Financial Management –
Child and Adult Care Food
Program (CACFP)
FNS Instruction 796-2 Revision 4
Presenter: Susan Weeks
USDA - Food and Nutrition Service
Child Nutrition Programs
1
What is FNS Instruction 796-2?
CACFP financial management guidance
• to State agencies and institutions
• to develop financial information
• to comply with CACFP regulatory requirements
2
Where can I find the FNS Instruction 796-2?
The FNS Instruction 796-2 revision 4 can be found on
the USDA website at
http://www.fns.usda.gov/sites/default/files/7962%20Rev%204.pdf
3
The FNS Instruction 796-2 has 12 Parts:
Parts
 I.
Purpose
 II.
Authority
 III. Abbreviations
 IV.
Scope
 V.
Definitions
 VI. Monitoring Nonprofit Food Service Status
4
The FNS Instruction 796-2 has 12 Parts:
Parts (cont.)
 VII. Basic Guidelines for Determining Allowability of Costs
 VIII. Standards for Allowable Costs
 IX. Basic Guidelines for CACFP Payments and Use of Funds
 X. Food Donation
 XI. Implementation
 XII. Office of Management and Budget Approval
5
The FNS Instruction 796-2 has 10 Exhibits:
Exhibits
 A. Glossary
 B. Food Cost
 C. Index
 D. Suggested Format for Recording Equipment and Depreciation
 E. Suggested Format for the Cost of Goods Used
6
The FNS Instruction 796-2 has 10 Exhibits:
Exhibits (cont.)
 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
(new)
7
(new)
What is the purpose of FNS Instruction 796-2?
 Key goal: Assure that CACFP costs are:
 allowable
for effective and efficient operation
of the nonprofit food service
to comply with CACFP requirements.
8
How to use FNS Instruction 796-2 to
determine if costs are allowable :
 Part VII - Basic Guidelines for Determining the
Allowability of Costs - to ensure that costs using
CACFP funds are allowable:






necessary
reasonable
authorized
within limits
current
single award






9
consistent
net cost
allocated
documented
disclosed
approved
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Necessary
10
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Reasonable
11
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Authorized
12
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Within Limitations
13
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Current
14
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Not in Multiple Awards
15
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Consistent
16
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Net Cost
17
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Allocated
18
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Documented
19
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Disclosed
20
FNS Instruction 796-2: Allowability of Costs
 To be allowable, CACFP costs must be:
 Approved
21
22
What changed in FNS Instruction 796-2
revision 4?
of language

