sandy creek central school district - cafeteria operations · 2017. 12. 12. · cafeteria employee...

Division of LocaL Government & schooL accountabiLity

o f f i c e o f t h e n e w y o r k s t a t e c o m p t r o L L e r

report of ExaminationPeriod Covered:

July 1, 2015 –June 24, 2016

2016M-354

Sandy Creek Central School District

Cafeteria Operations

thomas p. Dinapoli

Page

AUTHORITY LETTER 1

INTRODUCTION 2 Background 2 Objective 2 Scope and Methodology 2 CommentsofDistrictOfficialsandCorrectiveAction 2

CAFETERIA OPERATIONS 4 Recommendations 7 APPENDIX A ResponseFromDistrictOfficials 8APPENDIX B AuditMethodologyandStandards 11APPENDIX C HowtoObtainAdditionalCopiesoftheReport 13APPENDIX D LocalRegionalOfficeListing 14

Table of Contents

11Division of LocaL Government anD schooL accountabiLity

State of New YorkOffice of the State Comptroller

Division of Local Governmentand School Accountability December 2016

DearSchoolDistrictOfficials:

AtoppriorityoftheOfficeoftheStateComptrolleristohelpschooldistrictofficialsmanagetheirdistrictsefficientlyandeffectivelyand,bysodoing,provideaccountabilityfor taxdollarsspent tosupportdistrictoperations.TheComptrolleroverseesthefiscalaffairsofdistrictsstatewide,aswellasdistricts’compliancewithrelevantstatutesandobservanceofgoodbusinesspractices.Thisfiscaloversight is accomplished, in part, throughour audits,which identify opportunities for improvingdistrictoperationsandBoardofEducationgovernance.Auditsalsocanidentifystrategiestoreducedistrict costs and to strengthen controls intended to safeguard district assets.

Following is a report of our audit of the Sandy Creek Central School District, entitled CafeteriaOperations.ThisauditwasconductedpursuanttoArticleV,Section1oftheStateConstitutionandtheStateComptroller’sauthorityassetforthinArticle3oftheNewYorkStateGeneralMunicipalLaw.

This audit’s results and recommendations are resources for district officials to use in effectivelymanagingoperationsandinmeetingtheexpectationsoftheirconstituents.Ifyouhavequestionsaboutthisreport,pleasefeelfreetocontactthelocalregionalofficeforyourcounty,aslistedattheendofthis report.

Respectfullysubmitted,

Office of the State ComptrollerDivision of Local Governmentand School Accountability

State of New YorkOffice of the State Comptroller

2 Office Of the New YOrk State cOmptrOller2

Background

Introduction

Objective

Scope andMethodology

Comments ofDistrict Officials andCorrective Action

The Sandy Creek Central School District (District) is located in the Towns of Sandy Creek, Boylston, Orwell, Redfield, Richland andWilliamstown in Oswego County; the Town of Ellisburg in Jefferson County; and the Town of Osceola in Lewis County. The District is governed by the Board of Education (Board), which is composedof seven elected members. The Board is responsible for the general managementandcontrolof theDistrict’sfinancial andeducationalaffairs. The Superintendent of Schools (Superintendent) is the District’schiefexecutiveofficerandisresponsible,alongwithotheradministrativestaff,fortheDistrict’sday-to-daymanagementunderthe Board’s direction. The current Superintendent was appointed in September 2016.

The District operates two cafeterias with one centrally located food preparationarea.Thecafeteriasofferbreakfast,lunchandàlacartefoodstoapproximately800studentsand220employees.Thecafeteriahas a total of 15 staff, including the cookmanager who overseesoperations. The District’s budgeted school lunch fund appropriations forthe2016-17fiscalyearare$513,020,whicharefundedprimarilywith federal and State aid and revenues from the sales to students and employees.

The objective of our audit was to analyze the school lunch fund’s financial condition. Our audit addressed the following relatedquestion:

• DidtheBoardandDistrictofficialsensurecafeteriaoperationswerefinanciallyself-sufficient?

We examined the school lunch fund’s financial condition for theperiodJuly1,2015throughJune24,2016.WeextendedourscopebacktoJuly1,2010andforwardtoJune30,2016toreviewvariouscostsandtoconductafinancialanalysis.

