School Food Service Finance Issues

Meal Equivalents – the conversion of operational
data for all food sales into a standard unit of
measurement to gauge the effectiveness and
efficiency of a school foodservice program.
By converting all food sales to meal equivalents,
the SFA can determine:
•per meal cost
•productivity ratios such as meals per labor
Cost of Food Used – Important information that
is used to determine whether costs are within
guidelines and funds that are available to cover
costs. Cost of food used must be calculated
before the school foodservice administrator can
determine meal costs. A physical inventory must
be taken consistently and on a regular basis (a
minimum of a monthly inventory is recommended)
to obtain current and accurate results.
Cost of Food Used = Beginning Food Inventory $8,000
+ Food Purchases
= Total Food Available
- Ending Purchased Food Inventory $7,000
= Cost of Food Used
Streamlined Food Inventory – Integration of
commodity and purchased foods.
When calculating the cost of food used, the value
of USDA-donated commodities must be
considered. Inventories of donated foods are no
longer required to be separate from inventories
of other foods.
Commodities are now tracked with purchased
foods in the food inventory with the commodity
value entered as purchased price.
Monthly physical inventory accounts for both the
purchased and commodity food.
Per Meal Costs
Meal Cost is determined by dividing total expenditures
for a given reporting period by total meal equivalents
during the same period. Expenditures include all costs to
the school foodservice program, including food costs,
labor costs, supply costs, and all other costs.
Meal Cost
Total Expenditures
Lunches and Meal Equivalents
Pre-Costing of Menus
Pre-costing of menus can be completed in the
inTEAM Menu Compliance Tool that KDE provided
to every NSLP sponsor in the fall of 2012. This
tool assists the director in pre-costing (food cost)
of menus and helps establish an average meal
cost. x
Meals and Non-reimbursable Food Items
Reimbursable Pricing Meal Pricing
Paid Lunch Equity Tool – Required by Healthy HungerFree Kids Act, 2010
Requires SFAs participating in the National School Lunch
Program to ensure sufficient funds are provided to the
nonprofit school food service account for lunches served
to students not eligible for free or reduced price meals,
to prevent the free and reduced reimbursement
subsidizing paid lunch meals.
There are two ways to meet this requirement:
either through the prices charged for “paid”
lunches or through other non-Federal sources
provided to the nonprofit SFA account. The Paid
Lunch Equity tool is completed annually and
submitted with the SFA’s application and
Pricing of Non-reimbursable Food Items
Non-program Food Revenue Tool – Required by
Healthy Hunger-Free Kids Act. Objective – Ensure nonprogram activities are not subsidized by program
A la
Fresh Fruit
Obtain an
meal cost for
Lunch, ASCP
Multiply the
average meal
cost by the
number of
meals served
in a month
Equals one
month’s food
costs for
calculated cost
meals from
total food cost
food cost
Gather the following information:
• Food costs of reimbursable meals (Munis code 0630,
CACFP 0630C)
• Food costs of non-program foods (Munis code
• Revenue from non-program foods (Munis code 1620)
• Total revenue
• 1. Each sponsor will need to enter the opening fund balance (not
cash balance)
• 2. Revenues:
a. Program revenues are those collected from reimbursable
meals. (N/A for CEP schools)
b. State matching reimbursement is sent once a year (usually in
c. Federal reimbursement is received monthly-only include
reimbursement received for NSLP breakfast, lunch, after school
snacks and FFVP.
• d. Non-program revenue is any revenue received other
than federal reimbursement-should include SFSP and
CACFP at risk suppers, a la carte, adult meals, etc.
• e. Total revenues are reported from a,b,c,d
• f and g are automatically calculated by CNIPS
• Program revenues are
revenues collected for
reimbursable breakfasts,
lunches or snacks
• Non-program revenues
are revenues from any
other source; for
example, adult meals, a
la carte sales, catering
or special functions
3. Expenditures for Reporting Period:
a. Program Food Expenditures are those used to
produce reimbursable meals. (see guidance for
b. Non program expenditures are those used for
anything other than reimbursable meals or snacks.
c. Salaries are direct labor paid from food service
d. Employee benefits are those paid by the
employer (school district-does not include on behalf
• e Purchased services are those done by a company, such as
pest control
• f. Equipment purchase is any equipment over $5,000 (non
• g. Supplies/miscellaneous are anything under $5,000-should be
• h. Indirect costs (if applicable)-complete only if indirect cost is
paid to the general fund
• i. Total Fund Expenditures are calculated by adding a through
• Program Expenditures
(costs) are those used for
reimbursable meals.
• Non-Program
Expenditures (costs) are
all other foods sold.
Examples would be adult
meals, a la carte sales,
catering, etc.
• The proportion of total
revenue from the sale of
non-program foods to
the total revenue of the
school food service
account should be equal
to or greater than the
proportion of total food
costs associated with
obtaining non-program
foods to the total costs
from the account.
