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Financial Management: What’s Important and How Does It Play Into the Resource Management Comprehensive Review? PowerPoint Presentation
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Financial Management: What’s Important and How Does It Play Into the Resource Management Comprehensive Review?

Financial Management: What’s Important and How Does It Play Into the Resource Management Comprehensive Review?

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Financial Management: What’s Important and How Does It Play Into the Resource Management Comprehensive Review?

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  1. Financial Management: What’s Important and How Does It Play Into the Resource Management Comprehensive Review?

    Rob Leshin, MPA, Assistant Director, Nutrition Programs Pete McLoughlin, MBA, Financial Management Section Head, Nutrition Programs
  2. Objectives Understand and learn importance of effective financial management in food service operations and the “why” behind the USDA school lunch resource management regulations and requirements Learn what is expected at a review including what needs to be submitted Learn from hearing “better” and “not-so-good” practices from observations in the field Participate in helpful peer discussion Massachusetts Department of Elementary and Secondary Education
  3. Agenda Announcement regarding Supplemental Financial Report Overview of Resource Management Process within the Administrative Review Importance of Resource Management 5 Resource Management Review Areas: High level overview- concepts Documents we need- what we are asking for What we will review Better and not-so-good practices we have seen Massachusetts Department of Elementary and Secondary Education
  4. Supplemental Financial Report Who’s excited about the Supplemental Financial Report? Who can’t do without it? Who’d like to see a change in the process? Massachusetts Department of Elementary and Secondary Education
  5. Supplemental Report Challenges Hybrid P&L and Balance Sheet- end of month cash flow statement and status of assets and liabilities One size fits all report challenging for SFAs to complete Time consuming ….we’ve heard your concerns and we’re responding… Massachusetts Department of Elementary and Secondary Education
  6. Financial Reporting Requirements New process for SY2014-2015: Upload your YTD P&L, quarterly Upload your balance sheet annually (end of year) We will soon release guidance on what necessary elements need to be included in the P&L and balance sheet Massachusetts Department of Elementary and Secondary Education
  7. Resource Management Process within the Administrative Review Massachusetts Department of Elementary and Secondary Education
  8. Resource Management Process within the Administrative Review Massachusetts Department of Elementary and Secondary Education
  9. Resource Management Process within the Administrative Review Non Comprehensive Review RM review will be conducted at a higher level by program reviewer assigned to Admin review Comprehensive Review RM review will be conducted by MA ESE financial management staff Letter will go out detailing what is needed SFA uploads financial documents on Security Portal Goal is to accomplish most of review offsite Discuss resource management review areas onsite Massachusetts Department of Elementary and Secondary Education
  10. Why so many rules and regulations? Necessary, Reasonable, Allocable, Weighted Average Price (WAP), Indirect Costs, Paid Lunch Equity, USDA Foods, Pass Through Value, Revenue from Non Program Foods, 2 CFR Part 225, Allowable Costs, Direct Costs, Liabilities, Net off Invoice, Balance Sheet, Net Cash Resources, Three Months Average Expenses, Unallowable, 7 CFR 210.14, Indirect Costs Manual, Ending Cash Balance, Cost Allocation Plan, Deferred Revenue, Pre paid Balances, Profit and Loss Statement, Bad Debt, Uncollected Meal Charges, Assets, Inventory, Student Sales, Adult Meal Price, Point of Sale System, Daily Income Potential Statement, Generally Accepted Accounting Principals (GAAP), Source Documentation, Cash Controls, Theft Prevention, Cash Management Policies and Procedures, 2 CFR 3016.20, Meals Per Labor Hour, Meal Equivalents Total nonprogram food revenue>Total nonprogram food cost Total program revenue Total food cost Massachusetts Department of Elementary and Secondary Education
  11. Importance of Resource Management Federal regulations require State Agencies to ensure School Food Authorities (SFAs) safeguard limited assets and ensure they are used only for authorized school food service purposes Ensures effective and consistent management of program resources Critical to the fiscal and nutritional integrity of school nutrition programs. Massachusetts Department of Elementary and Secondary Education
