that they comply with the requirements for Paid Lunch Equity (PLE) in accordance with 7 CFR, Section 210.14(e).

The U.S. Department of Agriculture (USDA) Food and Nutrition Service annually provides program operators with a new PLE Tool to assist them with determining their price adjustment calculations. This school year’s tool is currently available in the Download Forms section of the Child Nutrition Information and Payment System (CNIPS).

During the AR, the program operator should submit PLE documentation if the weighted average lunch price is less than the PLE requirement, which is defined as the difference between the federal free and paid reimbursement rates. If the program operator cannot document the reason for not charging the required amount (e.g., charging less than what the PLE Tool requires) the program operator is required, as part of a corrective action, to use either or both of the following options to meet the PLE requirement:

1. Raise average paid lunch pricing
2. Deposit into the nonprofit school food service account the amount of nonfederal monies equal to the difference between the average weighted price and the price indicated by the PLE Tool

School Food Authorities (SFA) that do not charge students for paid lunches at all sites are considered non-pricing sites and are exempt from PLE requirements in accordance with USDA Policy SP 39-2011-Revised. Therefore, if an SFA operates all sites on the California Universal Meals Program or a Federal Provision, such as Provision 2 or the Community Eligibility Provision, PLE requirements do not apply.

Nonprogram Foods

Per 7 CFR, Section 210.14(f), nonprogram foods are those foods and beverages:

1. Sold in a participating school other than reimbursable meals and meal supplements
2. Purchased using funds from the nonprofit school food service account

Nonprogram foods include the following: a la carte, catering, meals vended to another agency, adult meals, and second meals served to students. They also include items purchased with nonprofit school food service account funds for vending machines, fundraisers, school stores, and catered and vended meals.

These federal regulations also require the program operator to comply with the following:

• All revenue from the sale of nonprogram foods accrues to the nonprofit school food service account
  
• Revenue available to support the production of reimbursable school meals does not subsidize the sale of nonprogram foods

Therefore, the program operator is required to regularly track revenue from the sale of nonprogram foods and calculate the ratio of food costs to revenues. The USDA Nonprogram Revenue Tool, accessible from the USDA web page, is used to calculate the ratio of cost to revenue and determine if revenues comply with the minimum ratio required for nonprogram foods.

If during an AR the program operator is not in compliance with these requirements, they must reevaluate nonprogram food pricing, increase prices, and provide a procedure to ensure future compliance.

Indirect Costs

Per 7 CFR, Section 210.14(g) Indirect costs, program operators must follow fair and consistent methodologies to identify and allocate allowable indirect costs to the nonprofit school food service account, in accordance with 7 CFR, Part 200, as implemented by Title 2, Code of Federal Regulations, Part 400.

Indirect costs are incurred for the benefit of multiple programs, functions, or other cost objectives and therefore cannot be identified readily and specifically with a particular program or other cost objective. Indirect costs typically support administrative overhead functions such as accounting, budgeting, payroll, personnel, purchasing, facilities management, centralized data processing, utilities, etc.

Per California Education Code Section 38101(c), an “indirect cost” shall be limited to the lesser of the school district’s indirect cost rate (ICR) as approved by the department or the statewide average approved ICR for the fiscal year.

For public school districts and county offices of education, the ICR is documented in the Unaudited Actuals financial report at the end of the fiscal year, specifically in Form ICR and Exhibit A. This document is required during an AR. If the incorrect rate was applied, the program operator must restore the excess charged to the nonprofit school food service account from the general fund.

Net Cash Resources (NCR)

Limits on Net Cash Resources

According to Title 7, Code of Federal Regulations, sections 210.2, 210.14(b), and 210.19(a)(1), program operators must limit their cash reserves, or net cash resources (NCR), to an amount that does not exceed three months of average operating expenditures or other amount established by the state agency. Beginning July 1, 2022 the California Department of Education has increased the NCR limitation to six months average operating expenditures. To ensure compliance with these regulations, the California Department of Education (CDE) is required to monitor, through review, audit, or by other means, the excess NCR of the nonprofit school food service account in each program operators participating in the School Nutrition Programs.

To determine a program operator’s compliance with this regulation, the CDE has created a form, SNP-57 Net Cash Resources Calculator, which uses financial information from the latest closed fiscal year. This form can be found in the Download Forms section of the Child Nutrition Information and Payment System (CNIPS).

If a program operator has an excess in NCR, as indicated by a completed NCR Calculator, the program operator must contact the Resource Management Unit (RMU) about their plan to reduce the excess and, when necessary, be placed on a budget agreement.

