Presentation on theme: "John Gallagher and Mark Durma USDA-FNS"— Presentation transcript:
1 John Gallagher and Mark Durma USDA-FNS Resource ManagementJohn Gallagher and Mark DurmaUSDA-FNS
2 New Administrative Review for School Meal Programs Healthy Hunger-Free Kids ActConsolidate the Administrative Review ProcessesIncorporate:*School Breakfast*New Nutrition Standards*6-cent performance-based reimbursementImplement a 3-year Review CycleProvide for offsite monitoring approachesEffective TrainingandOngoing T/A School Meal Programs has a new administrative review. Over the past year, the United States Department of Agriculture Food and Nutrition Service has worked with National Office and Regional Office staff, as well as State partners, to develop a new administrative review process.Reinventing the Administrative Review is based, in large part, on the new provisions in the Healthy, Hunger-Free Kids Act of 2010 passed by Congress. The Healthy, Hunger-Free Kids Act that called for a monitoring process that provides a more effective review of complex requirements within the school meal programs, while recognizing the resource constraints facing State government agencies. Central to this is the mandate for USDA to develop a unified monitoring process, which involved combining elements of the found in the previous administrative review with the formerly separate school meal nutrition review.Reinvention goals furthermore included: Incorporating into the new process school breakfast, the new meal pattern and dietary specification requirements and the 6-cent performance-based reimbursement; Ensuring requirements of the school meal programs are implemented properly and efficiently by having State Agencies monitor programs within a 3-year cycle; Developing recommended offsite monitoring approaches to offer flexibility, efficiency, and the broader incorporation of staff with the skills needed to address specific monitoring areas; and Providing effective training of the new monitoring process and ongoing technical assistance to essential headquarter, Regional Office and State agency staff.So- you may be asking yourself- why would this review be relevant to School Business Officials? What does this review of school breakfast and school lunch have to do with the work of school finance?[NEXT SLIDE]
3 New Section: Resource Management 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.As part of the new review process, a new section titled Resource Management has been added.Federal regulations require State Agencies to ensure that school districts, or how USDA refers to them as School Food Authorities, account for all revenues and expenditures of their nonprofit school food service. The Healthy Hunger-Free Kids Act also instituted new fiscal requirements, called Paid Lunch Equity and Revenue from Non-program Foods, that must be monitored. If you are not familiar with these terms- we will go into additional detail on those later in this presentation.Not only is it practical for SFAs to ensure their financial house is in order so that they have the monetary resources necessary to adequately serve all students nutritious meals, it is also required under federal law.
4 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 FoodsResource Management has five areas of review. Those areas are maintenance of a nonprofit school food service, which includes net cash resources and allowable costs; paid lunch equity; revenue from non-program foods; indirect costs; and USDA foods.We will discuss each of these areas in detail throughout the presentation and how each area fits into the review process.
5 Resource Management – Review Process SFA Off-Site AssessmentState Agency Risk AssessmentReview ApproachHere’s a visual representation of the Resource Management Review process that we will now discuss in detail.Technical Assistance & Corrective ActionComprehensive Review
6 Resource Management – Review Process Initial RM Off-site assessmentPart of larger off-site assessment toolIntegration of off-site components into Administrative Review Process4 weeks before on-site reviewResource Management Portion of Off-site Assessment Tool18 yes or no questionsAbout 5 review areas of RM plus 2 additional areasSFA responses should reflect most recently completed Fiscal YearCollaborate with SA to completeNo response results in RM Comprehensive ReviewThe Resource Management review begins with an initial off-site assessment. This assessment is part of a larger off-site assessment tool that the SA will be using to obtain information about various aspects of the SFA’s school nutrition program operations, which includes Resource Management.The Resource Management portion of the Off-site Assessment Tool contains 18 yes or no questions. These 18 questions obtain information about the 5 review areas of Resource Management plus 2 additional areas that are indicators of risk, but do not assess compliance. We will be discussing each of the 18 questions throughout this presentation. Your responses to these questions should reflect the most recently completed Fiscal Year. If you fail to collaborate with the State to complete these questions four weeks before the on-site portion of the administrative review, your SFA will automatically receive a RM Comprehensive Review, which is detailed assessment of the 5 review areas. We will be talking about the specifics of the comprehensive review later in this presentation.