• 4. Closing Fund Balance=Item 2e plus Item 1-Item 3
• 5. Gain or loss =Item 2e-Item 3 (will be positive or
• 6. Three Month Average Operating Cost=Item 3 I
divided by 4
• 7. Cash Balance is account 6101 on balance sheet
(actual cash in bank)
• Excess balance=Item 7-Item 6. If item 7 is more than
item 6 then there is an excess balance in food service
account and you will be contacted to tell us how you
intend to lower the balance
• 9. Enter the indirect cost rate provided by KDE or if a
Private non profit or RCCI use a rate of 10%
• 10 Indirect cost for food service operation=Item 3(c+d)
times indirect cost rate
Program Regulations for Procurement:
• National School Lunch Program: 7 CFR
• School Breakfast Program: 7 CFR 220.16
• Special Milk Program: 7 CFR Part 215
• Food Distribution: 7 CFR Part 250
Uniform Administrative Requirements for
• State/local governments: 7 CFR 3016
• Non-profits: 7 CFR 3019
Government Wide Federal Regulations
OMB Circulars
• A-87 – Allowable costs
• A-102, A-110
• A-122
State and Local Laws, Regulations, and Policies that are
not in conflict with Federal Requirements.
Public School Food Authorities
Public School Food Authorities (SFAs) may use their own
procurement procedures which reflect applicable state and local
laws and regulations, provided that the procurements conform to
applicable federal laws and standards identified in 7 CFR Part
3016.36 and Part 3016.60.
SFAs must compare their state and local requirements against the
federal requirements and follow the most restrictive!
Renovating a School Kitchen
• 2 CFR Part 225, Appendix B, section 25, Maintenance,
operations and repairs, identifies costs of normal repairs and
alterations as allowable so long as they: (1) keep property in
an efficient operating condition; (2) do not add to the
permanent value of the property or appreciably prolong its
intended life; and (3) are not otherwise included in rental
costs or other charges for space. Based on these principles,
FNS has allowed limited renovations within the inside
perimeter of a kitchen/cafeteria space with the required
prior SA approval.
Renovating a School Kitchen
• For example, renovating a kitchen by cutting away a portion
of the wall to allow room for a walk‐in refrigerator and
related electrical wiring would be an allowable expense if
the renovation is necessary to accommodate increased
participation of students in the School Meal Programs.
However, it would be an unallowable expense if renovation
of the kitchen was purely an aesthetic matter.
• Finally, the SFA cannot charge normal maintenance costs
directly to the nonprofit school food service account if such
costs are included in the school district’s indirect cost pool.
Building a School Kitchen
SMPs regulations in 7 CFR Parts 210.14 and 220.7(e)(1) require that revenues
received by the nonprofit school food service are to be used only for the
operation or improvement of such food service, except that, such revenue shall
not be used to purchase land or buildings, or to construct buildings, unless
otherwise approved by the FNS. Historically, FNS has not approved the cost of
building purchases because program funds are made available to help support
the costs of nutritional benefits for children in school settings and not to construct
school related facilities. The goal is to ensure that an SFA maintains the
necessary funding to operate the program as required by the SMPs’
authorizing legislation and regulations, and that the nonprofit school food
service account is not used to cover major expenses that should be borne by the
school district’s general funds (i.e., capital infrastructure costs).
Building a School Kitchen
The costs of building a kitchen are analogous to the costs of
constructing school buildings, which historically have been borne
by the school district with general or capital improvement funds.
Similarly, such capital infrastructure costs should be borne by the
school district just as the school building and its contents should be.
Equipment Purchases
If food service equipment is to be purchased with Food Service
Cash, this equipment must be bid separately from the bidding
of the rest of the project using wage rates as outlined under
provisions of the Davis-Bacon Act and bidding provisions
outlined in the Office of Management and Budget Circular A87 and in 7 CFR 3016 for the expenditure of these monies.
Equipment Purchases
Per OMB A-87:
• This can be undertaken by bidding Food Service Equipment as an
“Alternate” and clearly outlining in the contract documents the terms
under which this equipment is to be bid.
• Cost contracts and cooperative purchase agreements can only be used
if they were procured using the Federal Guidelines noted herein.
• Please note that State and Local Equipment Cost Contracts are NOT
valid unless they have been procured through the federal
provisions noted above and these bid must be undertaken for
EACH project.
• When submitting the BG1 to Facilities Management at KDE for
approval, it must state that Fund 51 will pay for the equipment if
allocated as such.
7 CFR Part 3016 – 7 CFR Part 3019 –
Competition in all procurements
Award only to responsible &
responsive vendors
3016.36 (b) (8)
Written selection procedures
Code of Conduct
Contract Administration System
Prohibition on geographic
3016.60 and
preference, unless specifically
permitted by Federal law (such as
2008 Farm Bill)
Not addressed
7 CFR Part 210 and 220
ALL funds received by the non profit school food account must be
used to obtain food and other goods and services for use in the
Child Nutrition Program (CNP).
• Purchase food, supplies, equipment required for meal prep
and service;
• Purchase prepared meals from vendors;
• Pay Food Service Management Company to operate their
food service;
• Pay for labor and operational costs;
• Pay indirect costs
• Use nonrestricted rate or a lesser rate
• Apply the rate to salaries and benefits
(excluding on-behalf payments)
• Cannot treat something as a direct cost if it is
also included in the indirect
cost pool
Cost Pool
• If a cost is considered a direct cost to one
federal program, it must be treated as a direct
cost to ALL federal programs
• Example: garbage removal
• Example: maintenance personnel
• Recommendation: make indirect cost entry
Sue Bartenfield
Branch Manager
School & Community Nutrition
Kentucky Dept. of Education
[email protected]
Valerie Crouch, SNS
Administrative Section Supervisor
Programmatic Delivery Section
School and Community Nutrition
Kentucky Dept. of Education
[email protected]
Susan Barkley
Assistant Director
Division of District Support
Kentucky Dept. of Education
[email protected]
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