Budget Agreements

The CDE may approve a program operator’s excess NCR in an amount greater than six months of average expenditures through a budget agreement. A budget agreement is a plan with the Nutrition Services Division for spending down excess funds. The CDE strongly recommends those program operators that discover excess NCR immediately submit a copy of their year-end financial information to RMU for consideration. The intent of this policy is to enable program operators to:

• Plan for future nonprofit school food service account purchases that benefit the school food service
• Avoid mandatory repayment to the nonprofit school food service account as a result of the school food authority (SFA) making unauthorized transfers to the general fund or from unauthorized expenditures that benefit the local educational authority and not food service
• Avoid imposed meal price reductions to lower excess funds to the six month threshold

Program operators can submit a proposed spending plan for approval to RMU for processing. Please include a copy of the SNP-57 Net Cash Resources Calculator Tool found in the Download Forms section of the CNIPS. Send your request, with the name of your agency by email to SNPBA@cde.ca.gov.

Paid Lunch Equity (PLE)

Effective July 1, 2011, the U.S. Department of Agriculture (USDA) published an Interim Rule regarding new requirements for paid lunches in the School Nutrition Program. The intent of the new regulations was to ensure that sufficient funds, or equity, are provided to the nonprofit school food service account from paid lunches in order to provide quality meals that met the new standards. The Paid Lunch Equity (PLE) requirement is defined as the difference in dollar amount between the federal free reimbursement rate and the paid reimbursement rate for lunches in the National School Lunch Program.

Per Title 7, Code of Federal Regulations, Section 210.14(e), program operators are required to annually calculate their PLE weighted average price (WAP) in order to determine the required paid lunch price and whether there is a need to raise lunch prices or contribute funds from a nonfederal funding source to the nonprofit school food service account. For example, program operators charging a WAP equal to or greater than the difference between the federal free and paid reimbursement rates, or $3.56 for School Year 2023–24, have met the PLE requirements and do not need to raise prices.

The USDA allows program operators that charged less than the difference between the two rates to use the following options to meet the PLE requirement:

1. Raise average paid lunch price(s)
2. Deposit into the nonprofit school food service account fund the amount of nonfederal funds equal to the difference between the WAP and the price indicated by the PLE Tool
3. A combination of the above

School Food Authorities (SFA) that do not charge students for paid lunches at all sites are considered non-pricing sites and are exempt from PLE requirements in accordance with USDA Policy SP 39-2011-Revised. Therefore, if an SFA operates all sites on the California Universal Meals Program or a Federal Provision, such as Provision 2 or the Community Eligibility Provision, PLE requirements do not apply.

The USDA Food and Nutrition Service annually provides program operators with the PLE Tool to assist them with making their price adjustment calculations. These requirements are intended to ensure that program operators retain sufficient monies in their nonprofit school food service account fund for paid lunches. The PLE tool can be found in the Child Nutrition Information and Payment System (CNIPS).

Paid Lunch Equity Exemption

For those program operators in strong financial standing, the USDA has allowed for a process to exempt certain program operators from the requirement to increase prices. Since this process has changed in the past few years, please see the policy page for the latest management bulletin or contact the Resource Management Unit by email at SNPCafeFundQuestions@cde.ca.gov for more information.

Equipment Approval

Capital Expenditure Approved List

Per the U.S. Department of Agriculture (USDA) Policy Memorandum SP 31-2014, any equipment appearing on the Capital Expenditure Approved List web page has prior state agency approval. Therefore, the program operator may purchase those equipment items following proper federal, state, or local procurement procedures as applicable without submitting a request to the state agency for approval. The effective date of the USDA Capital Expenditure Approved List is July 21, 2014.

Submitting a Capital Expenditure Request for Other Equipment

For any capital expenditure requests using School Nutrition Program funds with a unit cost of $5,000 or greater that are not included on the USDA approved list, program operators must send an email to SNPCafeFundQuestions@cde.ca.gov with the following information:

• The subject line should read, Capital Expenditure Request—(Indicate the type of equipment and whether it is an emergency request here [e.g., emergency replacement of delivery vehicle])
• The body of the email message should:
  1. Describe the equipment, including what it is and how it will support the operation or maintenance of the nonprofit school food service
  2. Provide estimated cost and whether you have sought bids for the equipment
  3. Explain how the old equipment that still has value will be disposed of and that you 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., not be shared with other programs not related to food services)
  5. Include your Child Nutrition Information and Payment System (CNIPS) identification number, agency name, and contact information

Training

SNP Presentations

Cafeteria Fund 2013–14 Webinar Series

This Cafeteria Fund Webinar series started in December 2013 and continued through February 2014 and provided training and resources to local educational agency (LEA) staff to help them properly manage and expend cafeteria funds as required by federal and state law, as well as regulatory and policy guidance.