  12. What is Financial Management as it Relates to Nutrition Programs? The process of defining the program objectives and financial goals for the school nutrition programs, and Implementing activities to attain those goals through the effective use of resources Critical component of a Food Service Director’s Responsibilities Massachusetts Department of Elementary and Secondary Education
  13. Financial Management Competencies A school nutrition director competent in financial management develops financial management guidelines that support school nutrition program operational goals and comply with regulations, and establishes cost control goals to effectively manage the school nutrition program. Massachusetts Department of Elementary and Secondary Education
  14. What are the Roles of the School Nutrition Director in Managing Finances? Management of financial resources Maintain financial accountability Involve district administrators, school board members, school nutrition managers, and school nutrition staff to identify goals Massachusetts Department of Elementary and Secondary Education
  15. What are the Key Activities for More Effective Financial Management? School nutrition programs should plan through the budget process, apply efficient cost control measures, increase productivity, and identify ways to increase resources. Massachusetts Department of Elementary and Secondary Education
  16. What are the Financial Management Questions You Should be Asking? Main sources of revenue? Percentage of total revenue attributed to each source? Expenditure categories? Massachusetts Department of Elementary and Secondary Education
  17. More Financial Management Questions… Costs to produce a meal? Percentage of revenue spent for labor or food? Labor productivity index (Meals Per Labor Hour)? Massachusetts Department of Elementary and Secondary Education
  18. More Financial Management Questions… Net gain or loss over the past 3 years? Do employees understand the importance of cost controls to the success of the program? What does a comparison of Average Daily Participation for the past 3 years tell me? Massachusetts Department of Elementary and Secondary Education
  19. Why Account for Revenues and Expenditures? Two Reasons: It’s required and, It makes sense! Massachusetts Department of Elementary and Secondary Education
  20. Reasons it’s Required 7 CFR Part 3016.20 states, “Grantees and sub grantees must maintain records which adequately identify the source and application of funds provided for financially assisted activities.” Proper record keeping a principle of the Generally Accepted Accounting Principles (GAAP), which is the uniform standard of guidelines for financial accounting used in school districts for compliance with Federal requirements Massachusetts Department of Elementary and Secondary Education
  21. Reasons it Makes Sense All businesses (nonprofit and for profit) need to account for each dollar within their financials in order to be successful Need to trace all funds coming in and going out to achieve financial accountability Protect employees (including yourself!) Be able to answer financial questions easily and accurately from local, state and federal officials Massachusetts Department of Elementary and Secondary Education
  22. What You Need to Track Revenue Defined as income received in exchange for goods or services provided by the school food service department (National Food Service Management Institute NFSMI). Examples: sales to students, prepaid meal sales, reimbursements, adult sales, interest, catering, vending sales etc. Massachusetts Department of Elementary and Secondary Education
  23. Classification of Revenue Local Sources State Sources Federal Sources Miscellaneous Sources Fund Transfer-In Massachusetts Department of Elementary and Secondary Education
  24. Revenue Accountability USDA mandates accountability for management of revenue by monitoring all revenue received, how revenue is dispersed, and that revenue is sufficient to ensure program sustainability. Massachusetts Department of Elementary and Secondary Education
  25. Revenue Analysis Calculate average revenue per meal or meal equivalent. Establish consistent guidelines for pricing nonprogram food items to ensure revenue is equal to or greater than costs. Compare revenue generated per meal with costs per meal. Massachusetts Department of Elementary and Secondary Education
  26. Why it’s important to compare revenue earned with meal cost helps determine if and where revenue should beincreased, allows you to analyze revenue by source, and identifies areas in which revenue should be monitored for revenue loss. Massachusetts Department of Elementary and Secondary Education
  27. Using Meal Equivalents in Program Analysis to Measure Performance By converting food sales to meal equivalents, the school nutrition director can determine meal cost, labor productivity ratios, and the average revenue earned per meal/meal equivalent. Massachusetts Department of Elementary and Secondary Education
