Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 1
Welcome to the Financial Management Webinar for School Year 2014-15. Today we will be covering the follow topics. Read slide. All the topics addressed in the webinar today impact a sponsor s ability to manage the school food service fund in a fiscally responsible manner. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 2
The Kansas State Department of Education (KSDE) requires each sponsor participating in the National School Lunch and School Breakfast Program to establish a Food Service Fund, which consists of all money deposited or transferred for the operation of the food service program. Sponsors must maintain the Food Service Fund to account for program income and expenditures. The food service fund is maintained to process all financial transactions of the food service program. Revenue from sales to students and adults and from federal and state reimbursement must be deposited in the fund. Allowable expenses for the food service program should be paid from the Food Service Fund. Food Service Facts, Chapter 10 regarding requirements for the Food Service Fund is a helpful resource. Chapter 10 describes how each revenue and expenditure should be entered into the fund to match the budget line items. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 3
Sponsors must maintain a positive cash balance, following the Kansas Cash Basis Law and at no time may the Food Service Fund balance be less than zero. At the end of each program year the amount in the food service fund is limited to not more than 3 months average expenditures (based on 9 months of operation). KSDE monitors the cash balance when the Annual Financial Report is submitted. To maintain the nonprofit status of the Food Service Fund, the fund balance or net cash resources of the fund should not exceed three (3) months' average expenditures. If the balance exceeds this threshold, the sponsor must take steps to reduce the balance or have an acceptable plan for using surplus revenues. The plan should be such that the balance will be reduced within a year. KSDE reviews the cash balance on the Annual Financial Report. If the Food Service Fund balance exceeds 3-months average expenditures, the sponsor is contacted by Jennifer Barger at KSDE and the sponsor must submit a plan to KSDE for reducing the fund balance. Since program funds may be used only for food service purposes, an excess balance may be reduced by improving the quality of food served, increase wages for food service staff or for purchasing needed supplies, services, or equipment. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 4
The first topic that we will discuss is Equity in School Lunch Pricing, which is commonly referred to as Paid Lunch Equity or PLE. Completion of the Paid Lunch Equity (PLE) Pricing Tool is required by USDA. Section 205 of the Healthy, Hunger-Free Kids Act of 2010 requires Sponsors participating in the National School Lunch Program to ensure sufficient funds are provided to the non-profit food service account for lunches served to students not eligible for free or reduced price meals. The provision applies only to paid student lunches and does not apply to adult lunches or student breakfasts. There are two ways to meet the requirement: either through the prices charged for paid lunches or through other non-federal sources provided to the nonprofit food service account. For school year 2014-15, each sponsor was required to complete the Paid Lunch Equity Pricing (PLE) Tool found at www.kn-eat.org, School Nutrition Programs, Program Renewal. The completed PLE Tool must be uploaded to the Sponsor Application in KN-CLAIM as part of the program renewal process. USDA s free reimbursement rate is considered to be the cost to produce a reimbursable meal. If the sponsor s average price of paid lunches is $2.65 or more, the sponsor was in compliance. If the sponsor s average price is less than $2.65, the tool calculated the required paid lunch price increase or non-federal source contribution. If a sponsor decided NOT to raise meal prices and instead added non-federal funds to the food service account, the required subsidy from non-federal source contributions requires school board approval. The board minutes must show the amount of non-federal funds transferred to the School Food Service Fund as a result of a low paid student meal price. Board minutes most show a separate motion for the specific transfer amount. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 5
Read slide. USDA uses reimbursement before we add the cash in lieu amount for Kansas. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 6
If a district s weighted average price is less than the current weighted average price requirement there are 4 options for the district: 1. Increase WAP to required amount (4.93% which is 2% plus inflation or CPI of 2.93%) 2. Contribute non-federal funds to school food service account 3. Increase prices partially AND contribute or 4. Request exemption if Sponsor is in strong financial standing. A sponsor may be granted an exemption from raising paid student lunch prices if the sponsor has been certified as meeting meal pattern requirements and can demonstrate that the required increase to paid lunch prices or revenue contributions would cause the Sponsor to exceed the 3 month operating balance limit. When making an exemption determination KSDE considers all aspects of the food service operations which include the following: how the Sponsor is taking specific steps toward meeting the new Smart Snack in Schools standards did the Sponsor correct all findings on the most current Administrative Review what menu improvements have been made to encourage students to eat healthier meals Sponsor s participation rates has the Sponsor implemented a wellness policy is the Sponsor s food service operation fully staffed does Sponsor have necessary cafeteria and kitchen equipment, and has the Sponsor increased certification process to increase access to the program. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 7
