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MASBO BI-Monthly Meeting Milford MA February 5, 2015

Financial Management in School Food Service Operations: What’s New, What’s Trending, and How it Affects the Role of the Business Manager. MASBO BI-Monthly Meeting Milford MA February 5, 2015 Pete McLoughlin, Financial Management Section Head Rob Leshin, Assistant Director

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MASBO BI-Monthly Meeting Milford MA February 5, 2015

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  1. Financial Management in School Food Service Operations:What’s New, What’s Trending, and How it Affects the Role of the Business Manager MASBO BI-Monthly Meeting Milford MA February 5, 2015 Pete McLoughlin, Financial Management Section Head Rob Leshin, Assistant Director Office for Nutrition Health and Safety Programs

  2. Agenda • Food Service Financial Management Overview • Renewed Focus on Financial Management • Financial Reporting • Resource Management Review Findings • Bad debt • Cafeteria Monitors • Consistency • Indirect Costs • Indirect Cost Study, March 2014 (USDA) Massachusetts Department of Elementary and Secondary Education

  3. Food Service Financial Management – The View From 30,000 ft • School Lunch and Breakfast Cost Study, April 2008 • SNA Member Feedback Survey, November 2014 • Financial Health of the Food Service Operation • Challenges Massachusetts Department of Elementary and Secondary Education

  4. USDA School Lunch and Breakfast Cost Study – April 2008 Massachusetts Department of Elementary and Secondary Education

  5. USDA School Lunch and Breakfast Cost Study – April 2008 Massachusetts Department of Elementary and Secondary Education

  6. SNA Member Feedback Survey – Nov ’14 Financial Health Massachusetts Department of Elementary and Secondary Education

  7. SNA Member Feedback Survey – Nov ’14 Challenging Issues Massachusetts Department of Elementary and Secondary Education

  8. Renewed Focus on Financial Management • Resource Management Comprehensive Reviews • Professional Standards • Financial Reporting • ESE Memo dated August 22, 2014 Massachusetts Department of Elementary and Secondary Education

  9. Resource Management Process within the Administrative Review Massachusetts Department of Elementary and Secondary Education

  10. Four Resource Management Review Areas • Maintenance of the Nonprofit School Food Service Account • Paid Lunch Equity • Revenue from Non-program Foods • Indirect Costs Massachusetts Department of Elementary and Secondary Education

  11. Maintenance of the Nonprofit School Food Service Account Key Financial Reports: • Statement of Activities (P&L) • Statement of Net Position (Balance Sheet) • General Ledger Massachusetts Department of Elementary and Secondary Education

  12. What We Review/Do • Revenues, expenditures, net profit or loss • General ledger detail underlying the above • Sampling of invoices, payroll detail, etc. • Daily potential income sheets supporting revenue • Three months average expenditures • Discuss Metrics-those being used/could be used • Allowable costs Massachusetts Department of Elementary and Secondary Education

  13. Net Cash Resources • Per 7CFR, Section 210.9 (b)(2), Net cash resources are limited to an amount that does not exceed 3 months average expenditures. • At the end of an operating year (June), the ending cash balance cannot exceed this figure. Massachusetts Department of Elementary and Secondary Education

  14. Allowable Costs • All expenditures must conform to Federal Cost Principles 2 CFR Part 225 (formerly OMB Circular A-87) which says they must be • Necessary • Reasonable • Allocable Massachusetts Department of Elementary and Secondary Education

  15. Criteria to Help Determine Necessary & Reasonable Costs • How does the cost contribute to achieving an objective of the school food service? • Is the cost recognized as ordinary and reasonable for the operation of the school food service? • Would a prudent person find the cost to be reasonable under the circumstances? Massachusetts Department of Elementary and Secondary Education

  16. Allocable • A cost must be assigned to the programs, functions, activities or other cost objectives that benefited from the school district having incurred the cost (cost allocation plan needed) • For example, school food service cannot be billed a higher share of utility costs just because the school district doesn’t have the funds - this would assign the cost to a cost objective that did not benefit from it Massachusetts Department of Elementary and Secondary Education

  17. Resource Management Review Findings • ESE Memo dated August 7, 2014 • Bad Debt • Cafeteria Monitors • Consistency Massachusetts Department of Elementary and Secondary Education

  18. Paid Lunch Equity Intent of PLE: To ensure paid lunch prices are sufficient to cover the costs of paid meals or otherwise provide enough funds to support paid meal costs. Massachusetts Department of Elementary and Secondary Education

  19. Paid Lunch Equity-Reality • SFAs must, on average, charge for paid lunches at least the difference between the federal reimbursements for free and paid lunch $2.51 for SY 2012–13 $2.59 for SY 2013-14 $2.65 for SY 2014-15 $2.70 for SY 2015-16 Massachusetts Department of Elementary and Secondary Education

  20. Paid Lunch Equity (PLE) Analysis • Determine weighted average price for all types of paid student lunches • Compare weighted average paid lunch price with the difference between free and paid reimbursement rates • Determine if a price increaseis necessary Massachusetts Department of Elementary and Secondary Education

  21. Special Nutrition Program Operations Study – Results related to HHFKA CEP Evaluation Results • Paid Lunch Equity – SFAs will need to raise price 30-50 cents over time; price gap narrowed by 6 percent in first year • Professional Standards – Most SFA Directors have considerable experience, but education and certification requirements vary • Food Safety – Nearly all SFAs have a written food safety plan based on HACCP principles and most schools had 2 or more safety inspections • Alternative Meals – practices vary for providing meals to students that can’t pay

  22. Revenue from Non-Program Foods • “Non-Program foods” - Foods and beverages sold in a participating school that are purchased using funds from the nonprofit school food service account. • Includes a la carte items, adult meals, items purchased with nonprofit school food service account funds for vending machines, fundraisers, school stores and catered and vended meals. Massachusetts Department of Elementary and Secondary Education

  23. Revenue From Non-Program Foods Intent of monitoring: With the exception of reimbursable meals, all food sold in a school and purchased with funds from the nonprofit school food service must generate revenue at least equal to the cost of such foods. Massachusetts Department of Elementary and Secondary Education

  24. Indirect Costs Intent of monitoring: Ensure SFAs are correctly determining if their costs are allowable, allocable and appropriately charged as a direct or indirect cost. Massachusetts Department of Elementary and Secondary Education

  25. What We Review/Do • Determine if SFA had an indirect cost rate agreement with the state • Determine indirect costs charged and the process for determining allocation • Determine whether federal programs were charged consistently across the SFA • Verify indirect costs charged were appropriate • Review documentation supporting indirect costs Massachusetts Department of Elementary and Secondary Education

  26. Current and Future Data Collection for Child Nutrition Studies

  27. School Foodservice Indirect Cost Study Principal Study - Research Questions • Do school districts have indirect cost rates? • If so, do they calculate the indirect costs that are attributable to foodservice? • If so, do they charge any, or all, of these costs to the foodservice account? • If so, do they actually recover these charges?

  28. Massachusetts Department of Elementary and Secondary Education

  29. Just 21.1% of All LEAs Calculated and Charged Indirect Costs Specifically to School Food Service Massachusetts Department of Elementary and Secondary Education

  30. Percent of All LEAs that Charged and Recovered Indirect Costs from School Foodservice, SY 2011-12, by LEA Size

  31. Reasons LEAs Did Not Charge Any Indirect Costs to School Food Service SY2011-2012 Massachusetts Department of Elementary and Secondary Education

  32. Thank You! Pete McLoughlin 781-338-6454 pmcloughlin@doe.mass.edu Massachusetts Department of Elementary and Secondary Education

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