Resource Management

Resource Management John Gallagher and Mark Durma USDA-FNS

Healthy Hunger-Free Kids Act New Administrative Review for School Meal Programs • Effective Training • and • Ongoing T/A

Federal regulations require State Agencies to ensure school districts, or how USDA refers to them as School Food Authorities (SFAs), account for all revenues and expenditures of their nonprofit school food service. Ensures effective and consistent management of program resources. New Section: Resource Management

Resource Management: Five Areas of Review 1. Maintenance of the Nonprofit School Food Service Account 2. Paid Lunch Equity 3. Revenue from Non-program Foods 4. Indirect Costs 5. USDA Foods

Resource Management – Review Process Technical Assistance & Corrective Action Comprehensive Review

Resource Management – Review Process • Initial RM Off-site assessment • Part of larger off-site assessment tool • Integration of off-site components into Administrative Review Process • 4 weeks before on-site review • Resource Management Portion of Off-site Assessment Tool • 18 yes or no questions • About 5 review areas of RM plus 2 additional areas • SFA responses should reflect most recently completed Fiscal Year • Collaborate with SA to complete • No response results in RM Comprehensive Review

Resource Management – Review Process Cont’d • Once RM portion of Off-site Assessment Tool is complete, SA uses the yes/no responses to complete the Resource Management Risk Indicator Tool. • Resource Management Risk Indicator Tool • Contains the same questions as RM portion of Off-site Assessment Tool • Tool Scoring assigns risk with RM requirements for each of the 18 questions • # of Risk indicators determines whether Resource Management Comprehensive Review is required

Resource Management – Review Process Cont’d • The Resource Management Risk Indicator Tool assesses risk via “risk indicators” • SFAs may receive a total of 0-7 risk indicators • 0-2 risk indicators: technical assistance and/or corrective action • 3+ risk indicators: more comprehensive review required • 5 risk indicators correspond to the 5 areas of RM review • Remaining 2 correspond to SFA size and past performance

Resource Management – Review Process Cont’d • Resource Management Comprehensive Review • 3+ risk indicators • Review all five areas of Resource Management: Maintenance of the Nonprofit School Food Service Account, Indirect Costs, PLE, Revenue from Nonprogram Foods, and USDA Foods (Regardless of Risk) • Off-site or On-site Review (Except Allowable Cost)

Resource Management – Review Process Technical Assistance & Corrective Action Comprehensive Review

Resource Management Risk Assessment Off-Site Assessment Tool

Structure of PresentationFor Each Resource Management Section: • Background Information • Monitoring Area & the Off-Site Assessment Tool • Resource Management Comprehensive Review • What documentation is required? • What will be assessed?

Resource Management: Five Areas of Review 1. Maintenance of the Non-profit School Food Service Account 2. Paid Lunch Equity 3. Revenue from Non-program Foods 4. Indirect Costs 5. USDA Foods

Background: Maintenance of the Nonprofit Food Service Account Nonprofit Food Service Nonprofit Food Service Account • All food service operations conducted by the SFA principally for the benefit of children • All revenue from which is used solely for the operation or improvement of such food services • Restricted account in which all revenue from all food service operations conducted by the SFA for the benefit of children • Retained and used only for the operation or improvement of such food service. Background

Revenue Use and Program Costs • SFAs must observe the restrictions on the use of nonprofit food service account revenues. • All revenue must be used for operating the food service program: • To include food and food service staff costs; • Administrative costs of the programs; and/or • Improving Quality and Efficiency Background

Revenue Use and Program Costs (Cont.) Costs must be: • Reasonable • Necessary • Allocable. What can revenue NOTbe used for? Purchase land or buildings Construct buildings (unless approved by FNS) Spend on items not related to the food service program. Background

Revenue Use and Program Costs (Cont.) • Appendix A of 2 CFR 225 • “Reasonable:” a cost that would be incurred by a reasonable person in the same circumstance. • “Necessary:” a cost needed to effectively and/or efficiently operate the meal program. • “Allocable:” only the cost or portion of cost that benefited the food service program is charged to the food service account. Background

“Allocable” Example • An administrative assistance spends part of his/her time on reviewing f/rp applications, preparing roster list, consolidating meal counts and submitting claim, and part of time on activities unrelated to food service program. • To charge salary as a cost to the school food service account, must keep time sheet record of time spent on food service related activities. Background

“Allocable” Example (Cont.) • Time sheet shows admin assistant spends 40% of time on food service related activities over a certain period (month/year). • 40% of salary is charged to the food service account. Background