Cafeteria Funds Webinar Part 1 – The Basics (Video; 33:54)
This video provides Cafeteria Fund Basics, which include general definitions, resources, and easy to answer questions.

Cafeteria Funds Webinar Part 2 – Practical Applications (Video; 19:19)
This video builds on Part 1 by instructing the viewer on how to analyze Cafeteria Fund related questions.

Cafeteria Funds Webinar Part 4 – Paid Lunch Equity and Revenue from Non-program Foods (Video; 29:37)
This video provides a review of paid lunch equity (PLE) and nonprogram foods. The viewer will learn policy guidelines governing these two requirements from the Healthy, Hunger Free Kids Act of 2010 and go through step-by-step instructions on how to use both the USDA PLE and Nonprogram Food Tool.

Cafeteria Funds Webinar Part 5 – Allowable Renovation Costs (Video; 27:57)
This video provides an overview of the federal and state regulations, laws and policy guidelines to explain and define allowable renovation costs. The viewer is given a series of questions and answers to many different renovation scenarios and learns the two criteria that distinguish between construction and non-construction type renovations.

Cafeteria Funds Webinar Part 6 – Time Accounting Requirements (Video; 25:55)
This video provides a review of the time accounting requirements. The viewer will first be given a series of questions to test their knowledge, then will learn the policy guidelines governing the time accounting requirements. The video will then present the questions again with the answers, instructing the viewer on the different types of time accounting in detail.

Cafeteria Fund 2018–19 Resource Management Training Series

This nonprofit school food service account online training series provides training and resources to local educational agency staff to help them properly manage and expend nonprofit school food service account funds as required by federal and state law as well as regulatory and policy guidance.

Paid Lunch Equity (PLE)

The PLE (Video; 16:16) training provides a review of PLE. The viewer will learn policy guidelines governing PLE requirements from the Healthy, Hunger Free Kids Act of 2010 as well as instructions on how to use the U.S. Department of Agriculture (USDA) PLE Tool.

Frequently Asked Questions

• General
• Capital Expenditures
• Time and Effort

1. Are program operators required to have a nonprofit school food service account, also known as cafeteria fund, to track all revenue and expenses for School Nutrition Programs?

   Yes. Title 2, Code of Federal Regulations, Section 200.302, financial management, requires program operators to adequately identify the source and application of funds for the federal award. Per Title 7, Code of Federal Regulations, Section 210.14(a), the nonprofit school food service account is a restricted account in which all of the revenue from all food service operations, conducted by the program operator principally for the benefit of school children, is retained and used only for the operation or improvement of the nonprofit school food service. Revenue, when applied to the nonprofit school food service account, means all monies received by or accruing to the nonprofit school food service in accordance with the state agency's established accounting system. This includes, but is not limited to, student meal payments, earnings on investments, other local revenues, state revenues, interest, and federal cash reimbursements.

2. How often should the program operator calculate their net cash resources?

   The program operator should closely monitor and calculate their net cash resources throughout the school year to avoid an excess nonprofit school food service account balance. Per Title 7, Code of Federal Regulations, Section 210.14(b), the program operator shall limit its net cash resources to an amount that does not exceed three months’ average expenditures. The California Department of Education is currently reviewing excess net cash resources on a case-by-case basis. If the program operator has excess net cash at the end of the fiscal year, please email SNPBA@cde.ca.gov for more information.

3. Is it allowable to charge the nonprofit school food service account for food service employee uniforms?

   Yes. If a program operator has a policy that requires food service employees to wear uniforms, then purchasing uniforms is allowable. The program operator must first make sure the cost is necessary, reasonable, and prudent for the operation of the nonprofit school food service.

4. Can we use funds from the nonprofit school food service account to renovate a central kitchen?

   Yes and no. The 2016 U.S. Department of Agriculture Indirect Cost Guidance Manual states that limited renovations within the inside perimeter of a kitchen or serving area may be allowable with the required prior California Department of Education (CDE) approval. The cost of providing adequate housing for cafeterias, including, but not limited to, kitchen facilities, is a charge against the funds of the school district per California Education Code Section 38100.

