Office of School Support Services School Nutrition Programs October 2013

Transcription

1 Michigan Department of Education Office of School Support Services School Nutrition Programs October 2013

2 Intent t and dscope To ensure the overall health of an SFA s nonprofit school food service Maintenance of the Nonprofit School Food Service Account Paid Lunch Equity (PLE) must be completed annually Revenue From Non program Foods must contribute same level of profit as meal programs (includes adult) Indirect Costs fair and consistent method USDA Foods properly utilized

3 Risk Based Approach Limits i COMPREHENSIVE review to those schools selected for an Administrative Review. And determined to be at risk in any given year using the Resource Management Risk Indicator The Offsite Assessment Tool Questions focuses on the areas in the prior slide This information i will be used by MDE for the Resource Management Risk Indicator MDE will REQUIRE we receive information 4 6 weeks prior to the review The intent of this process is to help MDE focus technical assistance on those SFAs truly in need

4 Resource Management Risk Indicator Tool Will assist in identifying which SFAs are at risk for problems in resource management If risk is identified in 3 or more areas out of 7, a comprehensive review is required of all 5 shaded hddareas listed below SFA Enrollment of over 40,000 SFA have any financial lfindings within the past 3 years Maintenance of school food service account Paid Lunch Equity Non program Foods Indirect Costs USDA Foods Corrective action will be required for any identified area

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6 Resource Management Risk Indicators Enrollment & Prior Fiscal Findings If you are a large district, over 40,000 students, you automatically have 1 risk factor. If on a prior review or audit of any of the child nutrition programs, there was a financial i finding, it is a risk ik factor.

7 Maintenance of the Nonprofit School Food Service Account Food Service Account For this area, multiple items are looked at, however, even if there are multiple risk factors within this one area, it only counts as 1 risk flag. This covers making sure SFA did a review of their revenues and expenses (Profit/Loss Statement or FID) Was the program a deficit operation last year Were surplus funds transferred out of the account to support other operations Does account balance exceed 3 months operating expenses If on a spend down plan, be sure to keep proper documentation Federal funds must be used only for the operation and improvement of the school food service Intent is to maximize program benefits to enrolled students

8 3 Months Costs Maximum Take a full year expenses (from Financial Information Database (FID) or audit report) and divide it by 3. The resultant number is the maximum amount of cash that should be in the nonprofit account If this amount is more than the amount of Net Cash Resources, the district is in compliance If your Net Cash Resources are over the 3 months of expenses, the district will be required to be on a spend down plan

9 Paid Lunch Equity Was the PLE tool used? Were prices adjusted accordingly or did the district receive an exemption from MDE to not raise prices Did the district choose to use non federal funds in place of or in addition to raising prices? If you completed your MEGS+ SNP application, with the appropriate information, this question has been taken care of through h the application i process

10 PLE Exemption District s i food service account must be in a strong financial i position. SFA must be 6 Cent Certified Number of lunches served by category Can the SFA financially maintain the new meal pattern Is the district working toward being in compliance for the new Smart Snack requirements Oh Other considerations: i What financial impact will Smart Snacks have on the account Are there menu changes that could be made to improve the meal programs Does the district have proper staffing Does the district i have sufficient i and proper equipment Is there an active Local Wellness Policy in place

11 SFAs must determine Paid Lunch Equity The average price charged for paid lunches in the previous school year (generally based on October data) The difference between the free lunch per meal reimbursement and the paid meal reimbursement Resulting dollar amount is the reimbursement difference or the target lunch price for the respective year $2 86 (free) $27 (paid) $ $2.86 (free) $.27 (paid) = $ $2.93 (free) $.28 (paid) = $2.65

12 MDE will request: Paid Lunch Equity SFA s completed Paid Lunch Equity Tool or similar Prior school year average weighted price if tool was not used All paid lunches for the month of October The number of paid lunches that are served at the different prices listed Prior year s unrounded average meal price MDE will then put this information into the PLE tool in order to determine if SFA completed theirs correctly Then a determination will be made to check that prices were raised accordingly gy

13 Paid Lunch Equity If prices were not raised, were non federal funds used Were the proper funds used for this purpose Details of allowable non federal funds can be found in SP SFA must submit corrective action if: Incorrectly calculated the appropriate paid lunch charge Did not raise its paid lunch price, even when necessary Used unallowable non federal funds Did not transfer enough non federal funds

14 Did the SFA use one of the approved methods of calculating Non program Foods costs/revenues? Did non program foods generate the same level of margin over food cost as program meals did? Non program food costs = % Food Cost Non program food revenues The above calculated % should be less than or equal to: Program food costs = % Program food cost Program revenues MORE TO COME ON THIS TOPIC HOPEFULLY SOON

15 Indirect Costs Did the SFA charge indirects to the food service account? Did the LEA charge the correct indirect cost rate as specified from MDE Food is not included in cost base Only the first $25,000 of a contract is included

16 USDA Foods and Total Flags The first question in Michigan is relatively easy as all schools are required to use a consortia to receive USDA foods and have them processed These same consortia have USDA food diverted to be processed into foods popular with SFAs If your SFA is contracted through a Food Service If your SFA is contracted through a Food Service Management Company, it is also a risk factor