7 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 ToolContains the same questions as RM portion of Off-site Assessment ToolTool Scoring assigns risk with RM requirements for each of the 18 questions# of Risk indicators determines whether Resource Management Comprehensive Review is requiredOnce the SFA has provided answers to each of the 18 questions, the State will uses these responses to complete the Resource Management Risk Indicator Tool.The Resource Management Risk Indicator Tool contains the same questions as the RM portion of the Off-site Assessment Tool. The SA inputs the applicable yes/no response into the tool to assign risk for each of the 18 questions. The number of risk indicators determines whether a Resource Management Comprehensive Review is required.
8 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 indicators0-2 risk indicators: technical assistance and/or corrective action3+ risk indicators: more comprehensive review required5 risk indicators correspond to the 5 areas of RM reviewRemaining 2 correspond to SFA size and past performanceOnce the RM Risk Indicator Tool is completed, the SA will know how many risk indicators the SFA has received. A SFA can receive 0-7 risk indicators. One for each of the 5 areas plus 2 that correspond to SFA size and past financial performance. If a SFA receives 0-2 risk indicators, a Resource Management Comprehensive Review is not required. However, the SA must determine if there is non-compliance in those flagged areas. If there is non-compliance, the SA must provide technical assistance and/or corrective action to bring that area into compliance.If a SFA receives 3 or more risk indicators, a Resource Management Comprehensive Review is required.
9 Resource Management – Review Process Cont’d Resource Management Comprehensive Review3+ risk indicatorsReview 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)During an Resource Management Comprehensive Review, the SA will examine the SFA’s compliance with all five of the Resource Management areas, even if the Risk Indicator Tool did not identify possible risk of noncompliance in all five areas.The State agency may elect to complete any aspect of the Comprehensive Review off-site or on-site, except for the review of allowable costs under the Maintenance of the Nonprofit School Food Service Account. That particular aspect of that monitoring area must be reviewed on-site.What does this mean for SFAs?It means that the SA may ask you send them some financial information and other documentation via , mail, fax or other method prior to the actual date of their on-site visit to your district. We will be discussing what types of documentation you can be expected to provide later in this presentation.
10 Resource Management – Review Process SFA Off-Site AssessmentState Agency Risk AssessmentReview ApproachHere’s a visual representation of the Resource Management Review process that we just discussed.The State agency will work with each school district/SFA scheduled for an administrative review to complete the Off-site Assessment Tool at least 4 weeks before the on-site review. This is the same Off-Site Assessment Tool that’s used in the other modules and it contains 18 yes or no Resource Management questions.Once completed, the State Agency must take the Off-site Assessment Tool information and enter the answers captured in the assessment into the Resource Management Risk Indicator Tool at least 4 weeks prior to the on-site review. The Risk Indicator Tool will determine if the SFA may be at risk of non-compliance with the 5 resource management review areas. Please keep in mind that the Risk Indicator Tool is designed to identify both the SFA’s potential risk of noncompliance with the federal Resource Management requirements AND instances of possible noncompliance with the federal requirements.If the Risk Indicator Tool finds the SFA is at potential risk of noncompliance in up to 2 Resource Management areas, the SA must determine if there is non-compliance in those flagged areas. If there is non-compliance, the SA must provide technical assistance to bring that area into compliance. The SA would issue a finding with corrective action and record activity in the Comments section of the Off-site Assessment Tool.If the Risk Indicator Tool shows that the SFA is at possible risk of non-compliance in three or more Resource Management areas, the State Agency must conduct a Resource Management Comprehensive Review. During an Resource Management Comprehensive Review, the SA will examine the SFA’s compliance with all five of the Resource Management areas, even if the Risk Indicator Tool did not identify possible risk of noncompliance in all five areas.Technical Assistance & Corrective ActionComprehensive Review
11 Resource Management Risk Assessment This is a screen shot of the Resource Management portion of the Off-site assessment tool. This image shows the first two questions of Resource Management. I am showing these questions because – as you may notice – this questions do not apply to the five areas that will be assessed under Resource Management and that were mentioned earlier. These two questions assess SFA size and past financial findings. While there isn’t any information to review for these areas, these questions are used indicate potential for risk and are not compliance questions.SFA Size: Is the SFA’s enrollment 40,000 students or more?Past Performance: Did the SFA have any financial findings related to the child nutrition programs on previous Administrative Reviews, A-133, OIG, or other state audits within the past three years?These two questions are not evaluated further as part of Comprehensive Review, SA may answer these 2 questions on the school districts behalf.Off-Site Assessment Tool
12 Structure of Presentation For Each Resource Management Section: Background InformationMonitoring Area & the Off-Site Assessment ToolResource Management Comprehensive ReviewWhat documentation is required?What will be assessed?In an effort to make this presentation easier to follow along with, I will be covering Resource Management the following way:First, I will be providing you with background information about each section. Then I will discuss how we monitor each area and cover the questions from the off-site assessment tool. Finally, I will address the Resource Management Comprehensive Review as it pertains to each monitoring area. I will identify documentation that you’ll be asked to provide and what the SA will assess using that information.