  28. Meal Equivalent Conversion Formulas 1 lunch = 1 meal equivalent 3 breakfasts = 2 meal equivalents (2/3 = .67) 3 snacks = 1 meal equivalent (1/3 = .33) 1 supper = 1 meal equivalent Nonprogram food sales = __revenue from nonprogram sales____ current free lunch reimbursement + current USDA Foods value per lunch Massachusetts Department of Elementary and Secondary Education
  29. What You Need to Track Cont’d Expenditures Defined as costs that can be indentified specifically within the operation of the school foodservice program (NFSMI) Examples: Food, labor, equipment, sanitation, outreach, promotional, fees, licenses, indirect costs etc. Massachusetts Department of Elementary and Secondary Education
  30. Classification of Expenditures Labor Employee Benefits Professional and Technical Services Property Services Purchased Foods and USDA Foods Supplies Capital Assets Miscellaneous Indirect Costs Food Service Management Massachusetts Department of Elementary and Secondary Education
  31. Managing Expenditures in the School Nutrition Program Why so important?... To be able to interpret, analyze, and use expenditure data for program evaluation and improvement. Massachusetts Department of Elementary and Secondary Education
  32. Expenditure Analysis Analyzing financial reports can provide information about patterns or trends, significant changes in specific cost categories, deviations from financial goals (budget), possible abuse or theft, and transaction errors. Massachusetts Department of Elementary and Secondary Education
  33. Types of Expenditure Analysis Total costs to produce a meal Meal costs per expenditure category Percentages of operational costs to total revenue (operating ratios) Costs to produce a meal compared with the average revenue generated per meal Massachusetts Department of Elementary and Secondary Education
  34. Meal Cost Deviations Higher food costs at the beginning of the year Purchase of a large ticket item Unplanned large repair bills Massachusetts Department of Elementary and Secondary Education
  35. Comparing Revenue to Expenditures Total net gain/loss to the school nutrition program expressed in dollars, Percent of gain/loss expressed in percentage of revenue, and Net gain/loss per meal or meal equivalent. Massachusetts Department of Elementary and Secondary Education
  36. Food Cost Expenditure Percentage to Total Revenue Formula: Category Costs Total Revenue Example: $16,500 (food costs) $30,000 (revenue) = .55 x 100 or 55% $.55 cents from each $1.00 generated was used to purchase food. Massachusetts Department of Elementary and Secondary Education
  37. Controlling Food and Labor Costs in School Nutrition Programs Why so Important?... Apply cost control measures to operate a financially sound program with nutritional integrity. Massachusetts Department of Elementary and Secondary Education
  38. Meals Per Labor Hour Number Meals/Meal Equivalents Number of Paid Productive Labor Hours Example: 338 Meals/Meal Equivalents 24 Paid Productive Labor Hours = 14.08 or 14 Meals Per Labor Hour Massachusetts Department of Elementary and Secondary Education
  39. Why Calculate the Cost of Food? To determine if costs are within guidelines, To ascertain if there are sufficient funds to pay expenditures, To establish the cost for each meal equivalent served, and To prevent waste and food theft through monitoring food usage. Massachusetts Department of Elementary and Secondary Education
  40. Calculating Cost of Food Used Beginning Inventory + Total Purchases____ = Total Food Available - Ending Inventory___ = Cost of Food Used *Purchased Food and USDA Foods Massachusetts Department of Elementary and Secondary Education
  41. Developing and Analyzing a School Nutrition Budget Why So Important?... Budgets help you to analyze and control revenues and expenditures and can help get everyone on the same page Massachusetts Department of Elementary and Secondary Education
  42. Steps To Building A Budget Forecast Revenue for each category Forecast Expenditures for each category Analyze whether goals and objectives are being met – Make Changes Massachusetts Department of Elementary and Secondary Education
  43. Budget Input School district business officials can provide guidance in accounting and business functions. They can also provide details such as school openings and closings, changes in enrollment, etc. Site level managers can provide information concerning participation trends, changes in student eating habits, equipment and labor needs, and other factors that will influence the budget process. Massachusetts Department of Elementary and Secondary Education
  44. The Budget as a Management Tool The budget assists in managing the school nutrition program by forecasting revenue, identifying how revenue will be allocated for expenditures, and predicting how much money will be in the fund balance at year’s end. B Massachusetts Department of Elementary and Secondary Education
  45. Five Resource Management Review Areas Maintenance of the Nonprofit School Food Service Account Paid Lunch Equity Revenue from Nonprogram Foods Indirect Costs USDA Foods Massachusetts Department of Elementary and Secondary Education
