Welcome and thank you all for attending today’s
Webinar on Cafeteria Funds, Part I – The Basics. Today’s Webinar provides the basic foundation
for the use of cafeteria funds. I am Sean Hardin, School Nutrition Programs Specialist,
with the California Department of Education, Nutrition Services Division. I will be presenting
today with Joan Herboth, School Nutrition Programs Specialist. The Cafeteria Fund is one of the hottest topics
in school nutrition at this time. As exciting as these times may be, the regulations and
policies governing the Cafeteria Fund are not easily understood and quite frankly can
be viewed as “No Fun”. That is why the School Nutrition Program Unit’s Cafeteria “FUN”d
Team has collaborated with our Department’s School Fiscal Services Division, Audits and
Investigations Division, Field Services Unit, and the U.S. Department of Agriculture (USDA)
to provide Local Educational Agencies (i.e., Food Services Directors/Managers, Chief Business
Officials, County/District Superintendents, etc.) with Cafeteria Fund guidance, resources,
and training to help you properly manage and expend cafeteria funds as required under federal
and state laws, regulations and policies. The federal regulations we will discuss today
apply to all Child Nutrition Programs. This includes the School Nutrition Programs (SNP),
the Child and Adult Care Food Program (CACFP), and the Summer Food Service Program (SFSP).
All references to the Education Code will only apply to the School Nutrition Program.
Now let�s begin the fun with Part I – the Basics of the Cafeteria Fund! Today’s Webinar includes the following:
– A Cafeteria Fund progress report will be presented to highlight what the California
Department of Education (CDE) has done, where we are now, and what are the plans going forward.
– The governing regulations and resources available to assist you in properly managing
your cafeteria fund. – Terms and definitions relating to the
Cafeteria Fund to help you become familiar with the Cafeteria Fund basics.
– We will review General Cost Principles. And then we will end with Common Cafeteria
Fund Audit Findings. We now want to share the Cafeteria Fund Progress
Report. It includes where we have been, where where we are now, and where we are going. On February 6, 2013, the Senate Office of
Oversight and Outcomes issued The Food Fight Report.
– CDE staff were interviewed prior to the release of The Food Fight Report and their
recommendations were incorporated into the document.
– The report identified weaknesses and gaps in the State’s oversight of Local Educational
Agencies (LEAs). – The report provided several recommendations,
some of the recommendations were to: – Include the Cafeteria Fund as part of
each LEA’s annual financial and compliance audit
– To remove sections of the Education Code that conflict with federal regulations, and
To require the CDE to provide LEAs with clear and comprehensive guidance on allowable
and unallowable Cafeteria Fund charges As we move on to this next slide, we will
talk about where we have been. The Nutrition Services Division (NSD) has been providing
training on Cafeteria Funds at various statewide professional organizations, such as:
The California School Nutrition Association and
The California Association of School Business Officials
The NSD has also offered two financial management courses:
– The Financial Management Level I course has been available since 2008 and
– The Financial Management Level II course began in 2010
In addition to the training we offer LEAs, the NSD has released twelve Management Bulletins
since 2009. Where we are now:
The NSD introduced its Cafeteria Fund Web page in July 2013. This Web page provides
guidance and resource materials covering allowable uses for Cafeteria Funds. You can see the
Web address on this slide. Also in 2013, the NSD created a designated e-mail address for
sponsors to send specific Cafeteria Fund questions. This e-mail address is staffed by the School
Nutrition Programs Cafeteria Fund Team of specialists. Again, the e-mail address is
provided to you on this slide. Where we are going with guidance and training:
We continue to provide policy guidance through Management Bulletins, also referred to as
MBs. We will review a couple of the most recent MBs. The first one is:
NSD-SNP-07-2013 – Cafeteria Fund Allowable Uses This MB was issued in May 2013 It updates the June 1995 Management Bulletin
No. 95-107, and It provides general guidance to several
Cafeteria Fund allowable charges. The next MB is:
USDA-SNP-18-2013 Paid Lunch Equity (PLE) Exemption MB
This MB was issued in October 2013 Describes the temporary USDA PLE exemption
process for LEAs whose net cash resources will exceed the three-month limitation if
they raise their paid lunch prices by $0.10 for that school year.