13 Resource Management: Five Areas of Review 1. Maintenance of the Non-profitSchool Food Service Account2. Paid Lunch Equity3. Revenue from Non-program Foods4. Indirect Costs5. USDA FoodsNow, we are going to talk about the Resource Management Review Area: Maintenance of the Non-profit school food service account. I will first provide background information on this area and then discuss how the administrative review will evaluate this area.
14 Background: Maintenance of the Nonprofit Food Service Account All food service operations conducted by the SFA principally for the benefit of childrenAll revenue from which is used solely for the operation or improvement of such food servicesRestricted account in which all revenue from all food service operations conducted by the SFA for the benefit of childrenRetained and used only for the operation or improvement of such food service.Although we have touched on some of the concepts of school meal finance, I want to provide you with some basic fundamentals that will be helpful as I discuss each of the topic areas more in-depth.Central to all conversations about USDA School Meal Program Finance is the non-profit food service and non-profit food service account.The Nonprofit Food Service must operate only for the benefit of children and the revenue earned by the food service must go solely to the improvement of the food serviceSimilarly, the Nonprofit Food Service Account must be maintained and operated solely for food service operations that benefit children- and the use of funds must solely be maintained for the operation and improvement of food service.##Background
15 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/orImproving Quality and EfficiencyThe nonprofit food service account must be maintained with all regulatory defined restrictions.In addition, all revenue must be used for program operations- this may be used for food, supplies, equipment, and personnel used to operate the meal service program; the as well as administrative expenses to operate the programs. And, the revenue can also be used to improve the quality and efficiency of the program.Background
16 What can revenue NOT be used for? Revenue Use and Program Costs (Cont.)Costs must be:ReasonableNecessaryAllocable.What can revenue NOT be used for?Purchase land or buildingsConstruct buildings (unless approved by FNS)Spend on items not related to the food service program.As is typical with most Federal programs; all costs must be: reasonable, necessary, and allocable- we will go into further discussion on those points in a moment.There are some restrictions to Federal School Meal Programs that do not apply to most Federal programs. School Food Service Revenues can not be used to purchase land or buildings; construct buildings- unless approved by FNS; or on items not related to food service.Background
17 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.For cost allowability great and small, USDA FNS directs all participants to Appendix A of 2 CFR 225.As you can see above- we give the definition of reasonable cost. So, if I were working in the food service and needed to purchase an additional food warmer because my food warmer had recently stopped working- would that be considered reasonable? The answer is it could be considered reasonable. The questions to consider are how much would it cost to repair the food warmer? Or does the cost of repairing the food warmer exceed the cost of repair? A reasonable person would likely make these considerations before purchasing a new food warmer.Then we provide the definition of necessary. Going back to the food warmer question- one may ask themselves if the food warmer is necessary. For example, if the food warmer is only used to keep a single specific item warm, it may not really be necessary to have one. If the food warmer is used on a daily basis, it is more than necessary to have one ready for useFinally, on the screen you will see the question about whether the cost is allocable. NEXT SLIDEBackground
18 “Allocable” ExampleAn 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.So, for example-Background
19 “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
20 Allowable Costs Requirements Conforms with Federal law, regulations, and program termsReasonableLegal under State and local lawConsistently treated as direct or indirectNecessaryNet of applicable creditsAdequately documentedAllocableDetermined in accordance with GAAPAccording to Appendix A of 2 CFR 225 allowable costs are as we just demonstrated:Necessary;Reasonable;Allocable;In addition, allowable costs must be:Legal under State and local law;Conforms with Federal law, regulation, and grant terms;Consistently treated as direct or indirect;Determined in accordance with Generally Accepted Accounting Principles (GAAP)Not included as a cost or matching contribution of any other grant;Net of applicable credits; and,Adequately documented.Background
