resource management john gallagher and mark durma usda-fns
TRANSCRIPT
Resource ManagementJohn Gallagher and Mark DurmaUSDA-FNS
New Administrative Review for School Meal Programs
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Effective Training
and Ongoing
T/A
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.
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Resource Management: Five Areas of Review
1. Maintenance of the Nonprofit School Food Service Account
2. Paid Lunch Equity
3. Revenue from Non-program Foods
4. Indirect Costs
5. USDA Foods
Resource Management – Review Process
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Technical Assistance & Corrective
Action
Comprehensive Review
Resource Management – Review Process
• Initial RM Off-site assessment▫ Part of larger off-site assessment tool
Integration of off-site components into Administrative Review Process
4 weeks before on-site review
• Resource Management Portion of Off-site Assessment Tool
▫ 18 yes or no questions▫ About 5 review areas of RM plus 2 additional
areas▫ SFA responses should reflect most recently
completed Fiscal Year▫ Collaborate with SA to complete▫ No response results in RM Comprehensive
Review
Resource Management – Review Process Cont’d• Once RM portion of Off-site Assessment
Tool is complete, SA uses the yes/no responses to complete the Resource Management Risk Indicator Tool.
• Resource Management Risk Indicator Tool▫ Contains the same questions as RM portion
of Off-site Assessment Tool▫ Tool Scoring assigns risk with RM
requirements for each of the 18 questions▫ # of Risk indicators determines whether
Resource Management Comprehensive Review is required
Resource Management – Review Process Cont’d•The Resource Management Risk Indicator
Tool assesses risk via “risk indicators”▫SFAs may receive a total of 0-7 risk
indicators 0-2 risk indicators: technical assistance and/or
corrective action 3+ risk indicators: more comprehensive
review required
•5 risk indicators correspond to the 5 areas of RM review
•Remaining 2 correspond to SFA size and past performance
Resource Management – Review Process Cont’d•Resource Management Comprehensive
Review▫3+ risk indicators
•Review all five areas of Resource Management: Maintenance of the Nonprofit School Food Service Account, Indirect Costs, PLE, Revenue from Nonprogram Foods, and USDA Foods (Regardless of Risk)
•Off-site or On-site Review (Except Allowable Cost)
Resource Management – Review Process
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Technical Assistance & Corrective
Action
Comprehensive Review
Resource Management Risk Assessment
Off-Site Assessment Tool
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?
Resource Management: Five Areas of Review
1. Maintenance of the Non-profit School Food Service Account
2. Paid Lunch Equity
3. Revenue from Non-program Foods
4. Indirect Costs
5. USDA Foods
Background: Maintenance of the Nonprofit Food Service Account
Nonprofit Food Service Nonprofit Food Service Account
• All food service operations conducted by the SFA principally for the benefit of children
• All revenue from which is used solely for the operation or improvement of such food services
• Restricted account in which all revenue from all food service operations conducted by the SFA for the benefit of children
• Retained and used only for the operation or improvement of such food service.
Background
Revenue Use and Program Costs•SFAs must observe the restrictions on the
use of nonprofit food service account revenues.
•All revenue must be used for operating the food service program:▫To include food and food service staff costs;▫Administrative costs of the programs;
and/or▫Improving Quality and Efficiency
Background
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
Revenue Use and Program Costs (Cont.)
• Appendix A of 2 CFR 225
• “Reasonable:” a cost that would be incurred by a reasonable person in the same circumstance.
• “Necessary:” a cost needed to effectively and/or efficiently operate the meal program.
• “Allocable:” only the cost or portion of cost that benefited the food service program is charged to the food service account.
Background
“Allocable” Example
•An administrative assistance spends part of his/her time on reviewing f/rp applications, preparing roster list, consolidating meal counts and submitting claim, and part of time on activities unrelated to food service program.
•To charge salary as a cost to the school food service account, must keep time sheet record of time spent on food service related activities.
Background
“Allocable” Example (Cont.)
•Time sheet shows admin assistant spends 40% of time on food service related activities over a certain period (month/year).
•40% of salary is charged to the food service account.
Background
Allowable Costs Requirements
Background
Allowable vs. Unallowable Costs
Background
More Rules: Net Cash Resources
• SFAs must limit their Nonprofit Food Service Account:
▫ Net cash resources MUST NOT exceed 3 months’ average expenditures
▫ 3 months’ average expenditures = expenditures related to food service during an average 3 month period
“Net Cash Resources” are:
Amount of cash
Accounts receivable
Accounts payable present in the food service account at a given
time
Background
Net Cash Resources • What if my account
exceeds the net cast requirement?
▫ Develop a spending plan and have it approved by the State agency
▫ Describe how the excess funds will be used to enhance the quality of the food service program.
▫ May include replacing equipment, adding equipment, purchasing higher quality foods, and upgrading the POS system.