5. We just purchased new equipment for our central kitchen. Is it allowable to charge the nonprofit school food service account to install new electrical wiring?

   No. Installing new electrical wiring that expands or upgrades the existing electrical line is an unallowable expense. Service systems such as air conditioning, heating, ventilation, sanitary or sewer systems, intercommunications, phones, internet, or computer lines are unallowable charges per Title 7, Code of Federal Regulations, Section 210.14(a).

6. Is it allowable to charge utilities directly to the nonprofit school food service account?

   Utility costs (i.e., electricity, gas, water) may be charged directly to the nonprofit school food service account if there is a mechanism to quantify the exact benefit to food service operations. The school district must have separate meters or utility lines that serve only the school food service area (kitchen and serving area) to charge utilities directly to the nonprofit school food service account. However, nonprofit school food service account funds may not be used to purchase or install meters, as meters are considered part of a district’s financial responsibility.

7. If a food service director receives a bike as an incentive for purchasing a certain number of items from a vendor, can the director raffle off the bike to students?

   No. Vendor credits are considered part of the nonprofit school food service account, since they accrue from purchases made with federal monies. Therefore, giving away items purchased with vendor credits is similar to donating federal money. Per Title 2, Code of Federal Regulations, Section 200.406, applicable credits (i.e., purchasing rewards, incentives) refer to those receipts or reduction of expenditure type transactions that offset or reduce expense items allocable to federal awards as direct or indirect costs.

8. Is it allowable to purchase movie tickets for food service employees with vendor credits?

   No. Per Title 2, Code of Federal Regulations, Section 200.406, applicable credits are vendor credits that accrue from purchases made with federal monies. These are considered part of the nonprofit school food service account and must be credited to the federal award either as a cost reduction or cash refund.

9. Our district needs to submit free and reduced-price eligibility student data for Local Control Funding Formula and is currently not in a Provision 2 base year. District administration wants us to organize and gather data. Is this an allowable charge to the nonprofit school food service account?

   No. The district must cover any expense related to Local Control Funding Formula activities. Per Title 2 Code of Federal Regulation, Section 200.405, only costs incurred specifically for the federal award which are necessary for the operation of food services can be paid from the nonprofit school food service account. However, the district may use free and reduced-price meal eligibility data collected by the program operator for Local Control Funding Formula purposes. Food service staff currently processing income data for the district can continue to do so as long as they complete a personnel activity report and the labor is charged to the general fund.

10. Can a school donate expiring goods or food items to the food bank?

    Yes. Any food prepared for child nutrition programs that are not consumed may be donated to eligible local food banks or charitable organizations. Eligible local food banks or charitable organizations must be tax exempt under Section 501(c)(3) of the Internal Revenue Code of 1986 (Title 26, United States Code, Section 501[c][3]). Protections are extended against civil and criminal liability for persons or organizations when making food donations under the Bill Emerson Good Samaritan Food Donation Act found in the Child Nutrition Act, Section 22. For further guidance and information, please contact your local environmental health department or see the California Department of Education Management Bulletin CNP-02-2018: Guidance on the Donation of Leftover Food in Child Nutrition Programs.

11. If an adult purchases a meal, is this considered nonprogram foods?

    Yes. Nonprogram foods include any nonreimbursable foods and beverages purchased using funds from the nonprofit school food service account. This encompasses all foods sold in schools as well as adult meals, foods sold outside of school hours, or any foods used for catering or vending activities.

12. If a student purchases a second lunch, is this considered nonprogram foods?

    Yes. Nonprogram foods include any nonreimbursable foods and beverages purchased using funds from the nonprofit school food service account. Per Title 7, Code of Federal Regulations, Section 210.10 (a)(2), program operators can get federal reimbursements for up to one reimbursable lunch and one reimbursable afternoon snack for each child per school day.

13. If the food service program provides catering services for a school district meeting, would the food service director need to implement a contract?

    No. Per U.S. Department of Agriculture Policy Memo SP 20-2016 , Nonprofit School Food Service Account Nonprogram Food Revenue Requirements, program operators providing goods and services are strongly encouraged to develop a written agreement with the outside entity that identifies food and labor costs and any other responsibilities.
    
    Food service personnel can then collaborate with school programs (e.g., school club, parent organization, district office, etc.) and offer their services through an agreement between both parties. Such agreements should include a stipulation that all risk relating to revenue losses must be covered by the outside entity and not the school food service.