Finally, the NSD is working on the – Personnel Activity Report (PAR) MB
– Currently in the review process – This MB provides a general overview of
when to use either (a) a periodic certification, (b) a personnel activity report or (c) one
of the two U.S. Department of Education approved substitute systems for time accounting
In addition, this MB will provide LEAs with a question and answer section including
questions taken from: – Audit Findings
– U.S. Department of Education (USDE) Q&As – U.S. Department of Agriculture (USDA)
Q&As The NSD’s Web link to the Management
Bulletin Web page is located at the bottom of the slide. Guidance and Training
The California Department of Education is providing a Cafeteria Fund Webinar series.
The topics of the Webinars are: Part I – The Basics. Today’s Webinar on
general definitions, resources, and basic questions.
Part II – Practical Application. This webinar is intended to teach attendees how
to analyze the cafeteria fund related problems by posing more practical questions with less
obvious answers Part III – Net Cash Resources and Spending
Plans. This webinar is intended to teach attendees the federal regulations governing net cash
resources and what to do if their net cash resources are in excess of the federal regulation
limitation Part IV – Paid Lunch Equity and Nonprogram
Foods. This webinar is intended to teach attendees about the new federal laws created in sections
205 and 206 of the 2010 Healthy Hunger-free Kids Act (HHFKA) We now will review Governing Regulations,
Laws, and Resources Local Educational Agencies (LEA) must comply
with state and federal regulations and laws. LEAs must reference numerous sources to understand
and determine allowable uses of Cafeteria Funds, such as:
– The Federal Regulations, Policy, Instructions, and Guidance
– The California Education Code (EC) The list continues with:
– The USDA Policy Memos and the Indirect Cost Guidance (ICG)
– The California School Accounting Manual (CSAM) – FNS Instruction 796-2, Revision 3 which is used for those operating a CACFP program The regulations and policies governing Cafeteria
Funds are numerous and complex. With so many resources to refer to, it can be quite confusing
to initially know how or where to start. As stated earlier, in July 2013, the SNP Cafeteria
Fund Team created a new Cafeteria Fund Guidance Web page to assist LEAs in locating the resources
and tools needed to manage their Cafeteria Funds. The Web page includes web links to
the resources just mentioned, it lists the Cafeteria Fund Management Bulletin (MB) announcements
from CDE relating to the Cafeteria Fund, etc. The Cafeteria Fund Web page is located at
the link shown on the bottom of the slide. The Cafeteria Fund Guidance Web page is designed
to be a one stop resource for LEAs to access information, guidance, trainings, updates
and tools to help manage your Cafeteria Fund. We will now take some time to navigate through
the web site to get more familiar with where to find resources. The Cafeteria Fund Guidance Web page starts
by explaining why LEAs are required to establish a cafeteria fund account and then provides
hyperlinks that access State and federal laws, regulations, and guidance specific to Cafeteria
Funds. The following resources are available on the Web page:
– Frequently asked questions – Hyperlinks to Management Bulletins that relate to Cafeteria Funds.
We next move to the section related to Contact Information. Here you can see the
e-mail address to send your Cafeteria Fund questions to the SNP Cafeteria Fund Team.
There is also an e-mail address to direct questions concerning CSAM.
The last section provides links to other sites related to Cafeteria Fund guidance.
You can see that the last two bullets are related to Indirect Cost Rates and to the
Indirect Cost Guidance Manual. We will now review some common definitions
as they relate to Cafeteria Funds What is the Cafeteria Fund?
A statutorily required and restricted account used by districts to track the revenue and
expenses related to their nonprofit school food service. LEAs are governed by California
state and federal laws and regulations that limit the use of expenditures and revenues
from the Cafeteria Fund or food services account. As you see in this slide, we have the definition
of Cafeteria Fund as contained in state law. “All receipts of the cafeteria, or cafeterias
[defined as school food services], as the case may be, derived from the sale of food
shall be deposited in the account and shall be expended only for the maintenance of the
cafeteria, or cafeterias.” Basically, the take away is that all the money
you make has to be used for the maintenance of the cafeteria. In this slide, we have the definition of Cafeteria
Fund contained under federal regulations. “Nonprofit school food service account means
the restricted account in which all of the revenue from all food service operations conducted
by the school food authority principally for the benefit of school children is retained
and used only for the operation or improvement of the nonprofit school food service.”