We conducted our audit in accordance with generally accepted governmentauditingstandards(GAGAS).Moreinformationonsuchstandards and the methodology used in performing this audit are includedinAppendixBofthisreport.

The results of our audit and recommendations have been discussed withDistrictofficials,andtheircomments,whichappearinAppendixA, have been considered in preparing this report.District officialsagreedwithourfindingsandindicatedtheyplannedtotakecorrectiveaction.


The Board has the responsibility to initiate corrective action. Pursuant toSection 35 ofGeneralMunicipalLaw,Section 2116-a(3)(c)ofNewYorkStateEducationLawandSection170.12oftheRegulationsoftheCommissionerofEducation,awrittencorrectiveactionplan(CAP)thataddressesthefindingsandrecommendationsinthisreportmustbepreparedandprovidedtoourofficewithin90days,withacopyforwardedtotheCommissionerofEducation.Tothe extent practicable, implementation of the CAPmust begin bytheendof thenextfiscalyear.Formore informationonpreparingandfilingyourCAP,pleaserefertoourbrochure,Responding to an OSC Audit Report, which you received with the draft audit report. TheBoardshouldmaketheCAPavailableforpublicreviewintheDistrictClerk’soffice.


Cafeteria Operations

TheBoardandDistrictofficialsareresponsibleforensuringcafeteriaoperations are financially self-sufficient. Accordingly, Districtofficialsshouldensurethefundgeneratesenoughrevenue,includingcollecting all eligible aid, to cover expenditures. District officialsshouldanalyzeoperationstoidentifyefficiencies,suchascomparingcost-per-mealtothemealprice,tosetappropriateprices.

Theproductionofmealsoveraspecifiedperiodoftimeisameasureof the school lunch operation’s efficiency. The number of mealequivalents1(ME)produceddividedbythestaffinghourstoproducethosemeals,alsoknownasthemealsperlaborhour(MPLH),2 provides theDistrictwith ameasurable figure to gauge these aspects of itsoperation. Districts can use MPLH to make adjustments to operations to ensure staff are preparing foods in the most productive manner possible. When meal costs and employee productivity are properly controlled andmonitored, school lunchoperations should functionwithoutsubsidiesfromotherDistrictfunds.IfDistrictofficialsplantousesubsidiesfromthegeneralfundtosustainoperations,theyshouldbe budgeted for appropriately to be transparent to District residents.

Districtofficialsdidnotensurecafeteriaoperationswerefinanciallyself-sufficient.Theschoollunchfundhasincurredoperatingdeficitsthataveragedapproximately$10,0003annuallyfrom2013-14through2015-16. Furthermore, District officials paid cafeteria employeebenefits annually from the general fund for the same period. Hadthese expenditures, which averaged $169,000 annually, been paidfrom the school lunch fund, the average annual operating deficitwouldhave increased toalmost$179,000.Additionally,asof June30,2016,theschoollunchfundowedthegeneralfund$100,000forinterfund loans,which exceeded the school lunch fund’s availablecash and receivable balances. Therefore, these funds are unlikelytobepaidback.Further, subsidies from thegeneral fundwerenotbudgeted,whichreducedtransparency.Finally,Districtofficialsdidnotperformacost-per-mealanalysis,andtheDistrict’sproductivitylevel for MPLH is below the industry average.

Meal Costs–TheDistrictserved819MEsdailyduringthe2015-16schoolyearat acostofapproximately$484,000.Duringouraudit____________________1 An ME includes the conversion of the number of breakfasts and à la carterevenuesintoanequivalentnumberoflunches.Asinglelunchisthestandardbywhich any measures are calculated.

2 MPLH is an industry-accepted standard used to determine the adequacy ofstaffinglevelsinaschoolfoodserviceoperation.

3 Thisaveragedeficitincludedatransferfromthegeneralfundin2015-16ofover$8,000.


period,Districtofficialstookthenecessarystepstoenrollalleligiblestudentsinthefreeandreduced-pricelunchprogramandreceivedtheappropriate amount of available federal and State aid for the school lunch fund.