14. Is the program operator required to establish a meal charge policy?

    In accordance with U.S. Department of Agriculture Policy Memo SP 46-2016 ,program operators must establish a meal charge policy no later than July 1, 2017, and communicate it annually in writing to the households

15. Can the cafeteria fund be used to pay for alternate meals?

    No. U.S. Department of Agriculture Policy Memorandum SP 23-2017 offers suggestions for program operators on how to avoid accruing unpaid meal charges by offering students prepayment incentives or by using low-cost (or no-cost) alternate meals.
    
    For reimbursable meals, Section 210.14(e) of Title 7, Code of Federal Regulations, program operators must ensure that the nonprofit school food service account does not subsidize paid lunches by establishing paid lunch prices such that the paid lunch weighted average price is equal to or greater than the weighted average price indicated on the U.S. Department of Agriculture’s Paid Lunch Equity Tool released annually.
    
    Questions 14 and 20 from U.S. Department of Agriculture Policy Memo SP 23-2017 reminds program operators that reimbursable meals can be offered at a low cost (or no cost) as long as the program operator’s weighted average price does not fall below the minimum required target price. For example, if the district just meets the weighted average price as indicated on the U.S. Department of Agriculture’s Paid Lunch Equity Tool and decides to offer reimbursable meals at a lower cost for a specific subset of students, this may require prices to be raised elsewhere to ensure the weighted average price does not fall below the threshold.
    
    For nonreimbursable meals, Title 7, Code of Federal Regulations, Section 210.14(f), states program operators must ensure revenues available to support the production of reimbursable school meals does not subsidize the sale of nonprogram foods.
    
    Question 20 from U.S. Department of Agriculture Policy Memo SP 23-2017 reminds program operators that nonreimbursable meals are subject to the requirements for revenue from nonprogram foods. Program operators must complete the U.S. Department of Agriculture’s Nonprogram Revenue Calculator to ensure that revenues from the sales of nonprogram foods generate at least the same proportion of revenues as they contribute to food costs. Providing low-cost (or no-cost) nonprogram foods may require program operators to increase prices in à la carte and adult meal sales or a catering program.

16. Can the cafeteria fund be used to cover unpaid meal charges (i.e., bad debt)?

    No. Once delinquent debt is reclassified as bad debt, it must be restored using nonfederal funds. These funds may come from the school district’s general fund, special funding from state or local governments, or any other nonfederal sources. Allowable sources of nonfederal revenue include:
    

    • State or local funds provided to cover the price of student meals
      
    • Local contributions provided by community organizations or individuals
      
    • Revenue from adult meals prepared using resources outside the food service and not funded through the nonprofit school food service account
      
    • À la carte revenue and profit from foods not purchased using nonprofit school food service account funds and funded from an account separate from the nonprofit school food service account
      
    • Revenue from catering or contracting services that operate using an account separate from the nonprofit school food service account

    
    If a revenue source is funded through nonprofit school food service account funds, then all revenue from the source must return to the nonprofit school food service account and may not be used to cover operating losses resulting from bad debts.

17. Are Provision 2 schools excluded from the weighted average price calculation under the Paid Lunch Equity requirements?

    Yes. Community Eligibility Provision and Provisions 2 sites are not factored into the calculation for the average weighted price for the Paid Lunch Equity requirement. For additional information, review U.S. Department of Agriculture Policy Memo SP 39-2011 found on the U.S. Department of Agriculture’s web page.

18. What is a capital expenditure?

    Per Title 2, Code of Federal Regulations, Part 200, Subpart A, Acronyms and Definitions, capital expenditures are expenditures used to acquire tangible (e.g., equipment) or intangible (e.g., software) assets used in the operations.

19. Do I have to submit a request to purchase all equipment prior to purchase?

    In accordance with U.S. Department of Agriculture Policy Memo SP 31-2014 , the U.S. Department of Agriculture approved the U.S. Department of Agriculture Capital Expenditure Approved List for equipment routinely purchased by program operators. Equipment with a unit cost of $5,000 or more not on the approved list must receive approval from the California Department of Education prior to purchase.

20. How can I obtain approval for equipment not on the U.S. Department of Agriculture Capital Expenditure Approved List?

    For any capital expenditure purchase with a unit cost of $5,000 or more not on the approved list, send an email to SNPCafeFundQuestions@cde.ca.gov and include the following information:

    Subject Line: Capital Expenditure Request from [program operator name]
    

    Body of the email:
    

    • Describe the equipment requested and how it supports the operation or maintenance of the nonprofit school food service.
      