21 Allowable vs. Unallowable Costs Salaries & wagesTravelTraining and staff developmentMeetings and conferencesPrinting and publicationsFood service or business suppliesAllowable costs with prior SA approvalCapital expenditures (equipment purchases, etc.)Unallowable costsAlcoholic beveragesEntertainmentCosts of general government lobbyingContribution to contingency fundsBad debtsCosts to cover expenses for Universal Free meals beyond those provided by reimbursement2 CFR Part 225 classifies costs in three categories: allowable, allowable with prior SA approval, or unallowableexamples of Allowable costs include:Salaries & wagesTravelTraining and staff developmentMeetings and conferencesPrinting and publicationsFood service or business suppliesAllowable costs with prior SA approvalCapital expenditures (equipment purchases, etc.)Unallowable costs include the following:Alcoholic beveragesEntertainmentCosts of general government lobbyingContribution to contingency fundsBad debtsBackground
22 More Rules: Net Cash Resources SFAs must limit their Nonprofit Food Service Account:Net cash resources MUST NOT exceed 3 months’ average expenditures3 months’ average expenditures = expenditures related to food service during an average 3 month period“Net Cash Resources” are:Amount of cashAccounts receivableAccounts payable present in the food service account at a given timeNow that we have discussed allowable costs- let’s talk a little more about some of the other fundamentals of the non-profit food service account. One of the important rules of thumb involves the account’s net cash resources.Net cash resources are equal to the amount of cash in the account, plus the accounts receivable, minus the accounts payable present in the food service account at a given time.For the non-profit food service account, the amount cannot exceed 3 months operating expenses3 months’ average expenditures is the amount of expenditures related to food service during an average 3 month periodBackground
23 Net Cash ResourcesWhat if my account exceeds the net cast requirement?Develop a spending plan and have it approved by the State agencyDescribe 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.So, what if your account does exceed the net cast resource requirements?The school district must develop a spending plan and submit it to the State agency for approval. The SFA will have to describe how it intends to use the additional funds and how the use of the funds will be used to improve the quality of the food serviceThe plan could include replacing old and damaged equipment, adding NECESSARY equipment, purchasing higher quality food, or upgrading the point of sale system- or as we call it- the POS.Background
24 SFA Compliance with Regulations - 7 CFR 210.14(a) Resource Management Area: Maintenance of the Non-Profit Food Service AccountSFA Compliance with Regulations - 7 CFR (a)Intent: Federal funds must be used only for the operation and improvement of the school food serviceIntent: Maximize program benefits to enrolled studentsNow, I will provide you with an overview of how the Non-Profit School Food Service Account be reviewed during an administrative review.One of the major responsibilities that accompany the decision to participate in the school meal programs is the management of the nonprofit school food service account. As we have previously indicated, maintenance of the nonprofit school food service is a regulatory requirement under 7 CFR (a). The purposes of the review, we are looking to ensure that Federal funds are used only for the operation and improvement of school food service. Removing for-profit motives from program operations maximizes program benefits and helps School Food Authorities to use limited funding resources for the improvement of school meals.Monitoring Area
25 Maintenance of the Nonprofit School Food Service Account Off-Site Assessment Tool Questions – 5 questions5 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?I will briefly walk you through the off-site assessment tool questions-please look at the slide above as I discuss each question…Off-Site Assessment Tool
26 Off-Site Assessment Tool Resource Management – Maintenance of the Nonprofit School Food Service AccountRESULTS:Regardless of Risk indicators triggered in any one RM review area, only one indicator is countedIf multiple risk indicators are triggered- only one counts in each of the Resource Management Review Areas. So, for example, if all five of your responses to the maintenance of nonprofit school food service questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator Tool.Off-Site Assessment Tool
27 Maintenance of the Nonprofit School Food Service Account Three Components -- Comprehensive Review1. Nonprofit School Food Service AccountReview the SFA’s documentation to verify the nonprofit status.2. Net Cash ResourcesDetermine if the SFA is in compliance with the 3 month operating expenses limit; if not, was prior SA approval obtained?3. Allowable costsDetermine if program funds were used on expenses that were reasonable, necessary, and otherwise allowable.If the Resource Management Risk Indicator Tool identifies that a SFA needs a comprehensive resource management review, the State Agency will examine the health of the SFA’s nonprofit school food service account by looking at three specific areas:1) The SA will determine the SFA’s nonprofit status by examining the SFA’s “Operating Statement” or “Statement of Activities” and by deducting expenses from total nonprofit foodservice revenue. The SA must verify that any excess revenues over expenses is retained and used only in the nonprofit food service program. The SA can also work with SFAs on corrective action plans to reduce or eliminate excessive balances.2) The SA will calculate the SFA’s net cash resources and ensure the SFA is in compliance with the SA’s criteria for approval of net cash resources in excess of 3 months average expenditures;3) The SA will test actual SFA expenses for compliance with allowable cost requirements and identify and correct any unallowable costs. The SA must also ensure that costs are adequately documented and treated consistently and that adequate support documents are maintained by the SFA.Remember :Comprehensive Review only necessary when 3+ risk indicatorsComprehensive Review