  46. Maintenance of the Nonprofit School Food Service Account High level overview - concepts Documents we need - what we are asking for What we will review “Better” and “not-so-good” practices we have seen Massachusetts Department of Elementary and Secondary Education
  47. Key Financial Reports Statement of Activities (P&L) Statement of Net Position (Balance Sheet) General Ledger Massachusetts Department of Elementary and Secondary Education
  48. Profit and Loss Statement (Statement of Activities) Revenue by source Expenditures by category Net/gain loss for the statement period Comparison of current month with previous month’s information and year-to-date information Massachusetts Department of Elementary and Secondary Education
  49. Sample Profit and Loss Statement Massachusetts Department of Elementary and Secondary Education
  50. Sample Profit and Loss Statement Massachusetts Department of Elementary and Secondary Education
  51. Sample Profit and Loss Statement Massachusetts Department of Elementary and Secondary Education
  52. School Food Service Account - Financial Management Questions How does your program track revenues and expenditures? Who is involved? Do you maintain consistent methods in doing so? Do you know how much money you take in and spend out daily/monthly? Massachusetts Department of Elementary and Secondary Education
  53. Not-so-good Practice -- Accounting for Prepaid SFA counting cash and checks received for student prepaid accounts as revenue on P&L Also counting meal sales against prepaid accounts as revenue…so, in essence, double counting Massachusetts Department of Elementary and Secondary Education
  54. Better Practice --Accounting for Prepaid SFA accounts for prepaid deposits as revenue only as it is drawn down as a meal sale at register SFA showing deposits received for prepaid student accounts as a liability (deferred revenue) Reduced prepaid liability as meals are consumed (as revenue) using prepaid accounts Massachusetts Department of Elementary and Secondary Education
  55. Not-so-good Practice -- Recognizing Revenue SFA not considering as revenue meals to students that were not paid up front since they didn’t have money (essentially charging the costs to their bill/account) Massachusetts Department of Elementary and Secondary Education
  56. Not so good Practice- Recognizing Revenue SFA recognizing May and June reimbursement as revenue in the following school year However, SFA not recognizing May and June reimbursements of prior year as revenue in the current school year Short 2 months of reimbursement revenue Massachusetts Department of Elementary and Secondary Education
  57. Better Practice- Recognizing Revenue SFA uses cash basis accounting for P&L and counts June reimbursement as revenue for following year SFA counts last year’s June reimbursement as revenue in current year - so it basically nets out Massachusetts Department of Elementary and Secondary Education
  58. Not-so-good Practice -- Communication Food Service Director is not directly involved in managing the financials – submits monthly claim for reimbursement and forwards bills Business Manager handles all finances/financial reports and does not communicate/review with FSD Food Service Director managing food service in the dark Massachusetts Department of Elementary and Secondary Education
  59. Better Practice -- Communication Business Manager and Food Service Director reconcile non-profit school food service account monthly with the general account Strong team involvement in the budgeting/planning process Good communication - on same page Massachusetts Department of Elementary and Secondary Education
  60. Not-so-good Practice -- Financial Records Profit and Loss Statement was not maintained at either the Food Service Director or Business Manager level Monthly performance as a result was not tracked – how can it be? Trends were not identified and analyzed Massachusetts Department of Elementary and Secondary Education
  61. Not-so-good Practice -- Fund Transfers SFAs operating at a deficit not showing funds transferred into school food service account to offset losses Massachusetts Department of Elementary and Secondary Education
  62. Balance Sheet (Statement of Net Position) Assets Cash balance Receivables due Value of inventories Non-current assets Liabilities Outstanding payables Deferred revenue Sales tax owed (when appropriate) Fund Balance Assets = Liabilities + Fund Balance Massachusetts Department of Elementary and Secondary Education
  63. Sample Balance Sheet Massachusetts Department of Elementary and Secondary Education
  64. Not-so-good Practice (s) – Balance Sheet SFA not maintaining a balance sheet SFA not including prepaid meal sales as a liability (Deferred Revenue) SFA is not including inventory as an asset Massachusetts Department of Elementary and Secondary Education