    • If replacing existing equipment, explain how the item being replaced will be disposed and acknowledge that any proceeds from the disposition of the equipment will be used to offset the cost of the replacement equipment.
      
    • Acknowledge that any equipment charged to the nonprofit school food service account will be used exclusively (100 percent) by the nonprofit school food service (i.e., not shared with other programs not related to food service).
      
    • List Child Nutrition Information and Payment System (CNIPS) ID number and name of program operator, and requestor’s name, title, and contact information.

21. Do I need prior approval from the California Department of Education if I am purchasing 20 units at $400 each, for a total purchase cost of $8,000?

    No. Per Title 2, Code of Federal Regulations, Section 200.439(b)(2), only equipment with a unit cost of $5,000 or more require prior written approval from California Department of Education.

22. The kitchen freezer stopped working and a replacement is essential for the operation of the food service program. Can I purchase a new freezer without prior approval or wait for the California Department of Education to approve the request?

    Per Title 2, Code of Federal Regulations, Section 200.439(b)(2), only equipment with a unit cost of $5,000 or more require prior written approval from California Department of Education. If the cost of the freezer exceeds this amount and it is a stand-alone unit (not a walk-in) which is currently on the U.S. Department of Agriculture Capital Expenditure Approved List, the unit is preapproved and a prior approval from California Department of Education is not needed.

23. If I was unaware of the prior California Department of Education approval requirement for any capital expenditure purchase greater than $5,000, can I still submit a request?

    No. Unfortunately any capital expenditure that is not on the USDA Capital Expenditure Approved List and has a unit cost of $5,000 or over must be approved prior to purchase by the California Department of Education.

24. What happens if a program operator does not obtain prior approval for purchases over $5,000?

    During a School Nutrition Program’s administrative review, the California Department of Education may disallow the cost of the item and the program operator will be required to reimburse its nonprofit school food service account from an allowable nonfederal funding source.

25. The food service director is purchasing new kitchen equipment and selling the old equipment. Who is allowed to retain the proceeds from the sale of the old equipment?
    

    Per Title 2, Code of Federal Regulations, Section 200.313(c)(4), proceeds from the sale of old equipment must be retained in the nonprofit school food service account and be used for the operation or improvement of the food service program. When replacing equipment purchased in whole or in part with federal reimbursement funds, a program operator may use the old equipment as a trade-in, or sell the equipment and use the proceeds to offset the cost of the replacement. Per Title 2, Code of Federal Regulations, Section 200.313(e), the program operator may retain $500 or ten percent of the proceeds, whichever is less, for its selling and handling expenses.

26. If the equipment is outdated and no longer needed by food services, may I donate the equipment to the school?

    Yes and no. Per Title 2, Code of Federal Regulations, Section 200.313, if the equipment is no longer needed by the federal award, the equipment may be disposed of in the following order of priority:
    

    1. Support the activities allowable under a separate award funded by the U.S. Department of Agriculture
       
    2. Support the activities allowable under another federal award
       
    3. The proceeds used to offset the cost of the replaced property or retained as revenue

27. A school district is closing down a school site. Can the school district retain all proceeds from the sale of their food service equipment?

    No. The school district must follow the guidelines on the disposition of equipment as described in Title 2, Code of Federal Regulations, Section 313, for any equipment in the school’s possession that was charged to the nonprofit school food service account for the original project or program.
    
    Items of equipment with a market value of less than $5,000 may be retained, sold, or otherwise disposed of, with no further obligation to the awarding agency.
    
    A program operator shall sell any equipment with a market value greater than $5,000 and deposit the proceeds into the nonprofit school food service account for final disposition.

28. Can a program operator set aside funds in a separate account for equipment replacement or purchases?

    No. The U.S. Department of Agriculture does not allow more than one nonprofit school food service account per local educational agency. In 2013, California’s legislature repealed the section of California Education Code that granted authority to the governing board of a school district to create a revolving cafeteria equipment account (Assembly Bill 626). Consequently, California Education Code no longer authorizes local educational agencies to establish or use separate equipment accounts.

29. A program operator only has one delivery van that currently requires a new transmission. Is it allowable to rent a delivery van to continue food service deliveries?
    

    Yes. The program operator should ensure the rental cost is necessary and reasonable. If the delivery van continues to break down or requires additional maintenance, then the program operator should conduct a cost analysis of renting versus buying a new delivery van.