28 Maintenance of the Nonprofit School Food Service Account Documentation NeededAssessment Will Be OnMost Recent Fiscal Year’s:“Operating Statement”“Statement of Activities”; or“Balance Sheet”SA will identify:Any revenue shortfalls or excessesIf excess, SA ensures SFA retained themComprehensive Review
29 Maintenance of the Nonprofit School Food Service Account: Net Cash Resources Documentation NeededAssessment Will Be OnMost 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 CFRComprehensive Review
30 Maintenance of the Nonprofit School Food Service Account: Allowable Costs Documentation NeededAssessment Will Be OnMost 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 YearThe sample will include costs from food, labor and other expensesSA will identify:If SFA’s sample of costs are allowableEnsure that SFA keeps adequate documentationIf the SFA allocates expenses consistently among local and Federal programsComprehensive Review
32 Resource Management: Five Areas of Review 1. Maintenance of the Nonprofit School FoodService Account2. Paid Lunch Equity3. Revenue from Non-program Foods4. Indirect Costs5. USDA FoodsNow, we are going to talk about the Resource Management Review Area: Paid Lunch Equity and how this area will be reviewed.
33 Paid Lunch EquityPricing sponsors must price paid lunches at a rate at least equivalent to the revenue received for free lunches ($2.59 in SY )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
34 Unallowable Non-federal Sources Paid Lunch EquityAllowable Non-federal SourcesUnallowable Non-federal SourcesAny 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 mealsPer-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 onlyFinancial support from non-federal sources must be cash for direct support for paid lunchesAllowable Non-federal sourcesPer-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 onlyUnallowable Non-federal sourcesany payments, including additional per-meal reimbursements, provided to the SFA forsupport 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 mealsBackground
35 Paid Lunch EquityIncluded 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.The second monitoring area of Resource Management is Paid Lunch Equity.Prior to the passage of Section 205 of the Healthy, Hunger Free Kids Act of 2010, there were no statutory or regulatory requirements for SFAs in establishing prices for paid reimbursable lunches or the amount of revenue that had to be generated by paid lunches. USDA’s research showed that the revenue received by schools for paid meals is often too low to cover the cost of those meals, effectively shifting federal subsidies designed for the lowest income children to less needy students.During a review of the Paid Lunch Equity, the State would determine if the SFA accurately calculated its need to raise its paid lunch prices, and if so, if it raised its prices as required.Monitoring Area
36 Off-Site Assessment Tool Paid Lunch EquityOff-Site Assessment Tool Questions – 4 questionsResultsDid 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 behalfRegardless 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 ToolTrue for all RM review areasI will briefly walk you through the off-site assessment tool questions-please look at the slide above as I discuss each question…This section doesn’t apply non-pricing programs and RCCIs without day studentsNote: This section doesn’t apply to non-pricing programs and RCCIs without day students.Off-Site Assessment Tool
37 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 DocumentationPrevious School Year (SY) Weighted Average PriceAll Paid Lunch Prices for October of the Previous SYNumber of paid lunches served at each paid lunch price in October of the previous SYComprehensive Review
38 Paid Lunch Equity Correct Determination of Need to Raise Prices What will theState agency assess?Correct Determination of Need to Raise PricesPrice Increase Occurred, as applicableNon-federal sources were:Used in Whole or in PartAllowableAppropriately added to the non- profit food service accountWhat will SA assess?Whether the SFA has correctly determined its need to raise its paid lunch prices;That the paid lunch price increase occurred as required, if applicableIf the SFA used non-federal sources in whole or in part to meet PLE compliance, if the non-federal funds were allowable and if so, the funds were in fact added to the nonprofit school food service account.Comprehensive Review
39 Resource Management: Five Areas of Review 1. Maintenance of the Nonprofit School FoodService Account2. Paid Lunch Equity3. Revenue from Non-program Foods4. Indirect Costs5. USDA FoodsNow, we are going to talk about the Resource Management Review Area: Revenue from Non-Program Food and how this area will be reviewed.
