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Resource Management John Gallagher and Mark Durma USDA-FNS.

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Presentation on theme: "Resource Management John Gallagher and Mark Durma USDA-FNS."— Presentation transcript:

1 Resource Management John Gallagher and Mark Durma USDA-FNS

2 New Administrative Review for School Meal Programs 2 Consolidate the Administrative Review Processes Incorporate: *School Breakfast *New Nutrition Standards *6-cent performance-based reimbursement Implement a 3-year Review Cycle Provide for offsite monitoring approaches Effective Training and Ongoing T/A Effective Training and Ongoing T/A

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. 3

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 Foods

5 Resource Management – Review Process 5 SFA Off-Site Assessment State Agency Risk Assessment Review Approach Technical Assistance & Corrective Action Comprehensive Review

6 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

7 Resource Management – Review Process Contd 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

8 Resource Management – Review Process Contd 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

9 Resource Management – Review Process Contd 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)

10 Resource Management – Review Process 10 SFA Off-Site Assessment State Agency Risk Assessment Review Approach Technical Assistance & Corrective Action Comprehensive Review

11 Resource Management Risk Assessment Off-Site Assessment Tool

12 Structure of Presentation For 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?

13 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

14 Background: Maintenance of the Nonprofit Food Service Account Nonprofit Food ServiceNonprofit 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

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/or Improving Quality and Efficiency Background

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

18 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

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 terms Reasonable Legal under State and local law Consistently treated as direct or indirect Necessary Net of applicable credits Adequately documented Allocable Determined in accordance with GAAP Background

21 Allowable vs. Unallowable Costs Allowable costs Salaries & wages Travel Training and staff development Meetings and conferences Printing and publications Food service or business supplies Allowable costs with prior SA approval Capital expenditures (equipment purchases, etc.) Unallowable costs Alcoholic beverages Entertainment Costs of general government lobbying Contribution to contingency funds Bad debts Costs to cover expenses for Universal Free meals beyond those provided by reimbursement Background

22 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

23 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

24 Resource Management Area: Maintenance of the Non-Profit Food Service Account 24 SFA Compliance with Regulations - 7 CFR (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 Monitoring Area

25 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

26 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

27 Maintenance of the Nonprofit School Food Service Account 27 Three Components -- Comprehensive Review 1. Nonprofit School Food Service Account Review the SFAs 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. Comprehensive Review

28 Maintenance of the Nonprofit School Food Service Account Documentation NeededAssessment Will Be On Most Recent Fiscal Years: 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

29 Maintenance of the Nonprofit School Food Service Account: Net Cash Resources Documentation NeededAssessment Will Be On Most Recent Fiscal Years: 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 Comprehensive Review

30 Maintenance of the Nonprofit School Food Service Account: Allowable Costs Documentation NeededAssessment Will Be On Most Recent Fiscal Years: 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 SFAs sample of costs are allowable Ensure that SFA keeps adequate documentation If the SFA allocates expenses consistently among local and Federal programs Comprehensive Review

31 NJ Handouts & Examples

32 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

33 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 ) 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 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 & thats provided for paid meals* *For SY 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

35 Paid Lunch Equity 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. 35 Monitoring Area

36 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 Off-Site Assessment Tool Note: This section doesnt apply to non-pricing programs and RCCIs without day students.

37 Paid Lunch Equity What documentation will you be asked to provide? SFAs 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

38 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

39 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

40 Nonprogram Revenue Nonprogram revenueNonprogram 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 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

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 Cost Total Program Revenue Total Purchased Food Cost Background

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 = $73,138 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

44 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 SFAs 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 Off-Site Assessment Tool Note: Section may be not applicable if the SFA does not sell nonprogram foods or beverages, including adult meals

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 foods Total revenue USDA NonProgram Food Revenue Tool or Alternative Mechanism Adult Meal Prices Comprehensive Review

46 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

47 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

48 Background Information: Program Costs Direct CostsIndirect 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

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. Background

50 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

51 Indirect Costs SFAs 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 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. Indirect cost pool Indirect cost rate Direct cost base 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 ICRA Background

54 Indirect Costs 54 Intent: To safeguard the financial integrity of the SFAs nonprofit school food service account by ensuring that the SFAs costs are appropriately charged as direct or indirect costs. Monitoring Area

55 Indirect Costs Off-Site Assessment Tool Questions Results Were indirect costs charged to the SFAs nonprofit school food service account? Were indirect costs charged to the SFAs 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 Tool True for all RM review areas Off-Site Assessment Tool Note: Section would NOT be applicable if SFA is not charging indirect costs to the food service account

56 Indirect Cost What documentation will you be asked to provide? Approved Indirect Cost Rate Agreement Financial statements Chart of accounts Accounting records Comprehensive Review

57 Indirect Cost What will the State agency assess? Use of the Correct Rate Accounting Consistency Prior Years Retroactive Billing Proper Classification of Indirect and Direct Costs Support Documents for Indirect Cost Billing Comprehensive Review

58 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

59 USDA Foods 4 methods for obtaining full value: (1) Rebate system: USDA Foods Processor Distributor Sponsor $ - Sponsor Distributor Rebate application – Sponsor Distributor $ - Distributor Sponsor Background

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 Foods USDA 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. 62 Monitoring Area

63 USDA Foods Off-Site Assessment Tool Questions Results Does the SFA receive its USDA Foods from a purchasing agency, cooperative, or distributor? (YES/NO) Does the SFA or SFAs 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 Tool True for all RM review areas Off-Site Assessment Tool

64 USDA Foods What documentation will you be asked to provide? 10 – 50% of the following records as applicable Contracts with entities other than the State distributing agencies (i.e. FSMC, processor, cooperatives) The bid document detailing the credit price by commodity type weight/case Inventory report from processor or cooperative Invoice/delivery receipt from the processor/distributor showing the credit the SFA received by commodity type Comprehensive Review

65 USDA Foods What will the State agency assess? Full Value of USDA Foods Use of USDA Foods Reconciliation to Ensure Purchasing Agent or FSMC has credited the SFA SFA receives rebates, discounts, and credits off invoices Comprehensive Review

66 Resource Management - RECAP Off-site Assessment Tool Questions on 5 RM areas plus 2 non-review areas SA determines risk of noncompliance with RM requirements 0-2 risk indicators Technical Assistance & Corrective Action only 3+ risk indicators Comprehensive Review RM Comprehensive Review Detailed look at all 5 RM areas SFA will have to provide documentation to SA

67 QUESTIONS?


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