30. Time and effort requirements apply to which programs?

    Employees paid with federal funds are subject to Title 2, Code of Federal Regulations, Section 200.430(i), standards for documentation of personnel expenses, unless specific guidance is provided for the federal award. Examples of federal awards are:
    

    • Child and Adult Care Food Program
    • School Nutrition Programs
    • Summer Food Service Program
    • Fresh Fruit and Vegetable Program

31. What is a personnel activity report?

    In accordance with the California School Accounting Manual (PDF), Procedure 905, documenting salaries and wages, employees who work on multiple activities or cost objectives of which at least one is federal must complete a personnel activity report or equivalent documentation. This documentation must:
    

    • Reflect an after-the-fact distribution of the actual activity of each employee
      
    • Account for the total activity for which each employee is compensated
      
    • Be prepared at least monthly and coincide with one or more pay periods
      
    • Be signed by the employee

32. Must a personnel activity report account for 100 percent of the worker’s effort?

    Yes. Per Title 2, Code of Federal Regulations, Section 200.430(i)(iii), time and effort documentation must reflect total activity for which the employee is compensated. Failure to account for 100 percent of an employee’s time will result in a finding during an administrative review or audit, and the California Department of Education will require the local educational agency to reimburse the nonprofit school food service account from the general fund.

33. How often must a personnel activity report be prepared?

    In accordance with the California School Accounting Manual (PDF), Procedure 905, personnel activity reports must be prepared at least monthly and coincide with one or more pay periods.

34. What are the minimum increments of time in which employees may record their time on a personnel activity report?

    The purpose of documenting time and effort is to capture the time spent on various cost objectives. Increments of time should not be arbitrarily limited, as this may prevent employees from accurately and completely reporting their efforts on all cost objectives. Since time and effort documentation must be detailed enough to reflect all the cost objectives on which an employee worked during a specific period of time, the time increments should be sufficient to recognize the:
    

    • Number of different activities performed
      
    • Length of time the employee spent performing tasks for each cost objective

    
    In other words, the program operator should use whatever time increment is necessary to accurately document the time spent on each cost objective.

35. Does a program operator need to follow the time and effort reporting regulations for the salaries and wages of employees that are used for matching requirements on federal awards?

    Yes. Program operators must support salaries and benefits of employees used to meet cost sharing or matching requirements in the same manner as those claimed as allowable costs on federal awards.

36. In lieu of personnel activity reports, our district is using a classroom unit allocation methodology to account for the custodian’s time. Is this allowable?

    No. In accordance with the California School Accounting Manual (PDF), Procedure 905, documenting salaries and wages, the California Department of Education has two approved substitute systems for time accounting:
    
    

    • Substitute System Based on Sampling Method: Under the sampling method substitute system, personnel activity reports are required less frequently than monthly. Specifically, this approved substitute system allows local educational agencies to collect personnel activity reports from employees every fourth month (three times a year). The information from these personnel activity reports is used both to reconcile the federal timekeeping estimates from the previous three months and to estimate the percentage of time employees will spend on various federal programs in the next three months.
      
      Note: If a program operator elects to use the sampling method substitute system, all multifunded employees who would otherwise be required to complete a personnel activity report must participate in that system.
      
      
    • Substitute System Based on Employee’s Predetermined Schedule: Under the predetermined schedule substitute system, a local education agency may receive California Department of Education approval to use alternative documentation instead of personnel activity reports to document the time and effort of an individual who works on multiple activities or cost objectives but who does so on a predetermined, or fixed, schedule. An individual documenting time and effort under this substitute system is permitted to certify time and effort on a semiannual basis.
      
      Significant deviations from an employee’s established schedule requires an employee to complete a personnel activity report that covers the period during which the deviations occurred. Unplanned, unforeseen, and infrequent deviations of less than five percent of the predetermined schedule are generally not considered significant. However, even small deviations, if planned or foreseeable at the outset, are considered significant regardless of their size and would warrant a reversion to the use of a personnel activity report. The five percent threshold applies daily.

37. During our last administrative review, our district was cited for not documenting our multifunded employees. Can our district, in lieu of personnel activity reports, submit a forensic audit to recreate documentation equivalent to a personnel activity report?