The full-price ratescharged to students for the2015-16fiscalyearmet the minimum pricing guidelines established by State and federal agencies. Even though the costs to produce a meal have decreased by2percentandtherevenuespermealhaveincreasedby6percent,after removing the transfer from the general fund and including the cafeteria employee benefits paid by the general fund, the costs toproduce anME exceeded the revenue generated by an average of$1.23perME(38percent) for the last threeyears.Asa result, thefund operated at a loss in each of those years.

Figure 1: Revenue and Cost-Per-ME 2013-14 2014-15 2015-16

Revenue per ME $3.14 $3.22 $3.32

Cost of Food and Materials per ME $2.03 $2.00 $1.89

Cost of Labor and Benefits per ME $1.33 $1.25 $1.39

Total Cost Per ME $3.36 $3.25 $3.28

Profit/(Loss) per ME ($.22) ($.03) $.04

Adjusted Revenue per MEa $3.14 $3.22 $3.26

Adjusted Cost of Labor and Benefits per MEb $2.42 $2.39 $2.58

Adjusted Total Cost per ME $4.45 $4.39 $4.47

Adjusted Loss per ME ($1.31) ($1.17) ($1.21)a Adjusted to exclude the $8,000 transfer in from the general fundb Adjusted to include the cost of the health insurance and retirement system costs for the

cafeteria employees paid out of the general fund

WhiletheDistrictofficialsraisedmealpricesforthe2015-16schoolyear,thecosttoproduceamealhasremainedhigh.Additionally,thecostoflaborandbenefitsperMEhasincreasedbyover6percentandrepresentsapproximately58percentofthetotalMEcosts.

We compared the District’s cost per ME with those of three other school districts in the surrounding counties that included cafeteria benefitsasexpenditures in theschool lunchfund.4Onaverage, theDistrict’s costs of food and materials were comparable to the other districts.However,laborandbenefitscostsweresignificantlyhigher.

____________________4 Thesecalculationsarebasedonreporteddatafromtheotherthreeschooldistricts:Alexandria Central School District, Lafargeville Central School District andPulaski Central School District.


Productivity–IndustrystandardsforMPLHconsidermanyfactors,including the type of service being provided, production system,amount of convenience foods used, skill levels of employees andcomplexityofthemenu.TheDistrict’scafeteriausesaconventionalsystem5 for food preparation. MPLH standards for a conventional systemwithdailyMEsof801to900rangefromalowof18andahighof20.TheDistrict’sMPLH for the2015-16 schoolyearwasslightlyover12,whichissignificantlylowerthanindustrystandards.

When MPLH falls below the industry standards, adjustments toseveralfactorscanassist theoperationinbecomingmoreefficient.Such changes could include adjustments to the number and skill level of staff, number of serving lines, production methods andcomplexityofmenuitems,oreffortstoincreasestudentparticipation.The two largest factors impacting MPLH are MEs and labor hours. Inorder to improve theDistrict’sMPLHbyadjusting laborhours,wedeterminedDistrict officialswouldneed to reduce total annuallaborhoursby32percentor22hoursperdaytoincreasetheMPLHto 18,which is the lower end of theDistrict’s applicable industrystandard. Conversely, by only increasingMEs, the District wouldneedtosignificantlyincreasethenumberofstudentsandstaffusingthecafeteriatogenerateanadditional394to529dailyMEs.Becauseit is not possible or practical for the District to achieve the industry standards by adjusting just one factor – reducing staff or increasing sales–by theamountsneeded to reach industrystandards, itmustconsider adjusting multiple factors to move towards the MPLH industry standards.

____________________5 Aconventionalsystemisoneinwhichfoodispurchasedinvariousprocessedstages from raw ingredients to some preprocessed foods, which will requireadditionalprocessingbeforeuse. Incontrast,aconveniencesystemuses fooditems that have been preprocessed and may or may not require additionalpreparation before service.

Figure 2: Comparative Cost of Labor and Benefits Per ME


WhileDistrictofficialswereawaretheschoollunchfundwasnotself-sufficient, theydidnotperformcost-per-meal andMPLHanalysesthat would have allowed them to identify potential areas where they couldreducecostsorenhancerevenues.Asaresult,hadtheemployeebenefitexpendituresbeenappropriatelyallocatedtotheschoollunchfund, the operating deficit would have been almost $170,000 for2015-16.HadDistrictofficialsregularlyperformedacost-per-mealanalysis and reviewofMPLH, it is possible deficits and subsidiescouldhavebeenminimizedoravoidedaltogether.Districtofficialsshouldlookforwaystoincreaserevenuesandefficienciesandreducecosts.