40 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
41 Nonprogram Revenue Proportion of Total Revenue from Effective on July 1, 2011Proportion of Total Revenue fromNonprogram Foods Salesis greater than or equal to theProportion of Total Food Costs of Nonprogram Foods to Total Food Costs of All FoodThis regulatory policy, effective July 1, 2011, requires SFAs to ensure that the proportion of total revenue from the sale of nonprogram foods to total revenue accruing to the school food service account shall be equal to or greater than the proportion of total food costs of nonprogram foods to total food costs of all foods. Therefore, revenues from the sale of nonprogram foods must generate at least the same proportion of SFA revenues as they contribute to SFA food costs.Background
42 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 CostTotal Program Revenue Total Purchased Food CostBackground
43 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 = $73,138Total Non Program Food Cost = $2,876 equals 8%Total Food Cost = $37,163Min portion of revenue from nonprogram funds = 8%Min Revenue Required from the Sale of Nonprogram Foods =$5,660Additional Revenue Needed to Comply = $1,241 Background
44 Revenue from Nonprogram Foods Off-Site Assessment Tool Questions – 2 questionsResultsDoes 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 accountRegardless 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 ToolTrue for all RM review areasI will briefly walk you through the off-site assessment tool questions-please look at the slide above as I discuss each question…Section may be not applicable if the SFA does not sell nonprogram foods or beverages, including adult mealsNote: Section may be not applicable if the SFA does not sell nonprogram foods or beverages, including adult mealsOff-Site Assessment Tool
45 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 foodsTotal revenueUSDA NonProgram Food Revenue Tool or Alternative MechanismAdult Meal PricesComprehensive Review
46 Revenue from Nonprogram Foods What will theState agency assess?Nonprogram Foods and Nonprogram Foods Cost CalculationsProcess for ComplianceRevenue accrues in the Nonprofit Food Service AccountAdult meals priced at least equal to costWhat will SA assess?Whether revenue from nonprogram foods and nonprogram foods costs are correctly calculatedIf the SFA has a sufficient process in place to accurately and thoroughly assess its compliance with the revenue from nonprogram foods requirementsWhether revenue from nonprogram foods accrues to the nonprofit school food service accountIf adult meals are priced at least equal to the cost of producing themComprehensive Review
47 Resource Management: Five Areas of Review 1. Maintenance of the Nonprofit School FoodService Account2. Paid Lunch Equity3. Revenue from Non-program Foods4. Indirect Costs5. USDA FoodsNow, we are going to talk about the Resource Management Review Area: Indirect Costs. I will first provide background information on this area and then discuss how the administrative review will evaluate indirect costs.