    No. Per Title 7, Code of Federal Regulations, sections 200.302 and 200.303, program operators must establish and maintain effective internal controls that adequately identify the source and application of funds for federally funded activities. Once the fiscal year is closed, the program operator cannot use existing data to recreate a nonexistent document. To provide flexibility, California Department of Education Management Bulletin SNP-04-2018 allows program operators to provide additional documentation to establish personal activity report equivalence. The combined documentation must satisfy the following:
    

    • Reflect an after-the-fact distribution of actual activity
      
    • Account for each activity for which the employee is compensated
      
    • Identify the funding source
      
    • Be prepared at least monthly
      
    • Be signed and dated

38. My district is participating in the federal Fresh Fruit and Vegetable Program and we use staff to provide labor for the grant and other School Nutrition Programs. Do I need to have each Fresh Fruit and Vegetable Program staff person maintain a personnel activity report?

    Yes. Staff contributing time and effort to the Fresh Fruit and Vegetable Program as well as other federal Child Nutrition Programs must maintain a personnel activity report.

39. If my part-time employees only work for the Fresh Fruit and Vegetable Program, can they complete a periodic certification?

    Yes. In accordance with the California School Accounting Manual (PDF), Procedure 905, your Fresh Fruit and Vegetable Program employee works on a single cost objective, and therefore may use the periodic certification to document time and effort. The California Department of Education does not require the use of a specific periodic certification form. The periodic certification must:
    

    • Be prepared at least every six months
      
    • Be signed and dated by the employee or a supervisor that has first-hand knowledge of the work performed
      
    • Attest that the employee worked solely on that single federal program or cost objective during the period covered

40. My district uses the produce grown in our school garden for nutrition education offered to our students. A service member from FoodCorps is being used to help maintain the garden, as well as prepare and serve produce grown there to the students for taste-testing. Can we use nonprofit school food service account funds to pay the program service fee of a FoodCorps service member?

    Yes. Funds from the nonprofit school food service account can be used to pay for FoodCorps service members since their activities support the operation of food services (Title 7, Code of Federal Regulations, Section 210.14[a]).
    
    For more information, please review the U.S. Department of Agriculture Policy Memo CACFP 16-2016; SFSP 16-2016; SP 48-2016 : Using Federal Funds to Support FoodCorps Service Members.
    

41. A food service employee usually spends all of their time working on a single cost objective. However, for one month the employee works on an activity in addition to their normal duties. Would the employee need to complete a personnel activity report?

    Yes. Any time an employee is not working solely (100 percent) on a single cost objective (an employee who works solely on one activity that is funded by a single source), the employee must complete a personnel activity report or equivalent documentation for any affected pay period.

42. We offer Breakfast in the Classroom. Can the custodian charge their time to the nonprofit school food service account to clean the classroom?

    No. The classroom is instructional space outside of the normal eating area.

43. Should an employee attach their duty statement to their monthly personnel activity report documentation?

    No. The program operator should retain all supporting documentation in the employee’s file for auditing or administrative review purposes.

44. It is commonly understood that food service funds cannot be used for air conditioning. Can you clarify whether funds can be used for either the purchase of and/or installation of air conditioning? Can school food service funds be used for portable evaporative or air conditioning units?

    The answer to both questions is "no." Although the work environment is greatly enhanced by air conditioning, USDA's interpretation is that air conditioning (or any other service system, such as telephone, gas, or electricity) is generally regarded as a district expense.

45. Can school nutrition program employees be provided meals, while on duty, at program expense?

    Yes. Employees whose duties involve the preparation and service of meals, and personnel involved in supervising these functions, may be provided a meal at program expense. This also includes student workers.

46. Can food service funds pay for gift items such as watches, pen sets, or plaques for food service employees when they retire or celebrate length of service, such as 25 years?

    Awards of minimal value, such as length of service pins or certificates of appreciation, for food service employees may be purchased from cafeteria funds. Awards given to employees to improve performance are not allowable.

Related Content

Senate Bill 265 Frequently Asked Questions
Frequently Asked Questions related to the implementation of Senate Bill 265.

Contact Information

Program operators may submit their inquiries as follows:

General Questions and Requests for Purchase Approval

If you have any questions regarding the use of nonprofit school food service account funds (e.g., request for purchase approval), please contact the Resource Management Unit (RMU) by email at SNPCafeFundQuestions@cde.ca.gov.

Inquiries on Administrative Reviews

Any questions regarding the National School Lunch Program administrative reviews including, but not limited to, the Resource Management Off-site Assessment Tool, 700 Series, please contact the RMU by email at NSDRMU@cde.ca.gov.

Budget Agreements

Any questions regarding excess net cash resources or budget agreements may be directed to the RMU by email at SNPBA@cde.ca.gov.