17 Comprehensive e ereview e Three Red Flags Out of the Seven Different Focus Areas will result in a Comprehensive Review of the Non Profit School Food Service Account

18 Comprehensive Review Overview MDE monitoring of this area is intended to ensure that SFAs: Use all nonprofit school food service revenue solely for the operation of the school food service Limit net cash resources to three months average operating costs Comply with allowable cost restrictions, limiting expenses of nonprofit school food service funds to those costs that are necessary, reasonable and allocable

19 Total Nonprofit Food Service Revenues for the SFA MDE will request information including but not limited to: Most recent balance sheet for the nonprofit school food service fund Identification of all monies received by or accruing to the nonprofit SFS account including meal payments, earnings on investment, other local revenues, state revenues and federal cash reimbursement Determine Net Cash Resources: Total Cash minus Cash Payables = Net Cash Resources Revenue/Expense (Profit & Loss) statement for the most current full year

20 Allowable Costs MDE must evaluate the SFA s compliance with allowable cost restrictions i on site during a comprehensive review MDE will review Year End Statement of Revenues and Expenses to determine if costs seem appropriate p in general MDE will also require additional documents like a general ledger report so all expenses can be evaluated MDE will first attempt to review a sample of general ledger expenditures to ensure the costs are reasonable and necessary for the operation of the SFS program Expenses should be reasonable, necessary and allocable If general ledger does not provide enough detail, MDE will request supporting documents including invoices, payroll py ledgers, receipts, POS summary print outs, and/or other pertinent documents

21 Necessary? Allowable Costs Required because the nonprofit food service cannot be operated td without t incurring i the cost Reasonable? If the cost, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the was made to incur the cost Allocable

22 Necessary and Reasonable What are the objectives of the School Meals Programs? How does the cost contribute to achieving an objective of the School Meals Programs? Is the cost recognized as ordinary and necessary for the operation of the School Meals Programs? Could the School Meals Programs be carried out without incurring this cost? Would a prudent person find the cost to be reasonable under the circumstances?

23 Necessary and Reasonable Would a taxpayer deem the cost to be reasonable in light of the SMPs objectives? Is this cost charged at a fair rate? Does the cost deviate significantly from the established practices of the SFA which may unjustifiably increase costs borne by the nonprofit school food service account? Could the SFA defend this purchase to the SA, the media, auditors, etc.?

24 Allocable In allocating costs, the costs must be assigned to the program(s) that benefited from the school district having incurred the cost Each cost objective must be charged its fair share of the cost Examples: A food service cooks hours used solely for cooking, serving, cleaning, the food service area should be charged 100% to food service On the other hand, a superintendent s salary benefits all of the school district and therefore, should be included in indirect costs A cost item must be treated consistently as direct or indirect in all activities of the SFA unless an awarding agency dictates otherwise

25 Comprehensive Review 10% of General Ledger expenditures Were costs necessary and allowable Does staff interviews support the expenditures Were costs charged to the correct account category 10 % of Salaries and Benefits Payroll Register Were costs necessary and allowable Supporting evidence of appropriate it employee costs Any evidence of charging both a direct cost and indirect cost for the same employee(s) 10% of Food and Processing Costs Invoices Review of Invoices for necessary and allowable expenses Review of General Ledger for appropriate it cost allocation Review a minimum of 10% of other costs

26 Direct and Indirect Costs Direct costs Incurred specifically for a program or other cost objective; clearly identifiable. Indirect Costs Incurred for the benefit of multiple programs, functions, or other cost objectives; not readily identifiable. Costs that cannot be exclusively attributable to the SMPs should generally be treated as indirect costs. Cost assignments are unique to the organization 26

27 Background Direct Costs Wages & salaries of food service workers Cost of food purchased Food service supplies Promotional/marketing materials for food service Food service equipment purchases Indirect Costs Payroll services Human resources Workers compensation Electricity Gas Sewer Trash Superintendent s Office 27

28 Indirect Cost Rate Approved by MDE for SFAs on an annual basis The indirect cost rate is applied to the direct cost base which is the sum of allowable and unallowable costs that receives a benefit from the costs in the pool Resource is FNS Indirect Cost Guidance (SP ) MDE may cover this area on or off site

29 Indirect Cost Allocation School Meals Indirect Costs Title I Student Transportation 29

30 More Questions???? Is retroactive billing done correctly? Are direct and indirect costs properly classified? Is double dipping occurring? Does documentation support costs charged to the nonprofit school food service account? Were indirect costs calculated based on the correct unrestricted indirect cost rate and applied to the direct cost base? 30

31 USDA Foods Review the use of USDA Foods in school meals Review the SFA s procurement of end products containing USDA Foods Ensure the SFA conducts an annual reconciliation 31

32 RESOURCES Memos/2013/SP os.pdf Business Officials Cooperation _Table_of_Typical_Costs_and_their_Classification_as_Direct _or_indirect_427867_7.pdf Direct/Indirect Costs f_a 87_427870_7.pdf 7 Appendix A ect_and_indirect_costs_427864_7.pdf Direct or Indirect Costs