  65. Not so good Practice – Balance Sheet, etc. School district “borrowed” money from the school lunch account at end of school year and returned it at start of next school year Massachusetts Department of Elementary and Secondary Education
  66. General Ledger A general ledger is a central repository for accounting data (deposits, payments, transfers, credits, etc.) broken out by categories, containing user-defined account codes The general ledger should include the date, description, and balance or total amount for each account Provides additional detail for what is shown in the P&L Massachusetts Department of Elementary and Secondary Education
  67. Sample GL- Revenue Massachusetts Department of Elementary and Secondary Education
  68. Sample GL- Expenditures Massachusetts Department of Elementary and Secondary Education
  69. Not-so-good Practice – General Ledger Food Service Director and Business Manager not reconciling on a monthly basis. FSD does not even see the G/L on a regular basis. Massachusetts Department of Elementary and Secondary Education
  70. Net Cash Resources Per 7CFR, Section 210.9 (b)(2), Net cash resources are limited to an amount that does not exceed 3 months average expenditures. At the end of an operating year (June), the ending cash balance cannot exceed this figure. Massachusetts Department of Elementary and Secondary Education
  71. Net Cash Resources ESE will ensure that school food authorities comply with the requirements to account for all revenues and expenditures of their nonprofit school food service. ESE will ensure compliance with the requirements to limit net cash resources and shall provide for approval of net cash resources in excess of three months' average expenditures. Massachusetts Department of Elementary and Secondary Education
  72. Allowable Costs All expenditures must conform to Federal Cost Principles 2 CFR Part 225 (formerly OMB Circular A-87) which says they must be Necessary Reasonable Allocable Massachusetts Department of Elementary and Secondary Education
  73. Necessary A cost is necessaryif the Child Nutrition Program’s authorizing statute, program regulations or applicable FNS policy establish that the nonprofit school food service cannot be operated without incurring the cost e.g. a school food service cannot be operated without incurring the cost of appropriate food Massachusetts Department of Elementary and Secondary Education
  74. Reasonable A cost is reasonableif, in its nature and amount, it does not exceed a price that is consistent with what a reasonable person would pay under the same or similar circumstances. Massachusetts Department of Elementary and Secondary Education
  75. Criteria to Help Determine Necessary & Reasonable Costs How does the cost contribute to achieving an objective of the school food service? Is the cost recognized as ordinary and reasonable for the operation of the school food service? Would a prudent person find the cost to be reasonable under the circumstances? Massachusetts Department of Elementary and Secondary Education
  76. Allocable A cost must be assigned to the programs, functions, activities or other cost objectives that benefited from the school district having incurred the cost (cost allocation plan needed) For example, school food service cannot be billed a higher share of utility costs just because the school district doesn’t have the funds Such an action would assign the cost to a cost objective that did not benefit from it Massachusetts Department of Elementary and Secondary Education
  77. Allowable or Unallowable? Food Hamburger patties (allowable) Labor School secretary (depends) Food service assistant (allowable) Other Unpaid charges/bad debt (unallowable) School board dinner (depends) A new refrigerator (allowable w/ prior approval) Renovating a kitchen (depends) Massachusetts Department of Elementary and Secondary Education
  78. Not-so-good -- Allowable Costs School department currier was fully charged to school lunch account as a direct cost Only a small portion of currier’s job duties were school food service related Massachusetts Department of Elementary and Secondary Education
  79. Not-so-good -- Allowable Costs School district charged the school lunch account for cafeteria monitors whose job solely was to supervise students Massachusetts Department of Elementary and Secondary Education
  80. Not-so-good -- Allowable Costs School district carries uncollected meal charges as bad debt year-to-year in order to continue collection efforts Massachusetts Department of Elementary and Secondary Education
  81. Not-so-good -- Allowable Costs SFA purchased coffee out of the non-profit school food service account for staff and did not charge for it. Massachusetts Department of Elementary and Secondary Education
  82. Documents we need The year-end balance sheet showing assets and liabilities for previous school year The profit & loss showing revenues and expenditures for previous school year The general ledger report for the previous school year Other documentation showing revenues and expenditures to/from the school food service non-profit revolving account (e.g. daily potential income sheets) Massachusetts Department of Elementary and Secondary Education