Background
Resource Management Area:Maintenance of the Non-Profit Food Service Account
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SFA Compliance with Regulations - 7 CFR 210.14(a)
Intent: Federal funds must be used only for the operation and improvement of the school food service
Intent: Maximize program benefits to enrolled students
Monitoring Area
Maintenance of the Nonprofit School Food Service Account
Off-Site Assessment Tool Questions – 5 questions
5 questions (cont.)
• Did the SFA conduct a year-end review of total revenues and expenses to determine the school food service nonprofit status?
• Did the SFA identify year-end expenses in excess of revenues?
• If the SFA had excess revenues at the end of the year, were the surplus funds transferred out of the school food service account to support other operations and/or to achieve a zero balance?
• Did the SFA, in the most recent fiscal year, complete a process to measure its compliance with the requirement to limit net cash resources to a level at or below three months’ average expenditures?
• Did the SFA maintain support records to document its compliance with the three months’ net cash resource limit?
Off-Site Assessment Tool
Resource Management – Maintenance of the Nonprofit School Food Service Account
RESULTS:
•Regardless of Risk indicators triggered in any one RM review area, only one indicator is counted
Off-Site Assessment Tool
Maintenance of the Nonprofit School Food Service Account
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Three Components -- Comprehensive Review
1. 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.
Comprehensive Review
Maintenance of the Nonprofit School Food Service Account
Documentation Needed Assessment Will Be On
▫Most Recent Fiscal Year’s:
“Operating Statement”
“Statement of Activities”; or
“Balance Sheet”
▫SA will identify: Any revenue
shortfalls or excesses
If excess, SA ensures SFA retained them
Comprehensive Review
Maintenance of the Nonprofit School Food Service Account: Net Cash Resources
Documentation Needed Assessment Will Be On
▫Most Recent Fiscal Year’s:
“Operating Statement”
“Statement of Activities”; or
“Balance Sheet”
▫SA will identify: Whether the SFA
is limiting net cash resources to an amount that does not exceed 3 months’ average expenditures, as required under 7 CFR 210.14.
Comprehensive Review
Maintenance of the Nonprofit School Food Service Account: Allowable Costs
Documentation Needed Assessment Will Be On
▫Most Recent Fiscal Year’s:
“Operating Statement” “Statement of Activities”; or “Balance Sheet”
▫Source documentation for:
At least 10% of total expenditures for most recently closed Fiscal Year
The sample will include costs from food, labor and other expenses
▫SA will identify:
If SFA’s sample of costs are allowable
Ensure that SFA keeps adequate documentation
If the SFA allocates expenses consistently among local and Federal programs
Comprehensive Review
NJ Handouts & Examples
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
Paid Lunch Equity•Pricing sponsors must price paid lunches
at a rate at least equivalent to the revenue received for free lunches ($2.59 in SY 2013-2014.)
• If the price charged is less, sponsors must increase their price gradually (not more than 10¢) each year until minimum is met.
•Alternatively, non-Federal funds provided to support paid meals may be used to offset price increase. Background
Paid Lunch Equity
Allowable Non-federal Sources Unallowable Non-federal Sources
▫ Per-meal reimbursements for paid breakfast and lunches from states, counties, school districts and others*;
▫ Funds provided by organizations;
▫ Any portion of State revenue matching funds that exceed the minimum requirement & that’s provided for paid meals*
*For SY 13-14 only
▫ Any payments, including additional per-meal reimbursements, provided to the SFA for support of the School Breakfast Program or other Child Nutrition Programs;
▫ Any payments, including additional per-meal reimbursements, provided specifically to support free and reduced price meals
Background
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.
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Monitoring Area
Paid Lunch Equity
Off-Site Assessment Tool Questions – 4 questions
Results
• Did the SFA use the USDA Paid Lunch Equity Tool to evaluate paid lunch prices?
• Did the SFA increase its paid lunch prices if the tool indicated a paid lunch price increase was required?
• Did the SFA use non-Federal funds to support its paid lunch prices?
• Did the SFA submit its most frequently charged paid lunch price to the SA? ▫ SA may answer this on your behalf
• Regardless of how many risk indicators are triggered in any one RM review area, only one indicator is counted.
• For example, if all four of your responses to the PLE questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator Tool▫ True for all RM review areas
Off-Site Assessment Tool
Note: This section doesn’t apply to non-pricing programs and RCCIs without day students.
Paid Lunch Equity•What documentation will you be asked to
provide?▫SFA’s calculations to meet the paid lunch equity
requirements. SFA-completed Paid Lunch Equity Tool; or, Approved Alternative Documentation
▫Previous School Year (SY) Weighted Average Price
▫All Paid Lunch Prices for October of the Previous SY
▫Number of paid lunches served at each paid lunch price in October of the previous SY
Comprehensive Review
Paid Lunch Equity
What will the State agency assess?
•Correct Determination of Need to Raise Prices
•Price Increase Occurred, as applicable
•Non-federal sources were:▫Used in Whole or
in Part▫Allowable▫Appropriately
added to the non-profit food service account
Comprehensive Review
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
Nonprogram Revenue“Nonprogram revenue” “Nonprogram foods”
• Refers to the revenue resulting from the sale of nonprogram foods.