TheBoardandDistrictofficialsshould:

1. Complete a cost-per-meal analysis and, where possible,explore methods for increasing revenues and decreasingexpenditurestoalevelthatallowstheschoollunchfundtobeself-sustaining.

2. Monitor the MPLH and develop a strategy to move toward the industry standards for MPLH.

3. Ensure that the cost of the associated benefits for cafeteriaemployees are paid from the school lunch fund so the actual costofoperationscanbeusedinmakingfinancialdecisions.

4. Budgettheappropriatesubsidiesfromotherfunds,asdeemednecessary,toensurethatfinancialdecisionsaretransparenttoDistrict residents.

Recommendations


APPENDIX A

RESPONSE FROM DISTRICT OFFICIALS

TheDistrictofficials’responsetothisauditcanbefoundonthefollowingpages.


APPENDIX B

AUDIT METHODOLOGY AND STANDARDS

Toachieveourauditobjectiveandobtainvalidevidence,weperformedthefollowingprocedures:

• WeinterviewedDistrictofficialsandemployeesandreviewedtheBoardminutestogainanunderstanding of the cafeteria operations including pricing.

• Wecalculated theresultsofoperationsfrom2013-14 through2015-16for theschool lunchfundbycomparingtheactualrevenuesandexpenditures.Wealsocalculatedthetrendintheschool lunch fund’s fund balance over this same period.

• We calculated the employee benefits costs (health insurance and retirement benefits) forcafeteriaemployeespaidoutofthegeneralfundfor2013-14through2015-16.

• Wedocumented the interfund loanbalances for the school lunch fund for2013-14 through2015-16anddeterminedthelikelihoodofthe2015-16balanceowedtothegeneralfundbeingpaid back by comparing it to the school lunch fund’s cash balance.

• Wereviewedthe2015-16priceschargedtostudentsandstaffforschoollunchestodetermineif the District was charging the appropriate prices based on the United States Department of AgricultureandNewYorkStateEducationDepartment(SED)guidance.

• WecalculatedthetotalreimbursementtheDistrictshouldhavereceivedfor2013-14through2015-16usingtheclaimablemealsrecordedinthesoftwaresystemandthefederalandStatereimbursement rates. We compared this amount to the amount of aid actually recorded as received to ensure the District received all eligible aid.

• Wereviewed20studentsthatreceivedfreeorreducedlunchesduring2015-16and30studentswhowereentitledtoparticipateinthefreeandreduced-pricelunchprogramduring2015-16to ensure thatDistrict officialswere properly enrolling all eligible students in the free andreduced-pricelunchprogram.

• We calculated the MEs for 2013-14 through 2015-16. See the University of MississippiInstituteofChildNutrition’sFinancial Management Information System, 2nd Editionathttp://www.theicn.org/documentlibraryfiles/PDF/20151012031820.pdfpages59through61forthecalculation steps to determine MEs.

• Wecalculatedtheschoollunchfund’scostsandrevenuesperMEfor2013-14through2015-16and analyzed the results for trends. We also calculated results of operations in the school lunch fund per ME for the same time period.

• WecalculatedtheDistrict’sMPLHtodetermineifproductivitylevelswerewithintheacceptedschool food service industry standards.See theUniversity ofMississippi Institute ofChild


Nutrition’sFinancial Management Information System, 2nd Editionathttp://www.theicn.org/documentlibraryfiles/PDF/20151012031820.pdf pages 70 to 72 for theMPLH calculation.See the University of Mississippi Institute of Child Nutrition’s Foundations for Effective Leadership in Child Nutrition Programs, Lesson Three, Foundation: the Business of Child Nutrition Programsathttp://www.nfsmi.org/Foundations/lesson3/FoundationsL3Pop.pdfpage35forthestaffingguidelinesforon-siteproduction.Wealsocalculatedthenecessarychangesin labor hours and MEs the District would need to achieve to meet the industry standards.