  83. What We Will Review/Do Revenues, expenditures, net profit or loss General ledger detail underlying the above Sampling of invoices, payroll detail, etc. Daily potential income sheets supporting revenue Three months average expenditures Discuss Metrics-those being used/could be used Allowable costs B Massachusetts Department of Elementary and Secondary Education
  84. Paid Lunch Equity High level overview- concept and tool Documents we need- what we are asking for What we will review “Better” and “not-so-good” practices we have seen Massachusetts Department of Elementary and Secondary Education
  85. Paid Lunch Equity Intent of PLE: To ensure paid lunch prices are sufficient to cover the costs of paid meals or otherwise provide enough funds to support paid meal costs. Massachusetts Department of Elementary and Secondary Education
  86. Paid Lunch Equity-Reality SFAs must, on average, charge for paid lunches at least the difference between the federal reimbursements for free and paid lunch $2.51 for SY 2012–13 $2.59 for SY 2013-14 $2.65 for SY 2014-15 Massachusetts Department of Elementary and Secondary Education
  87. Paid Lunch Equity (PLE) Analysis Determine weighted average price for all types of paid student lunches Compare weighted average paid lunch price with the difference between free and paid reimbursement rates Determine if a price increaseis necessary Massachusetts Department of Elementary and Secondary Education
  88. Paid Lunch Equity Tool Source: USDA’s Paid Lunch Equity Tool available on USDA’s website: http://www.fns.usda.gov/attachment-sp15-2014-paid-lunch-equity-school-year-2014-2015-calculations-and-tool Massachusetts Department of Elementary and Secondary Education
  89. Paid Lunch Equity Tool If weighted average price is below reimbursement difference, SFA must either: Gradually adjust paid lunch prices upward or Provide non-federal funds to cover the difference Combination of the two to meet difference Massachusetts Department of Elementary and Secondary Education
  90. Paid Lunch Equity Tool Increase weighted average price all the way to reimbursement difference Increase by minimum of 4.27% (for SY14-15) Allowable non federal funds: Amount needed = number of paid lunches multiplied by difference between WAP and required price State match funds for paid lunches ($0.0575 per paid lunch) District or local organization funds contributed for paid lunches Massachusetts Department of Elementary and Secondary Education
  91. Documents we need Your calculations to meet the paid lunch equity requirements. This could be your completed USDA Paid Lunch Equity Tool or alternate documentation The previous school year weighted average price for paid lunches (if USDA Paid Lunch Equity Tool is not utilized) All paid lunch prices for previous October Number of paid lunches served associated with each paid lunch price for previous October Massachusetts Department of Elementary and Secondary Education
  92. What We Will Review/Do Explain Paid Lunch Equity Tool Discuss your methodology for pricing paid meals Compare paid lunch charge to cost per meal Discuss if an increase is necessary Assist you in developing a paid lunch pricing plan Massachusetts Department of Elementary and Secondary Education
  93. Not-so-good practices- PLE SFAs that have: Not done any analysis Didn’t complete the PLE tool Had the same price for 3-4 years Massachusetts Department of Elementary and Secondary Education
  94. Better practices- PLE SFAs used tool, or alternate method, which indicated increase needed, and used it as part of explanation to school committee why price increase necessary Massachusetts Department of Elementary and Secondary Education
  95. Better practice- PLE SFA was forward thinking and looked at future year PLE pricing/anticipated pricing requirements to stay in compliance for future years Massachusetts Department of Elementary and Secondary Education
  96. Revenue From Nonprogram Foods High level overview- concept and tool Documents we need- what we are asking for What we will review “Better” and “not-so-good” practices we have seen Massachusetts Department of Elementary and Secondary Education
  97. Revenue from Nonprogram Foods “Nonprogram foods” - Foods and beverages sold in a participating school that are purchased using funds from the nonprofit school food service account. Includes a la carte items, adult meals, items purchased with nonprofit school food service account funds for vending machines, fundraisers, school stores and catered and vended meals. Massachusetts Department of Elementary and Secondary Education
  98. Revenue From Nonprogram Foods Intent of monitoring: With the exception of reimbursable meals, all food sold in a school and purchased with funds from the nonprofit school food service must generate revenue at least equal to the cost of such foods. Massachusetts Department of Elementary and Secondary Education