The take away from this slide, which is just like state law, is that the Cafeteria Funds
are reserved only for the operation or improvement of the cafeteria. Restricted Account
The California Education Code provides the following guidance:
– The term “Cafeteria” is synonymous with “Food Service”
– The EC requires all revenues from sales from the cafeteria be deposited into the cafeteria
account, and spent on the maintenance of the cafeteria
– In addition, it does not allow the food service to be charged more than once for the
same service. If a food service program is being charged for a service as a direct cost,
the school district shall not also allocate that cost as a direct support cost or indirect
cost. Restricted Account – Education Code
Further guidance in the California Education Code:
The accounting system used to record the financial affairs of any school district shall be in
accordance with the definitions, instructions, and procedures published in the California
School Accounting Manual (CSAM) as approved by the State Board of Education and furnished
by the Superintendent of Public Instruction. The Superintendent of Public Instruction shall
require the use of a uniform cost accounting procedure, as set forth in the CSAM. Restricted Account – Federal Regulations
Title 7 Code of Federal Regulations sections 210.2 and 210.14(a):
– Requires the cafeteria fund to be a nonprofit, and – It requires the revenue from food service operations be retained and used only for the
operation or improvement of the nonprofit school food service
Expenditures of nonprofit school food service revenues shall be in accordance with
the financial management system established by the state agency In addition, it requires the expenditures
of the nonprofit school food service’s revenue be in accordance with the financial management
system established by the State Agency – in the case of California this would be the CSAM We now have two poll questions for you to
answer. For this and all other poll questions during this Webinar, after the question has
been read, we encourage you to pause the recording, answer the question, and then resume the recording. All receipts of the Cafeteria, derived from
the sale of food shall be deposited in the Cafeteria Fund account? True or False What are all monies received by or accruing
to the nonprofit school food service called? A. Expenses
B. Costs C. Revenue
D. Bonus I will give you a moment to pause the recording
and answer the question. The answer to the first question is True and
the answer to the second question is C Now that we understand what the cafeteria
fund is and what it should be used for, by looking at the basic guidelines or factors
affecting the allowability of costs, as located in Title 2, Code of Federal Regulations Part
225, Appendix A (also referred to as Office of Management and Budget Circular A-87). To be allowable under federal regulations,
costs must meet the following general criterion: No. 1. The cost must be Necessary and Reasonable.
What does this mean? – The cost must benefit the program. Must
be necessary for the performance or administration of the grant or award (which means reimbursement
in this case) – The cost must follow sound business practices,
such as. Arms length bargaining (hint: procurement process)
Follow federal, state, and local laws Follow requirements of the grant award
– The cost must be at fair market value for similar goods or services
– The sponsor must spend the funds prudently A cost is prudent if it does not exceed an
amount which would be incurred by a prudent person under the circumstances prevailing
at the time the decision was made to incur the cost
example (no Lexus allowed if a Ford will do) No. 2 – The cost must be allocable.
A cost is allocable to the nonprofit school food service if:
– The goods or services involved are chargeable or assignable to the nonprofit school food
service in accordance with the relative benefits received by the nonprofit school food service.
No. 3 – Most Restrictive You must follow the most restrictive regulation,
which could be either state or federal No. 4 – The cost must be consistently treated.
– The cost must follow uniform policies that apply equally to federal and non-federal
activities of the governmental unit – You cannot assign the cost as a direct
cost if similar costs under different programs have been allocated as an indirect cost
For example, an LEA is relocating its nonprofit school food service and several other of its
activities from the main school building to an annex, to charge rent on the annex to only
the nonprofit school food service account would not be treating the cost consistently.
No. 5 – The cost must be net of applicable credits.
– Applicable credits refer to those receipts or reductions of expenditure-type transactions
that offset or reduce expense items allocable to federal awards as direct or indirect costs.