48 Background Information: Program Costs Direct CostsIndirect CostsDirect 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.Program costs may include both “direct” and “indirect” costs.Direct costs are those costs directly attributable to the program. So, for example, paying the salary of the food service director is a direct cost to the program.Indirect costs may benefit multiple programs and areas. So, for example, the custodial service in a facility, or in most of our cases- schools, benefit all programs. Only an amount attributable to the food service program can be funded by program funds.Background
49 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.Here are some more examples of direct program costs:wages/salaries, supplies, equipment used in food service.Here are some examples of indirect program costs:employee benefits, human resources, payroll services, accounting/finance, facilities management, utilities, water, refuse collection.Background
50 Program Costs (Cont.) The same cost or expense may not: Be identified under both direct and indirect costsBe treated inconsistently throughout the organization (either as direct or indirect).Background
51 Indirect CostsSFAs may charge a certain amount of costs identified as indirect to the food service account, but may not calculate or estimate this amount on their own.Must request an “indirect cost rate” from their Federal “cognizant” agency.The cognizant agency is the Federal agency that provides the most funds to the organization.Background
52 Indirect Costs (Cont.) Indirect Cost Rate Proposal (ICRP) Indirect Cost Rate Agreement (ICRA)Indirect Cost Rate is the ratio of indirect costs to direct costs organization wideThe indirect cost rate is applied to the “direct cost base” of a specific unit/program to calculate the amount of indirect costs to charge to the program.Indirect cost poolIndirect cost rateDirect cost baseIn order to establish an indirect cost rate, an organization (or in our case, school districts) will submit an Indirect Cost Rate Proposal (ICRP) to the cognizant agency (usually department of education), which results in an Indirect Cost Rate Agreement (ICRA).Essentially, the indirect cost rate is the ratio of indirect costs to direct costs organization-wide.The indirect cost rate is applied to the “direct cost base” of a specific unit/program to calculate the amount of indirect costs to charge to the program.Background
53 Indirect Costs (Cont.)This methodology and calculation of the indirect cost rate and direct cost base is determined by the Federal cognizant agency only, through the ICRAIf you’d like more information about Indirect Cost, please see Memo SP on the FNS website under Program Policy. This particluar memo provides a Guidance manual on Indirect Cost for School Food Authorities.Background
54 Indirect CostsIntent: To safeguard the financial integrity of the SFA’s nonprofit school food service account by ensuring that the SFA’s costs are appropriately charged as direct or indirect costs.Examining a SFA’s indirect costs as part the Resource Management review helps safeguard the financial integrity of a SFA’s nonprofit school food service account.In general, the full cost of a program, function or activity includes both direct and indirect costs. The determining factor in distinguishing a cost as direct or indirect is the extent to which it can be identified with a specific program, function, or activity that benefits from the organization (i.e., SFA) having incurred the cost rather than the nature of the goods and services themselves.Direct costs are incurred specifically for a program or other cost objective and can be clearly identified to a particular objective such as school food service. Some examples include wages and salaries of food service workers, food service supplies and food service equipment purchases.Indirect costs are necessary for the general operation of the SFA. Indirect costs are those costs of doing business that are incurred for a common or joint purpose benefiting more than one cost objective, and not readily assignable to particular cost objectives. Due to their generic nature individual indirect costs are not assignable to the School Meal Program’s specific functions or activities. Some examples include payroll services, electricity, water, and gas since the entire SFA uses these resources.Monitoring Area
55 Off-Site Assessment Tool Questions Off-Site Assessment Tool Indirect CostsOff-Site Assessment Tool QuestionsResultsWere indirect costs charged to the SFA’s nonprofit school food service account?Were indirect costs charged to the SFA’s nonprofit school food service account at the SA- approved rate?Regardless of how many risk indicators are triggered in any one RM review area, only one indicator is counted.For example, if both of your responses to the Indirect Cost questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator ToolTrue for all RM review areasSection would not be applicable if the SFA is not charging indirect costs to the school food service accountNote: Section would NOT be applicable if SFA is not charging indirect costs to the food service accountOff-Site Assessment Tool
56 Approved Indirect Cost Rate Agreement Financial statements What documentation will you be asked to provide?Approved Indirect Cost Rate AgreementFinancial statementsChart of accountsAccounting recordsComprehensive Review
57 Indirect Cost Use of the Correct Rate Accounting Consistency What will theState agency assess?Use of the Correct RateAccounting ConsistencyPrior Year’s Retroactive BillingProper Classification of Indirect and Direct CostsSupport Documents for Indirect Cost BillingWhat will SA assess?Use Correct Rate: Ensure the indirect cost charged to the nonprofit school food service account is consistent with the approved indirect cost rate to the direct cost base found in the approved indirect cost rate agreement.Accounting Consistency: Handling of indirect costs must be consistent in all activities of the SFA unless otherwise exempted.Prior Year’s Retroactive Billing: Confirm that the nonprofit school food service account was not charged for indirect costs that were previously paid from the general fund.Proper Classification of Costs (Direct/Indirect): Costs must be consistently treated as direct or indirect. Confirm that school food service accounts are not charged directly for expenditures that are included in the indirect cost pool (double dipping).Support Documents for Indirect Cost Billing: Verify the documentation that supports actual indirect costs charged to the school food service account. Check for mathematical errors and confirm that indirect costs were calculated based on the correct rate and the correct baseComprehensive Review
58 Resource Management: Five Areas of Review 1. Maintenance of the Nonprofit School FoodService Account2. Paid Lunch Equity3. Revenue from Non-program Foods4. Indirect Costs5. USDA FoodsNow, we are going to talk about the Resource Management Review Area: USDA Foods. I will first provide background information on this area and then discuss how the administrative review will evaluate USDA Foods.