• WereviewedannualreportsfiledwithourofficeandSEDdatafromthreeotherschooldistrictsfromthesurroundingcountieswhichrecordedappropriatecafeteriabenefitcostsintheschoollunch fund. We compared the District’s costs per ME to the other three districts to determine how the District’s costs compared to similar schools in the surrounding counties.

WeconductedthisperformanceauditinaccordancewithGAGAS.Thosestandardsrequirethatweplanandperform theaudit toobtainsufficient,appropriateevidence toprovidea reasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievethattheevidenceobtainedprovidesareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.


APPENDIX C

HOW TO OBTAIN ADDITIONAL COPIES OF THE REPORT

OfficeoftheStateComptrollerPublicInformationOffice110StateStreet,15thFloorAlbany,NewYork12236(518)474-4015http://www.osc.state.ny.us/localgov/

Toobtaincopiesofthisreport,writeorvisitourwebpage:


APPENDIX DOFFICE OF THE STATE COMPTROLLER

DIVISION OF LOCAL GOVERNMENTAND SCHOOL ACCOUNTABILITYAndrewA.SanFilippo,ExecutiveDeputyComptroller

GabrielF.Deyo,DeputyComptrollerTraceyHitchenBoyd,AssistantComptroller

LOCAL REGIONAL OFFICE LISTING

BINGHAMTON REGIONAL OFFICEH.ToddEames,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Suite170244 Hawley StreetBinghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313Email:[email protected]

Serving:Broome,Chenango,Cortland,Delaware,Otsego,Schoharie,Sullivan,Tioga,TompkinsCounties

BUFFALO REGIONAL OFFICEJeffreyD.Mazula,ChiefExaminerOfficeoftheStateComptroller295MainStreet,Suite1032Buffalo,NewYork14203-2510(716)847-3647Fax(716)847-3643Email:[email protected]

Serving:Allegany,Cattaraugus,Chautauqua,Erie,Genesee,Niagara,Orleans,WyomingCounties

GLENS FALLS REGIONAL OFFICEJeffreyP.Leonard,ChiefExaminerOfficeoftheStateComptrollerOne Broad Street PlazaGlensFalls,NewYork12801-4396(518)793-0057Fax(518)793-5797Email:[email protected]

Serving:Albany,Clinton,Essex,Franklin,Fulton,Hamilton,Montgomery,Rensselaer,Saratoga,Schenectady,Warren,WashingtonCounties

HAUPPAUGE REGIONAL OFFICEIraMcCracken,ChiefExaminerOfficeoftheStateComptrollerNYSOfficeBuilding,Room3A10250VeteransMemorialHighwayHauppauge,NewYork11788-5533(631)952-6534Fax(631)952-6530Email:[email protected]

Serving:NassauandSuffolkCounties

NEWBURGH REGIONAL OFFICETennehBlamah,ChiefExaminerOfficeoftheStateComptroller33AirportCenterDrive,Suite103NewWindsor,NewYork12553-4725(845)567-0858Fax(845)567-0080Email:[email protected]

Serving:Columbia,Dutchess,Greene,Orange,Putnam,Rockland,Ulster,WestchesterCounties

ROCHESTER REGIONAL OFFICEEdwardV.Grant,Jr.,ChiefExaminerOfficeoftheStateComptrollerThe Powers Building16WestMainStreet,Suite522Rochester,NewYork14614-1608(585)454-2460Fax(585)454-3545Email:[email protected]

Serving:Cayuga,Chemung,Livingston,Monroe,Ontario,Schuyler,Seneca,Steuben,Wayne,YatesCounties

SYRACUSE REGIONAL OFFICERebeccaWilcox,ChiefExaminerOfficeoftheStateComptrollerStateOfficeBuilding,Room409333E.WashingtonStreetSyracuse,NewYork13202-1428(315)428-4192Fax(315)426-2119Email:[email protected]

Serving:Herkimer,Jefferson,Lewis,Madison,Oneida,Onondaga,Oswego,St.LawrenceCounties

STATEWIDE AUDITSAnnC.Singer,ChiefExaminerStateOfficeBuilding,Suite170244 Hawley Street Binghamton,NewYork13901-4417(607)721-8306Fax(607)721-8313

sandy creek central school district - cafeteria operations · 2017. 12. 12. · cafeteria employee...

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