– Examples would be: Purchase discounts, Rebates or allowances,
Insurance refunds or rebates No. 6 – costs must be adequately documented
Just a side note – many of our review findings against LEAs involves this issue, so you must
always remember that it is important to adequately document how your agency’s funds are expended,
which includes: – Invoices
– Receipts – Personnel Activity Reports (PARs)
Other records that will need to be maintained to prevent an Administrative Review finding
include but not limited to: – Purchase orders
– Proof of delivery or performance of the service – Approvals
– State agency or district prior approval of the purchase of products
or services. California Education Code Section 38101(d)
and (e) mirror federal regulation as they: – Require a written explanation of the purpose
of and basis for any charges to, or transfers from, a food service program, and
– They do not authorize a school district to charge a food service program any charges
prohibited by state or federal law or regulation. We now have another poll question for you
to answer. It is ok to give my brother the vending contract.
– True or False I will give you a moment to pause the recording
and answer the question. The correct answer is – False Now Joan Herboth will take over. We will now
move into some common audit review findings. Recent Child Nutrition Program reviews have
resulted in findings related to: Employee salaries and benefits
and Utilities and Maintenance In this slide, we are defining how an employees
salary and benefits are charged to the Cafeteria Fund.
Employee salaries and benefits are allowable as a direct charge to the cafeteria fund if
the proper supporting documentation is maintained in accordance with the federal requirements
which is located in 2 CFR Part 225, Appendix B, Item 8.h. The LEA must maintain one of the following
time distribution records for salary and benefit charges against the cafeteria fund:
1. Periodic Certification 2. Personnel Activity Report, or
3. The U.S. Department of Education (USDE) approved substitute systems for time accounting
– more details of the two approved substitute systems are located in the CSAM and the CDE
School Fiscal Services Division Web page We will go into greater detail of the first
two more commonly used time distribution records. If you wish to know more about the other two
USDE approved substitute time accounting systems (Option No. 3) please contact the CDE School
Fiscal Services Division e-mail account at [email protected] For employees who work on a single cost objective
or federal award, their salary and wage charges must be supported by periodic certification.
For a detailed description of this type of certification you should refer to 2 CFR, Part
225, Appendix B, Item 8.h.(3) or in the CSAM, page 905-8. Employees who work on a single
cost objective must maintain certification that:
– Certifies the employee works solely on that program or cost objective
– Certification must be prepared at least semi-annually, and
– Certification must be signed by the employee or supervisor A cost objective is legally defined as, “A
function, organizational subdivision, contract, grant, or other activity for which cost data
are needed and for which costs are incurred.” Basically for your purposes a cost objective
is a “program or award”, such as NSLP, CACFP, or SFSP. How do you know the employee is working on
a single cost objective? The easy example of a single cost objective
occurs when an employee works solely on one activity and is funded by a single federal
award. The question can become more difficult if you have several awards (or programs) funding
a single activity. Please refer to CSAM for more information on what a cost objective
is and how to identify if employee is a single cost objective. This slide is an example of periodic certification
documentation. Note that either state or federal regulations require the use of a specific
periodic certification form, but the CDE has provided periodic certification samples on
pages 905-23 and 905-24 in the CSAM. As stated earlier, the link to the CSAM is on the Cafeteria
Fund Guidance Web page. Employees who work on multiple cost objectives
must maintain personnel activity report (PAR). As per 2 CFR Part 225, Appendix B, Item 8.h.(5)
a PAR, or equivalent documentation. The 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, and – Be signed by the employee
Note: Budget estimates or other percentages determined before the services are performed
do not qualify as support for charges to federal awards but may be used for interim accounting
purposes provided that the LEA follows federal guidelines found at Item 8.h.(5)(e). Which employee classifications typically require
PARs? Here are a few examples: – Activity Supervisors
– Custodians – Security
– Warehouse workers – Maintenance workers
– Groundskeepers – Administrative food service staff that
work less than 100 percent in the food service department Here is a sample PARs form that provides greater
detail than the one provided in CSAM. Do either state or federal laws or regulations
require the use of a specific PARs form? No – any equivalent documentation that contains
the above standards is acceptable. CSAM provides a sample PARs form on page 905-22; however,
please note that the sample form may not include sufficient detail to meet the time documentation
requirements of specific programs. We now have two poll questions for you to
answer. LEAs do not have to maintain documentation
for staff who work 100 percent for Food Services. True or False Nonprofit school food service employees working
in both the SNP and CACFP must maintain personnel activity report (PAR).