60 USDA Foods 4 Methods for Obtaining Full Value (Cont.) (2) Fee for Service – The processor charges the sponsor a fee (for processing only) per pound or case to convert USDA Foods into end product. (3) Direct Discount – Processor sells finished end product directly to sponsor at a discount. Discount is based on the value of USDA Foods in end product.Background
61 USDA Foods 4 Methods for Obtaining Full Value (Cont.) (4) Net Off Invoice – Processor delivers end product to a distributor who then sells the product to the sponsor at a discount. Discount based on the value of USDA Foods in product.Background
62 USDA FoodsUSDA Foods requirements: Included under Section 14 of the NSLA, 7 CFR (d), 7 CFR 250, FD instructions/policy memoranda.Intent: Ensure that SFAs have adequate policies and procedures in place to safeguard and fully utilize USDA foods.The fifth and final area of review under Resource Management is USDA Foods. USDA foods, also called “donated foods,” are foods donated, or available for donation, by the USDA under 7 CFR Part The goal of monitoring USDA foods is to ensure SFAs have sufficient methods in place to safeguard and fully utilize USDA foods in the production of school meals. We also want to identify practices that may increase the likelihood that a SFA will be out of compliance with USDA food requirements and to identify opportunities to provide technical assistance to these SFA’s.Monitoring Area
63 Off-Site Assessment Tool Questions Off-Site Assessment Tool USDA FoodsOff-Site Assessment Tool QuestionsResultsDoes the SFA receive its USDA Foods from a purchasing agency, cooperative, or distributor? (YES/NO)Does the SFA or SFA’s purchasing agent or cooperative divert USDA foods for processing? (YES/NO)Does the SFA contract with a vendor or a Food Service Management Company for food service? (YES/NO)Regardless of how many risk indicators are triggered in any one RM review area, only one indicator is counted.For example, if both of your responses to the USDA Food questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator ToolTrue for all RM review areasOff-Site Assessment Tool
64 USDA Foods What documentation will you be asked to provide? 10 – 50% of the following records as applicableContracts with entities other than the State distributing agencies (i.e. FSMC, processor, cooperatives)The bid document detailing the credit price by commodity type weight/caseInventory report from processor or cooperativeInvoice/delivery receipt from the processor/distributor showing the credit the SFA received by commodity typeComprehensive Review
65 USDA Foods Full Value of USDA Foods What will theState agency assess?Full Value of USDA FoodsUse of USDA FoodsReconciliation to Ensure Purchasing Agent or FSMC has credited the SFASFA receives rebates, discounts, and credits off invoicesWhat will SA assess?If the SFA is receiving the full value of USDA FoodsWhether the SFA is using USDA Foods in its school food serviceIf SFA conducts an annual reconciliation to ensure that a purchasing agent or FSMC has credited the SFA for the value of all USDA foods receivedWhether the SFA is receiving the rebates, discounts, credits or net off invoice to which it is entitledComprehensive Review
66 Resource Management - RECAP Off-site Assessment ToolQuestions on 5 RM areas plus 2 non-review areasSA determines risk of noncompliance with RM requirements0-2 risk indicatorsTechnical Assistance & Corrective Action only3+ risk indicatorsComprehensive ReviewRM Comprehensive ReviewDetailed look at all 5 RM areasSFA will have to provide documentation to SA