• All food sold that is not part of the reimbursable meal, e.g., a la carte foods, individual food/beverage item sales, 2nds of entrées or other items, vending machine foods/beverages, adult meals, etc.). Background
Nonprogram RevenueEffective on July 1, 2011
Proportion of Total Revenue from Nonprogram Foods Sales
is greater than or equal to the
Proportion of Total Food Costs of Nonprogram Foods to Total Food Costs
of All Food
Background
Nonprogram Revenue
Revenue Ratio: Nonprogram revenue
(program revenue + nonprogram food revenue)
Food Cost Ratio: Cost of nonprogram foods
(cost of program foods + cost of nonprogram foods)
•Total Non-Program Food Revenue > Total Non-Program Cost
Total Program Revenue Total Purchased Food Cost
Background
Nonprogram Revenue Calculator Cost for Reimbursable Meal Food $34,287 Cost of Nonprogram Food $2,876 Total Food Costs $37,163 Total Nonprogram Food Revenue $4,419 Total Revenue $73,138
Total Non Program Food Revenue = $4,419 equals 6%Total Revenue = $73,138
Total Non Program Food Cost = $2,876 equals 8%Total Food Cost = $37,163 Min portion of revenue from nonprogram funds = 8%Min Revenue Required from the Sale of Nonprogram Foods =$5,660Additional Revenue Needed to Comply = $1,241
Background
Revenue from Nonprogram Foods
Off-Site Assessment Tool Questions – 2 questions
Results
• Does the SFA use the USDA Nonprogram Food Revenue Tool or a USDA-approved alternative method to calculate its nonprogram food costs and nonprogram food revenue?
• Was the SFA’s proportion of total revenue from the sale of nonprogram foods to the total revenue of the school food service account equal to or greater than the proportion of total food costs associated with obtaining nonprogram foods to the total costs associated with obtaining program and nonprogram foods from the account
• Regardless of how many risk indicators are triggered in any one RM review area, only one indicator is counted.
• For example, if all four of your responses to the PLE questions indicate risk, only one risk indicator will be assessed when the SA completes the RM Risk Indicator Tool▫ True for all RM review areas
Off-Site Assessment Tool
Note: Section may be not applicable if the SFA does not sell nonprogram foods or beverages, including adult meals
Revenue from Nonprogram Foods
•What documentation will you be asked to provide?▫Food costs of reimbursable meals;▫Food costs of nonprogram foods;▫Revenue from nonprogram foods▫Total revenue▫USDA NonProgram Food Revenue Tool
or Alternative Mechanism▫Adult Meal Prices
Comprehensive Review
Revenue from Nonprogram Foods
What will the State agency assess?
•Nonprogram Foods and Nonprogram Foods Cost Calculations
•Process for Compliance
•Revenue accrues in the Nonprofit Food Service Account
•Adult meals priced at least equal to cost
Comprehensive Review
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
Background Information:Program Costs
Direct Costs Indirect Costs
• Direct costs: incurred specifically for a program or other cost objective and readily identified to a particular objective.
• Indirect costs: incurred for the benefit of multiple programs, functions, or cost objectives; cannot be readily and specifically identified with a particular program or cost objective.
Background
Program Costs (Cont.)
•Examples of direct costs: wages/salaries, supplies, equipment used in food service.
•Examples of indirect costs: employee benefits, human resources, payroll services, accounting/finance, facilities management, utilities, water, refuse collection.
Background
Program Costs (Cont.)
•The same cost or expense may not:
▫Be identified under both direct and indirect costs
▫Be treated inconsistently throughout the organization (either as direct or indirect).
Background
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
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 rateDirect cost base
Background
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
Indirect Costs
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•Intent: 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.
Monitoring Area
Indirect Costs
Off-Site Assessment Tool Questions
Results
• Were 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 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
Indirect Cost
•What documentation will you be asked to provide?
▫Approved Indirect Cost Rate Agreement
▫Financial statements▫Chart of accounts▫Accounting records
Comprehensive Review
Indirect Cost
What will the State agency assess?
•Use of the Correct Rate
•Accounting Consistency
•Prior Year’s Retroactive Billing
•Proper Classification of Indirect and Direct Costs
•Support Documents for Indirect Cost Billing
Comprehensive Review
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
USDA Foods4 methods for obtaining full value:
(1) Rebate system:
USDA Foods Processor DistributorSponsor
$ - Sponsor Distributor
Rebate application – Sponsor Distributor
$ - Distributor Sponsor Background
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
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
USDA Foods
•USDA Foods requirements: Included under Section 14 of the NSLA, 7 CFR 210.14(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.
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Monitoring Area
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 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 Tool▫ True for all RM review
areas
Off-Site Assessment Tool
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 typeComprehensive Review
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
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
QUESTIONS?