  99. Requirements of Nonprogram Foods Revenue Formula: Total Nonprogram Foods Revenue Total Program Revenue > Total Nonprogram Food Costs Total Food Costs Massachusetts Department of Elementary and Secondary Education
  100. Revenue Requirement Calculation- Example Total Food Costs: $ 500,000 Nonprogram Food 50,000 Program Food 450,000 Total Revenue $ 1,000,000 $50,000 Nonprogram Food = 10% minimum $500,000 Total Food 10% x $1,000,000= $100,000 Revenue Required Massachusetts Department of Elementary and Secondary Education
  101. Information to complete USDA Nonprogram Revenue Tool Food costs of reimbursable meals Food costs of nonprogram foods Revenue from nonprogram foods Total revenue of program Massachusetts Department of Elementary and Secondary Education
  102. Nonprogram Food Revenue Tool Source: USDA’s Nonprogram Food Revenue Tool available on USDA’s website: http://www.fns.usda.gov/cnd/governance/Policy-Memos/2011/SP39-2011ar.xls Massachusetts Department of Elementary and Secondary Education
  103. Adult Meal Price Formula Minimum Adult Meal Price = Federal reimbursement for a free student lunch + Per meal value of USDA Foods Massachusetts Department of Elementary and Secondary Education
  104. Documents we need Documentation demonstrating food costs of: reimbursable meals for previous school year nonprogram foods for previous school year Documentation demonstrating revenue from nonprogram foods for previous school year total revenue for previous school year A copy of the your most recent “USDA Nonprogram Food Revenue Tool” or alternative mechanism used during the previous school year. Price charged for adult meals Massachusetts Department of Elementary and Secondary Education
  105. What We Will Review/Do Review the SFAs details on nonprogram foods revenues and costs Review the tool results (if completed) or step you through the process Discuss how the SFA could capture nonprogram food costs separately Review and discuss pricing of nonprogram foods Identify adult meal charges to ensure they cover all costs Massachusetts Department of Elementary and Secondary Education
  106. Not-so-good Practice --Nonprogram Foods Food Service Director charges school district cost of food plus a small, fixed percentage more for catering Massachusetts Department of Elementary and Secondary Education
  107. Not-so-good Practice --Nonprogram Foods SFAs adult meal charge was less than cost per adult meal Another call for using metrics Massachusetts Department of Elementary and Secondary Education
  108. Better Practice -- Nonprogram Foods SFA sells coffee (good quality) to adult staff as a revenue generator to help offset losses Massachusetts Department of Elementary and Secondary Education
  109. Better Practice -- Nonprogram Foods SFA charges for vending the cost of food; labor related to delivery, preparation, and serving; costs related to ordering; in addition to reasonable profit margin Massachusetts Department of Elementary and Secondary Education
  110. Better Practice -- Nonprogram Foods SFA tracks costs for Nonprogram foods separate from reimbursable food costs by capturing exact costs where possible and estimating other food costs Massachusetts Department of Elementary and Secondary Education
  111. Indirect Costs High level overview Documents we need- what we are asking for What we will review Better and not-so-good practices we have seen Massachusetts Department of Elementary and Secondary Education
  112. Indirect Costs Intent of monitoring: Ensure SFAs are correctly determining if their costs are allowable, allocable and appropriately charged as a direct or indirect cost. Massachusetts Department of Elementary and Secondary Education
  113. Indirect Costs Background Direct costs -Incurred specifically for a program or other cost objective; clearly identifiable with a specific program. Indirect Costs - Incurred for the benefit of multiple programs, functions, or other cost objectives; not readily identifiable with a specific program. Cost assignments are unique to the organization Massachusetts Department of Elementary and Secondary Education
  114. Examples of Typical Costs Massachusetts Department of Elementary and Secondary Education
  115. Indirect Cost Allocation Among Federal Programs- Consistency Massachusetts Department of Elementary and Secondary Education
  116. Documents we need A copy of your Indirect Cost Rate Agreement from State or Cost Allocation Agreement Support documentation for indirect costs billed to the school food service account for previous school year List of classification costs (direct, indirect) Massachusetts Department of Elementary and Secondary Education
  117. What We Will Review/Do Determine if SFA had an indirect cost rate agreement with the state Determine indirect costs charged and the process for determining allocation Determine whether federal programs were charged consistently across the SFA Verify indirect costs charged were appropriate Review documentation supporting indirect costs Massachusetts Department of Elementary and Secondary Education
