Policy Memo 175H

DOH-CACFP: Number 175H (04/14), Supersedes Number 59 (06/01)

TO: CACFP Sponsoring Organizations of Day Care Homes

FROM: Dwight LaDu, State Director, Child and Adult Care Food Program

SUBJECT: CACFP Financial Management - Updated

I. Purpose and Scope

The United States Department of Agriculture (USDA) recently issued a revision of the Food and Nutrition Service (FNS) Instruction, Financial Management - Child and Adult Care Food Program, commonly referred to as FNS 796-2, Rev. 4. This version replaces USDA's financial management instructions for CACFP Sponsoring Organizations originally issued in 2001 and titled, FNS 796-2, Rev. 3. The new revision is in effect immediately upon receipt of this memorandum.

II. Review of Key Changes

The purpose of FNS Instruction 796-2 is to assure that CACFP costs are necessary and reasonable for the effective and efficient operation of the nonprofit food service and are otherwise allowable under the Federal cost principals and the Instruction.

  1. All costs charged to CACFP must be approved through the annual budget renewal process. Undisclosed costs that are not approved are unallowable costs up to the point of disclosure. Retroactive approval of previously undisclosed costs is not allowed.

    Example: the allocated cost of trash removal was not included in the Sponsor's October budget request and was therefore not approved. The error is discovered the following January and brought to the attention of CACFP. If the cost is deemed allowable, approval can only be given from the date of disclosure forward. Retroactive approval of undisclosed costs can no longer be approved, even if the cost would normally be allowable.

  2. Allowable CACFP costs must conform to the following rules:
    1. Necessary: the cost must be essential for the operation of the program.
    2. Reasonable: the cost must not exceed what a prudent person would incur under normal circumstances, and must adhere to:
      1. Generally Accepted Accounting Procedures (GAAP)
      2. Represent "arms-length" relationships
      3. Less-than-arms-length relationships must have Specific Prior Written Approval (SPWA) from CACFP.
    3. Current: the cost must not represent prior or future time periods
    4. Allocated: the cost must be properly and consistently assigned across funding sources using an approved allocation method
    5. Documented: the cost must be documented; undocumented costs are not allowed
  3. New Allowable Costs
    1. Costs associated with growing food to use in a meal service; including seeds, fertilizers, labor, plot rental and related nutrition activities. Prior approval is required.
    2. Costs used to reproduce and distribute USDA's Team Nutrition and other resources. When these materials are not sufficient, prior approval from CACFP is required before costs are incurred.
    3. Costs related to physical activity or limiting screen time of participants when the training is focused on CACFP requirements. Prior approval is required.
    4. Costs for contracted monitoring staff is allowed with a valid contract. SPWA is required.

III. Summary of Changes

This memorandum transmits the newly revised Financial Management - CACFP guidance (FNS 796-2, Rev. 4) and summarizes key changes. This revision is in effect immediately upon issuance and can also be found on CACFP's website at: http://www.health.ny.gov/prevention/nutrition/cacfp/regspm.htm

Attachment: FNS 796-2, Rev. 4