True or False I will give you a moment to pause the recording
and answer the question. The answer to the first question is – False.
And the answer to the second question is – True We will now continue with Audit Findings concerning
Utilities and Maintenance. The Cafeteria Fund can only be directly charged for utilities
and maintenance costs, such as electricity; gas; water; and repairs if there is a mechanism
to quantify the exact benefit to the food services operations. So what do you mean by “If there is a mechanism
to quantify exactly the benefit to the food services operations?”
Basically there must be an approved methodology to accurately document the utility charges
to only the nutrition program. In order to satisfy this condition, LEAs are
required to: – Have the preparation, kitchen and serving
area on a separate meter (the cost to install the meter is a district expense), and the
LEA must – Keep the utility provider’s invoice
or statement in their files for examination of their 3-Year Administrative Review (remember,
lack of documentation will cause the charge(s) to be disallowed and the sponsor’s general
fund shall reimburse the cafeteria fund). When to use an alternative allocation methodology
to apportion the costs between programs. In order to use an alternative allocation
methodology it must be preapproved by the CDE’s cognizant agency – the U.S. Department
of Education. Currently the CDE has no prior prior approved allocation methodology for utilities;
any sponsor employing an unapproved methodology will have their utility charges disallowed. Similarly to the “Utilities” section, the
sponsor must have an approved methodology to accurately document the maintenance or
repairs of only the kitchen and serving area equipment.
In order to satisfy this condition, sponsors are required to:
– Have a job cost ticket or similar documentation detailing labor costs incurred based on actual
labor hours expended (PARs) Note: If repairs are completed by an outside
vendor, please refer to 2 CFR Part 225, Appendix B Item 32 for the federal guidelines for
the allowability of professional services. Our last poll question for today is The Cafeteria Fund can only be directly charged
for utilities and maintenance costs, such as electricity; gas; water; and repairs if
there is a mechanism to quantify the exact benefit to the food services operation.
True or False I will give you a moment to pause the recording
and answer the question. The correct answer is – True We will now provide you with a summary concerning
the Basics of Cafeteria Funds. To summarize:
– Charges for salaries or wages must be documented by:
– Periodic Certification – PARs or equivalent documentation
– One of the two USDE approved substitute systems for time accounting
– Charge only actual supplies and expenses used in school food services to the Cafeteria
Fund – the charges cannot be based on estimates and you must have documentation supporting
the charge. – Charge costs consistently to all programs
including the Cafeteria Fund “If the CDE determines that a district charged
unallowable expenses to the Cafeteria Fund,” the CDE is authorized by Education Code Section
38101(f) to direct the district to transfer the amount improperly expended (via payment
plan or in whole) back into the Cafeteria Fund. For those operating the CACFP or the
SFSP, the CDE will bill and return money back to the USDA. Send questions related to the SNP Cafeteria
Fund to the School Nutrition Program Cafeteria Fund Team. The e-mail address is provided
on the top of this slide. In your e-mail please include the following
information: – In the subject line include what you are
requesting assistance with (i.e. paid lunch equity, nonprogram revenue, etc.)
– In the body of the e-mail please include: – LEA name
– CNIPS identification number – Description of the issue and
– If this is capital expenditure request, also include an explanation as to why the
equipment is necessary for the operation of the nonprofit school food service For Administrative Review questions, you can
contact the Field Services Unit at the at the following e-mail address or phone number
listed on this slide. For accounting and CSAM questions you can
e-mail the School Fiscal Services Division at the e-mail address listed in this slide. Due to the trend over the past several years
that shows districts are charging improper expenses to the Cafeteria Fund, the CDE has
been working to educate LEAs, School Food Service and School Business Associations,
Advocacy Groups, and the Legislature about the laws that govern school food service.
We hope a new trend is on the horizon, where Chief Business Officials and Food Service
Directors understand what is an allowable expense. We would like to thank you for your participation
in today’s Webinar. We hope that Part I of this Webinar series has built a foundation
of knowledge and provided you with the location for guidance and resource materials. Please
watch Cafeteria Funds Part II – Practical Applications for an opportunity to apply the
concepts learned in this Webinar.