  118. Not-so-good Practices – Indirect Costs SFA charging indirect costs as two custodian salaries-correct amount as it turned out, but can’t be done. SFA was also charging Food Service Operation and not other federal programs similarly Massachusetts Department of Elementary and Secondary Education
  119. Better Practice – Indirect Costs No indirect costs at all being charged to school lunch account Massachusetts Department of Elementary and Secondary Education
  120. Better practice – Indirect Costs SFA developed a cost allocation plan – in this case based upon administrative costs as a percentage of costs overall and applied the same percentage to indirect costs across all areas Massachusetts Department of Elementary and Secondary Education
  121. USDA Foods High level overview- concept and tool Documents we need- what we are asking for What we will review Better and not-so-good practices we have seen Massachusetts Department of Elementary and Secondary Education
  122. USDA Foods Why so important?... Ensure that SFAs have adequate policies and procedures in place to safeguard and fully utilize USDA foods Ensure processor rebates, discounts and credits for the value of USDA foods are accounted for Massachusetts Department of Elementary and Secondary Education
  123. Documents we need Documentation demonstrating the school food service account received the full value of USDA foods for prior school year Documentation demonstrating proper storage and use of USDA Foods Records demonstrating the accounting for the receipt, valuation, storage and use of USDA foods Sample contracts, receipts, invoices and other related records, if applicable Bid documentation detailing the credit price by commodity type weights/case, if applicable Inventory report from processor or cooperative, if applicable Invoice/delivery receipt from the processor/distributor showing the credit the food service account received by commodity type, if applicable Massachusetts Department of Elementary and Secondary Education
  124. What We Will Review/Do Determine whether SFA received full-value of USDA Foods Verify proper storage and use of USDA Foods Verify SFA conducted annual reconciliation with FSMC regarding donated foods value Review a sampling of documents (contracts, receipts, invoices, etc.) Massachusetts Department of Elementary and Secondary Education
  125. Better Practice – USDA Foods SFA using the Summary End Product Data Schedule to understand the invoices regarding processed foods and payments to processors Massachusetts Department of Elementary and Secondary Education
  126. Summary End Product Data Schedule Massachusetts Department of Elementary and Secondary Education
  127. Sample Invoice - Commodity Pass Through – State Warehouse Massachusetts Department of Elementary and Secondary Education
  128. Better practice- USDA Foods SFA utilizes DoD Fresh Program as a means to maximize use of entitlement dollars Massachusetts Department of Elementary and Secondary Education
  129. Not-so-good practice- USDA Foods SFA unaware, at any given time, of their diverted food inventory at processors Massachusetts Department of Elementary and Secondary Education
  130. Not-so-good practice- USDA Foods SFA leaving large amounts of entitlement dollars on the table at the end of fiscal year Massachusetts Department of Elementary and Secondary Education
  131. Questions???? Massachusetts Department of Elementary and Secondary Education
  132. Resources Some Material Adapted From: Reinvention of the Administrative Review: School Meals Administrative Review Reinvention Team 2013 USDA/State Agency Training National Food Service Management Institute (NFSMI) Financial Management: A Course for School Nutrition Directors Indirect Costs: Guidance for State Agencies and School Food Authorities: USDA 2011 http://www.fns.usda.gov/sites/default/files/SP41-2011_os.pdf Additional Sources: National Food Service Management Institute (NFSMI) Financial Management Information System http://www.olemiss.edu/depts/nfsmi/Information/fmis/fmis_booklet.htm Massachusetts Department of Elementary and Secondary Education
  133. Resources 2 CFR Part 225 (formerly OMB Circular A-87) Cost Principles for State, Local, and Indian Tribal Governments http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=/ecfrbrowse/Title02/2cfr225_main_02.tpl 7 CFR Part 3016 Uniform Administrative Requirements http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=/ecfrbrowse/Title07/7cfr3016_main_02.tpl 7 CFR 210.14 Resource Management http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=02dde6ef8db07a90198929f18099722e&rgn=div5&view=text&node=7:4.1.1.1.1&idno=7#7:4.1.1.1.1.3.1.6 7 CFR 220.13.(i) Record Keeping http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=b1239e07dc80865bec89e9e7456cbb74&rgn=div5&view=text&node=7:4.1.1.1.3&idno=7#7:4.1.1.1.3.0.1.13 Massachusetts Department of Elementary and Secondary Education