Allowable Costs Requirements Background

Allowable vs. Unallowable Costs Background

More Rules: Net Cash Resources • SFAs must limit their Nonprofit Food Service Account: • Net cash resources MUST NOT exceed 3 months’ average expenditures • 3 months’ average expenditures = expenditures related to food service during an average 3 month period “Net Cash Resources” are: Amount of cash Accounts receivable Accounts payable present in the food service account at a given time Background

Net Cash Resources • What if my account exceeds the net cast requirement? • Develop a spending plan and have it approved by the State agency • Describe how the excess funds will be used to enhance the quality of the food service program. • May include replacing equipment, adding equipment, purchasing higher quality foods, and upgrading the POS system. Background

SFA Compliance with Regulations - 7 CFR 210.14(a) • Intent: Federal funds must be used only for the operation and improvement of the school food service • Intent: Maximize program benefits to enrolled students Resource Management Area:Maintenance of the Non-Profit Food Service Account Monitoring Area

Maintenance of the Nonprofit School Food Service Account Off-Site Assessment Tool Questions – 5 questions 5 questions (cont.) • Did the SFA conduct a year-end review of total revenues and expenses to determine the school food service nonprofit status? • Did the SFA identify year-end expenses in excess of revenues? • If the SFA had excess revenues at the end of the year, were the surplus funds transferred out of the school food service account to support other operations and/or to achieve a zero balance? • Did the SFA, in the most recent fiscal year, complete a process to measure its compliance with the requirement to limit net cash resources to a level at or below three months’ average expenditures? • Did the SFA maintain support records to document its compliance with the three months’ net cash resource limit? Off-Site Assessment Tool

Resource Management – Maintenance of the Nonprofit School Food Service Account RESULTS: • Regardless of Risk indicators triggered in any one RM review area, only one indicator is counted Off-Site Assessment Tool

Three Components -- Comprehensive Review 1. Nonprofit School Food Service Account • Review the SFA’s documentation to verify the nonprofit status. 2. Net Cash Resources • Determine if the SFA is in compliance with the 3 month operating expenses limit; if not, was prior SA approval obtained? 3. Allowable costs • Determine if program funds were used on expenses that were reasonable, necessary, and otherwise allowable. Maintenance of the Nonprofit School Food Service Account Comprehensive Review

Maintenance of the Nonprofit School Food Service Account Documentation Needed Assessment Will Be On • Most Recent Fiscal Year’s: • “Operating Statement” • “Statement of Activities”; or • “Balance Sheet” • SA will identify: • Any revenue shortfalls or excesses • If excess, SA ensures SFA retained them Comprehensive Review

Maintenance of the Nonprofit School Food Service Account: Net Cash Resources Documentation Needed Assessment Will Be On • Most Recent Fiscal Year’s: • “Operating Statement” • “Statement of Activities”; or • “Balance Sheet” • SA will identify: • Whether the SFA is limiting net cash resources to an amount that does not exceed 3 months’ average expenditures, as required under 7 CFR 210.14. Comprehensive Review

Maintenance of the Nonprofit School Food Service Account: Allowable Costs Documentation Needed Assessment Will Be On • Most Recent Fiscal Year’s: • “Operating Statement” • “Statement of Activities”; or • “Balance Sheet” • Source documentation for: • At least 10% of total expenditures for most recently closed Fiscal Year • The sample will include costs from food, labor and other expenses • SA will identify: • If SFA’s sample of costs are allowable • Ensure that SFA keeps adequate documentation • If the SFA allocates expenses consistently among local and Federal programs Comprehensive Review

NJ Handouts & Examples

Paid Lunch Equity • Pricing sponsors must price paid lunches at a rate at least equivalent to the revenue received for free lunches ($2.59 in SY 2013-2014.) • If the price charged is less, sponsors must increase their price gradually (not more than 10¢) each year until minimum is met. • Alternatively, non-Federal funds provided to support paid meals may be used to offset price increase. Background

Paid Lunch Equity Allowable Non-federal Sources Unallowable Non-federal Sources • Per-meal reimbursements for paid breakfast and lunches from states, counties, school districts and others*; • Funds provided by organizations; • Any portion of State revenue matching funds that exceed the minimum requirement & that’s provided for paid meals* *For SY 13-14 only • Any payments, including additional per-meal reimbursements, provided to the SFA for support of the School Breakfast Program or other Child Nutrition Programs; • Any payments, including additional per-meal reimbursements, provided specifically to support free and reduced price meals Background

Included in the Healthy, Hunger-Free Kids Act (Section 205) • Intent: To ensure that SFAs charge paid lunch prices sufficient to cover the costs of paid meals or otherwise provide enough funds to support paid meal costs. Paid Lunch Equity Monitoring Area

