1. 1 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

2. 2 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

3. 3 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/796- 2%20Rev%204.pdfhttp://www.fns.usda.gov/sites/default/files/796- 2%20Rev%204.pdf http://www.fns.usda.gov/sites/default/files/796- 2%20Rev%204.pdf http://www.fns.usda.gov/sites/default/files/796- 2%20Rev%204.pdf

4. 4 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

5. 5 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

6. 6 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

7. 7 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 (new)  J.Questions and Answers (new)

8. 8 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.

9. 9 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 consistent net cost allocated documented disclosed approved

10. 10 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Necessary

11. 11 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Reasonable

12. 12 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Authorized

13. 13 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Within Limitations

14. 14 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Current

15. 15 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Not in Multiple Awards

16. 16 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Consistent

17. 17 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Net Cost

18. 18 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Allocated

19. 19 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Documented

20. 20 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Disclosed

21. 21 FNS Instruction 796-2: Allowability of Costs  To be allowable, CACFP costs must be: Approved

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23. 23 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 …

24. 24 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

25. 25 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.

26. 26 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.

27. 27 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)

28. 28 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

29. 29 What changed in FNS Instruction 796-2 revision 4 (cont.)?

30. 30 What changed in FNS Instruction 796-2 revision 4 (cont.)? Units of Output Method Depreciation = Cost – Salvage Value_____ x # Units of Output Expense 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

31. 31 What changed in FNS Instruction 796-2 revision 4 (cont.)?

32. 32 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 1 = $24,000 x 0.4 = $9,600 Year 2 = $14,400 x 0.4 = $5,760 Year 3 = $ 8,640 x 0.4 = $3,456 Year 4 = $ 5,184 x 0.4 = $2,073.60 Year 5 = $ 3,110.40 – 3,000 (salvage value) = $110.40

33. 33 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)

34. 34 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

35. 35 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

36. 36 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

37. 37 What changed in FNS Instruction 796-2 revision 4 (cont.)?  Three Glossary Terms were added (Exhibit A): Accrual Accounting Arms-Length Bargaining Reimbursement

38. 38 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.)

39. 39 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

40. 40 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).

41. 41 What changed in FNS Instruction 796-2 revision 4 (cont.)?  Updates to the (Exhibit C): Additional subjects were added: ADP Equipment Computers Inspection Fees

42. 42 What changed in FNS Instruction 796-2 revision 4 (cont.)?  Two Exhibits were added: Exhibit I. Costs Requiring Additional Approvals new Exhibit J. Questions and Answers new

43. 43 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”.

44. 44 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”

45. 45 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”

46. 46 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”

47. 47 What changed in FNS Instruction 796-2 revision 4 (cont.)?  Exhibit J: Q and A Topics (continued) “Procurement” “Rental Costs” “Training” “Travel”

48. 48 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?

49. 49 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.

50. 50 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?

51. 51 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.

52. 52 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?

53. 53 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.)

54. 54 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.Monitors listed as contractors ($25/visit; $0.55/mile) 2.Leased office space bldg. owned by Chairman of Board 3.Training supplies include coffee mugs w/agency logo 4.Misc. expenses include store gift cards for employees 5.Training costs include 45 lunches @ $10 each Are these allowable expenses?

55. 55 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?

56. 56 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)

57. 57 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?

58. 58 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.

59. 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 Is this an allowable expense?

60. 60 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.

61. 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 Is this an allowable expense?

62. 62 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.

63. 63 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?

64. 64 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

65. 65 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 consistent net cost allocated documented disclosed approved

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