Financial Fundamentals for School Nutrition Programs

1. Financial Fundamentals for School Nutrition Programs Patricia Mouser, R.D.,L.D. Midland ISD pmouser@esc18.net

2. 1. Revenue Sources by Category • Objective: Identify school nutrition program revenue sources by category; • Local • State • Federal

3. Discussion Question/Activity • What do you consider your main source of revenue in your school nutrition program? Rank your top 5 revenue sources with #1 being the greatest amount.

4. Revenue Generation • Identify areas where revenue is being lost.

5. Discussion Scenario • Students who choose not to eat at school result in lost revenue to the program. Discuss how schools should go about setting participation goals and then follow-up with plans to increase participation

6. Discussion Scenario • Some parents do not complete application forms for their children to receive meal benefits although the children are eligible. Suggest ways that the school districts might approach these parents and their children to encourage them to participate.

7. Discussion Scenario • More and more school districts are reporting student theft of food displayed on the serving line. Suggest ways the school district can eliminate theft of food items.

8. 2. Expenditures • Objective: Identify SNP expenditure sources by category

9. Expenditures by Category • Rank your top 5 expenditures by category with #1 being your greatest expense

10. Discussion Scenarios • Have program costs been analyzed according to categories of expenditure? • How do program costs in the school’s nutrition program operation compare to other school programs or to industry standards? • Have the school nutrition program’s staffs been included in the financial management of the operation?

11. Discussion Question • What are the overhead costs that the school nutrition program pays for in your school district?

12. 3. Financial Reports for SNP’s • Objectives: Review the essential financial reports used in school nutrition programs.

13. Financial Reports • Balance Sheet • Statement of Revenues and Expenditures

14. Components of a Balance Sheet • Assets: cash on deposit, investments, accounts receivable, funds from other sources, inventories and other assets • Liabilities; accounts payable, accrued salaries, wages, benefits, amounts due to other district funds, deferred income • Fund Balance; funds reserved for encumbrances, inventory, capital equipment, undesignated or unreserved funds

15. Statement of Revenues and Expenditures • Term used by Governmental Accounting Standards Board of the Department of Education (Often referred to as P & L)

16. Statement of Revenues and Expenditures; See Example • Total revenue available to the program by source • Total expenditure by category • Net profit (gain) or loss (deficit) to the program

17. 4. Financial Reports to Analyze Program Efficiency • Objectives: Interpret basic financial management reports • Analyze financial data based on performance measures • Recognize methods to increase revenue and decrease expenditures

18. Financial Management Analysis • Analysis is important to ensure that the school district • 1. Manages expenditures within the revenues received • 2. Operates without a need for transfers from the general fund • 3. Has sufficient funds to reimburse the school district for costs

19. Review Financial Data to: • Help determine the efficiency of a SNP • Provide information about program profitability • Promote basic financial management decisions • Generate performance benchmarks • Identify areas for improvement • Determine staffing decisions

20. 3 Crucial Evaluations: • Maximizing Revenue • Controlling Costs • Program Efficiency

21. Financial Reports: Revenue Detail Expenditure Detail Financial Analysis Report Performance Measures: Meal Equivalents Per Meal Costs Percentage Ratios Productivity Rates Meal Participation Reports Tools

22. 4 Steps to Analyze Revenue: • 1. Identify revenue sources by category • 2. Calculate average revenue per meal • 3. Identify sources for increasing revenue • 4. Establish appropriate prices for meals and non-reimbursable foods

23. Setting Meal Prices • Revenue from meals served to students and adults provide the bulk of revenue to the school nutrition program.

24. Meal Price Increase Considerations • How long has it been since lunch prices have increased in your school district? • What are some of the reasons for the increase this year? • How do your meal prices compare to nearby districts? • Does nutrient/quality need to improve?

25. Meal Price Calculation Cost of Lunch less value of commodities and paid reimbursement

26. Revenue Generation • Increasing meal prices • Determining non-reimbursable meal prices

27. Setting Non-Reimbursable Food Prices • What factors influence food prices?

28. Establishing the Base Price • Determine the raw food cost of the item offered for sale • Identify the desired food cost percentage for the operation • Calculate a base selling price by dividing the item’s raw food cost by the desired food cost percent

29. Nonreimbursable Food Pricing Calculation • Raw Food Cost divided by food cost percentage equals base selling price

30. Evaluating Expenditures • Identify sources for expenditures by category • Analyze Program costs (cost of food used and cost per meal equivalent served)

31. Performance Measures • Cost of food used • Cost percentages to total revenue • Total meal cost • Meal cost per category • Productivity ratios

32. Cost of Purchased Food Used • 1. Determine whether costs are within guidelines • 2. Ascertain if there is sufficient money to cover expenditures • 3. Establish the plate cost for each meal served • 4. Prevent waste and theft of food items through careful monitoring of food used.

33. Cost of Purchased Food Used • Add any Food Purchases to the Beginning Purchased Food Inventory and delete the ending inventory

34. Cost Percentages: Performance Measures • Cost percentages relate expenses to revenues. • Two of the most critical percentages are food cost percentage and labor cost percentage

35. Labor Costs • Salaries and wages • Benefits • Professional development • Education hours

36. Labor Cost Calculation • Calculate your labor cost percentage by dividing the total labor (salaries and benefits) by the total revenue

37. Meal Equivalents • Meal equivalents; a statistical tool used to allocate costs based on a unit of production • Meal units: Lunch, Breakfast, snacks, nonreimbursable food sales

38. Calculating Meal Equivalents • The National Food Service Management Institute Financial Management Information System uses the following ratio to determine a ME: • 3 breakfasts = 2 lunches (.66) • 3 snacks = 1 lunch • Sales $ divided by “factor” = 1 ME (the factor is free lunch reimbursement plus commodity value per meal)

39. Determining the Average Revenue Earned per Meal Equivalent • Forecast revenue from all sources • Total the forecasted revenue amounts • Determine meal equivalents • Divide revenue generated by total meal equivalents

40. Measuring Productivity • Meals per labor hour • Participation rates (ADP and rate per category of meal eligibility

41. Meals Per Labor Hour: • Staffing Guidelines should be in Policies and Procedures • Table as a Guideline: www.ode.state.or.us/services/nutrition/nslp/finance/ (page 4 of Manual)

42. Conventional: 10-200 ME =12 MPLH 201-300 ME =14 MPLH Convenience: 10-200 ME = 16 MPLH 201-250 ME = 17 MPLH Meals per Labor Hour

43. Summary • Review Standard Performance Measures • List Options for Improving Financial Efficiencies • Develop an Action Plan (beyond the budget!)