Paid Lunch Equity Off-Site Assessment Tool Questions – 4 questions Results • Did the SFA use the USDA Paid Lunch Equity Tool to evaluate paid lunch prices? • Did the SFA increase its paid lunch prices if the tool indicated a paid lunch price increase was required? • Did the SFA use non-Federal funds to support its paid lunch prices? • Did the SFA submit its most frequently charged paid lunch price to the SA? • SA may answer this on your behalf • Regardless of how many risk indicators are triggered in any one RM review area, only one indicator is counted. • For example, if all four of your responses to the PLE questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator Tool • True for all RM review areas Note: This section doesn’t apply to non-pricing programs and RCCIs without day students. Off-Site Assessment Tool

Paid Lunch Equity • What documentation will you be asked to provide? • SFA’s calculations to meet the paid lunch equity requirements. • SFA-completed Paid Lunch Equity Tool; or, • Approved Alternative Documentation • Previous School Year (SY) Weighted Average Price • All Paid Lunch Prices for October of the Previous SY • Number of paid lunches served at each paid lunch price in October of the previous SY Comprehensive Review

Paid Lunch Equity What will the State agency assess? • Correct Determination of Need to Raise Prices • Price Increase Occurred, as applicable • Non-federal sources were: • Used in Whole or in Part • Allowable • Appropriately added to the non-profit food service account Comprehensive Review

Nonprogram Revenue “Nonprogram revenue” “Nonprogram foods” • Refers to the revenue resulting from the sale of nonprogram foods. • All food sold that is not part of the reimbursable meal, e.g., a la carte foods, individual food/beverage item sales, 2nds of entrées or other items, vending machine foods/beverages, adult meals, etc.). Background

Nonprogram Revenue Effective on July 1, 2011 Proportion of Total Revenue from Nonprogram Foods Sales is greater than or equal to the Proportion of Total Food Costs of Nonprogram Foods to Total Food Costs of All Food Background

Nonprogram Revenue Revenue Ratio:Nonprogram revenue (program revenue + nonprogram food revenue) Food Cost Ratio: Cost of nonprogram foods (cost of program foods + cost of nonprogram foods) • Total Non-Program Food Revenue >Total Non-Program Cost Total Program Revenue Total Purchased Food Cost Background

Nonprogram Revenue Calculator Cost for Reimbursable Meal Food $34,287 Cost of Nonprogram Food $2,876 Total Food Costs $37,163 Total Nonprogram Food Revenue $4,419 Total Revenue $73,138 Total Non Program Food Revenue = $4,419 equals 6% Total Revenue = $73,138 Total Non Program Food Cost = $2,876 equals 8% Total Food Cost = $37,163 Min portion of revenue from nonprogram funds = 8% Min Revenue Required from the Sale of Nonprogram Foods =$5,660 Additional Revenue Needed to Comply = $1,241 Background

Revenue from Nonprogram Foods Off-Site Assessment Tool Questions – 2 questions Results • Does the SFA use the USDA Nonprogram Food Revenue Tool or a USDA-approved alternative method to calculate its nonprogram food costs and nonprogram food revenue? • Was the SFA’s proportion of total revenue from the sale of nonprogram foods to the total revenue of the school food service account equal to or greater than the proportion of total food costs associated with obtaining nonprogram foods to the total costs associated with obtaining program and nonprogram foods from the account • Regardless of how many risk indicators are triggered in any one RM review area, only one indicator is counted. • For example, if all four of your responses to the PLE questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator Tool • True for all RM review areas • Note: Section may be not applicable if the SFA does not sell nonprogram foods or beverages, including adult meals Off-Site Assessment Tool

Revenue from Nonprogram Foods • What documentation will you be asked to provide? • Food costs of reimbursable meals; • Food costs of nonprogram foods; • Revenue from nonprogram foods • Total revenue • USDA NonProgram Food Revenue Tool or Alternative Mechanism • Adult Meal Prices Comprehensive Review

Revenue from Nonprogram Foods What will the State agency assess? • Nonprogram Foods and Nonprogram Foods Cost Calculations • Process for Compliance • Revenue accrues in the Nonprofit Food Service Account • Adult meals priced at least equal to cost Comprehensive Review

Background Information:Program Costs Direct Costs Indirect Costs • Direct costs: incurred specifically for a program or other cost objective and readily identified to a particular objective. • Indirect costs: incurred for the benefit of multiple programs, functions, or cost objectives; cannot be readily and specifically identified with a particular program or cost objective. Background

Program Costs (Cont.) • Examples of direct costs: wages/salaries, supplies, equipment used in food service. • Examples of indirect costs: employee benefits, human resources, payroll services, accounting/finance, facilities management, utilities, water, refuse collection. Background

Program Costs (Cont.) • The same cost or expense may not: • Be identified under both direct and indirect costs • Be treated inconsistently throughout the organization (either as direct or indirect). Background

Resource Management