 Updated references (7 CFR 226 and 2 CFR 225)
 Hyperlinks to regulations and handbooks
 Text boxes added to emphasize key points
 Examples added …
23
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Four acronyms were added (Part III):
• DCH – Day Care Home
• SA – State Agency
• SEA – State Education Agency
• U.S. GAAP – Generally Accepted Accounting
Principles in the United States
24
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Part VI D – Excessive Nonprofit Food Service
Account Balances
• Excess funds in the CACFP nonprofit food
service account may be transferred to
allowable costs in other Child Nutrition
Programs.
25
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Part VI D – Excessive Nonprofit Food Service
Account Balances (cont.)
• With specific prior written approval,
excess funds may be used for
increases in salary and benefits
to improve food service operations
for the benefit of the participants.
26
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Several updates in Part VIII:
 Communications and Technology (I-8)
- ADP equipment and software are allowable
(ADP = Automated Data Processing)
27
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Several updates in Part VIII (cont.):
 Depreciation and Use Allowance rewritten (I-13)
• Three Depreciation Methods:
1) Straight Line
2) Units of Output
3) Accelerated Depreciation
28
What changed in FNS Instruction 796-2
revision 4 (cont.)?
29
What changed in FNS Instruction 796-2
revision 4 (cont.)?
Units of Output Method
Depreciation
Expense
=
Cost – Salvage Value_____
x # Units of Output
Total Est. Units of Output (Life)
in time period
Example:
Depreciation = ($24,000 – $3,000) x 30,000 = $0.14 x 30,000 = $4,200
Expense
150,000
30
What changed in FNS Instruction 796-2
revision 4 (cont.)?
31
What changed in FNS Instruction 796-2
revision 4 (cont.)?
Example:
Depreciation Expense = (Cost – Accumulated Depreciation) x Factor
Double Declining Factor if lifetime = 5 years: 1/5 x 2 = 0.4
Year
Year
Year
Year
Year
1=
2=
3=
4=
5=
$24,000 x 0.4 = $9,600
$14,400 x 0.4 = $5,760
$ 8,640 x 0.4 = $3,456
$ 5,184 x 0.4 = $2,073.60
$ 3,110.40 – 3,000 (salvage value) = $110.40
32
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Part VIII Updates (cont.):
 Direct Expensing of Equipment and Other
Capital Expenditures rewritten (I-16)
33
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Part VIII Updates (cont.):
 Facilities and Space Costs (I-17)
- Health inspection fees allowed
for Afterschool and Outside School Hours Care
34
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Part VIII Updates (cont.):
 Materials and Supplies (I-27)
- Expendable purchases limit increased from a
30-day to 90-day supply
35
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Update of Part IX (B-1a) Reimbursement for
Sponsoring Organizations of Day Care Homes
(due to Healthy Hunger Free Kids Act of 2010)
• Added 10% Carryover
(unspent Day Care Home Sponsor Administrative Funds)
• >10% Must be Returned to the State Agency
• First-In First-Out (FIFO) accounting
36
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Three Glossary Terms were added (Exhibit A):
• Accrual Accounting
• Arms-Length Bargaining
• Reimbursement
37
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Updates to Food Costs (Exhibit B):
B. Allowable Food Costs
• Costs associated with growing food
to be used in the meal service
(Seeds, fertilizer, labor, plot rental, and
associated nutrition activities.)
38
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Food Costs Updates - Exhibit B (cont.):
B. Allowable Food Costs
• FSMCs and Processors must credit institutions
for value of USDA Foods received
39
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Food Costs Updates (Exhibit B):
All institutions must adhere to Federal procurement
procedures for the CACFP.
USDA’s web-based procurement training (available
online from NFSMI).
40
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Updates to the
(Exhibit C):
Additional subjects were added:
• ADP Equipment
• Computers
• Inspection Fees
41
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Two Exhibits were added:
• Exhibit I. Costs Requiring Additional Approvals
• Exhibit J. Questions and Answers
42
new
new
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit I: Costs Requiring Additional Approvals
(Refers to Part VIII – Standards for Allowable Costs
Section I – Selected Items of Cost)
Table sorted by “Topic or Cost”
“Section” and “Page #”
“Description”
“Type of Additional Approval Required”.
43
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit I - Types of Required Additional Approval:
 “Prior Approval” (State agency’s permission
prior to actually incurring the costs)
 “Specific Prior Written Approval” (State
agency’s permission in writing in advance of
incurring the costs)
 “Specific Prior Written FNS
Regional Office Approval”
44
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers (by topic)
• “Allowable Costs”
• “Benefits”
• “Depreciation”
• “Facilities and Space”
• “Generally Allowable Costs”
• “Income to the Program”
45
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Q and A Topics (continued)
• “Labor Costs”
• “Less-than-arms-length transactions”
• “Memberships, Subscriptions, and
Professional Organization Activities”
• “Nonprofit Food Service”
• “Outreach”
• “Physical Activity”
46
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Q and A Topics (continued)
• “Procurement”
• “Rental Costs”
• “Training”
• “Travel”
47
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
• Topic: “Physical Activity” (includes limiting
screen time)
Question: Are sponsor publication, printing and
reproduction costs relating to encouraging
physical activity and limiting screen time of
participants allowable?
48
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers (cont.)
Answer: It depends.
USDA has made available free resources. Under
certain circumstances, costs to reproduce and
distribute materials may be allowable.
49
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
• Topic: “Physical Activity”
Question: Will any physical activity equipment be
considered and allowable cost?
50
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
• Topic: “Physical Activity” (includes limiting
screen time)
Answer: Costs for equipment, facilities, lessons,
programs, or for fitness instructors are not
allowable.
51
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
• Topic: “Training”
Question: What kind of training costs related to
physical activity or limiting screen time of
participants will be allowed?
52
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
• Topic: “Training”
Answer: These training costs are the same as
other allowable meeting and conference costs if
the training is focused on CACFP requirements.
(Prior approval required.)
53
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
• Topic: “Allowable Costs”
Question: Several questionable costs were noted
in a budget submitted from a sponsor of centers:
1.
2.
3.
4.
5.
Monitors listed as contractors ($25/visit; $0.55/mile)
Leased office space bldg. owned by Chairman of Board
Training supplies include coffee mugs w/agency logo
Misc. expenses include store gift cards for employees
Training costs include 45 lunches @ $10 each
Are these allowable expenses?
54
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
1. Monitors listed as contractors
($25/visit; $0.55/mile)
Is this an allowable expense?
55
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
1. Monitors listed as contractors
This is an allowable expense - IF specific
prior written approval was received.
(and State agency should evaluate contracts)
56
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
2. Leased office space
Building owned by Chairman of Board
Is this an allowable expense?
57
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
2. Leased space - owned by Board Chair
This is an allowable expense – IF …
1) less-than-arms length was disclosed,
2) cost properly allocated, and 3)
specific prior written approval received.
58
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
3. Training supplies include coffee mugs
w/agency logo
Is this an allowable expense?
59
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
3. Training supplies include coffee mugs
w/agency logo
This is not an allowable expense.
60
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
4. Miscellaneous expenses include store
gift cards for employees
Is this an allowable expense?
61
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
4. Miscellaneous expenses include store
gift cards for employees
This is an allowable expense.
62
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
5. Training costs include 45 lunches @$10 ea
Is this an allowable expense?
63
What changed in FNS Instruction 796-2
revision 4 (cont.)?
 Exhibit J: Questions and Answers
5. Training costs include 45 lunches @$10 ea
This is an allowable expense - IF …
1) Program training is concurrent
2) costs are reasonable and necessary
64
Use FNS Instruction 796-2 to determine if
costs are allowable :
 Part VII - Basic Guidelines for Determining the
Allowability of Costs:






necessary
reasonable
authorized
within limits
current
single award






65
consistent
net cost
allocated
documented
disclosed
approved
66
67