Non-program food is any food or beverage sold to anyone (not just students) that is not part of a reimbursable meal, and which was purchased using the non-profit school food service account. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 8
Adult meals must be priced to at least the free meal reimbursement rates. Portion sizes for adults should be the same as served to students in grades 9 12. The reason adult meals are priced higher than students is because reimbursement is only received for student meals. Adult meals should be priced to cover ALL costs. Schools that provide adults with double portions or a special salad bar should charge what it actually costs to prepare that meal! If a sponsor provides reduced price or free meals to non-food service adults, the sponsor must reimburse the food service for the value of these meals. Each year as Child Nutrition & Wellness approves program agreements, we recommend to you that adult prices reflect the free reimbursement rate for meals, or determine that transfers are adequate to cover lower adult meal prices. Transfers for low priced adult meals and gratis other adult meals should be recorded separately on the MFR. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 9
If the food service sells a la carte items, it is crucial that a la carte offerings be priced appropriately to ensure that the sponsor recovers its food, labor, direct and indirect costs. The cost of an item is not always just the raw food cost and the labor to prepare it. For example, if it needs to be served on a paper product, such as a wax bag or paper boat, then the cost of the paper product should be included in the cost of the item. Sponsors also need to think about the cost of over-producing. Many schools do 10-20 servings of an a la carte item and then if they do not all sell, the product has to be thrown away-greatly increasing the average cost per item sold. While discussing a la carte labor lets also consider not just the labor to produce the a la carte items, but also the extra labor for cashiers. Many times a school could eliminate a cashier if less or no a la carte is offered. Federal and state reimbursement intended for student lunches, breakfasts and snacks should not subsidize the cost of operating an a la carte program. Prices charged at area convenience stores can be used as a guide for pricing a la carte items in schools. A quick rule of thumb is to take the food costs and multiply this by 3. There are a couple of exceptions to this rule, one is milk. What would happen if you charged 3 times the cost of milk? There would be many unhappy parents. Some programs price milk, fruit and other highly nutritious foods at the item s food cost. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 10
In addition to non-reimbursable food sales at school, many districts provide food for special functions outside the school day or away from the school campus. Non-reimbursable food sales that may occur either outside the school day or away from the campus include: catered meals to school-related groups, (outside catering is not allowed since it could jeopardize the non profit food service status) contract meals provided to another sponsor, and special school function meals such as athletic banquets or staff in services. It is critical that school nutrition directors/managers set prices to adequately cover food and other costs when preparing these types of food functions so there is no loss to the school nutrition program. Federal regulations do not allow school nutrition program funds to supplement other food sales outside the reimbursable student meal. Loss leader items must be covered by other non-reimbursable food item sales. Special functions must be priced high enough to cover the entire costs of the food function-including labor overtime. This may not be popular in some school districts that expect the nutrition department to underwrite part of the costs for special functions, but it is a federal requirement. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 11
Read slide. The Revenue from Non Program Food report looks at Total Expenditures and Non- Reimbursable Sales & Charges on the Annual Financial Report. Be sure to include revenue received for all a la carte (second milk, adult meals, etc.), catering, contracting with another Sponsor, etc. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 12
Each serving site that collects money from students and adults should maintain the Daily Income, Sales & Deposit Report (Form 10-A). Care should be taken to assure that money is receipted to the Food Service Fund and recorded correctly by category on this form. At the end of each month the sponsor should ensure that all income received is posted to the Food Service Fund. Income is reported at the time it is received. Income from student reimbursable sales, adult meal sales, and a la carte sales should be reported separately. To facilitate meeting this requirement, adult staff members should not purchase meals or a la carte items from a family account. At the end of each month, the revenue for each column on the Daily Income, Sales & Deposit Report should be totaled. The completed Daily Income, Sales & Deposit Report should be submitted to the sponsor s Authorized Representative for preparation of reports. The total deposits on this sheet should correspond with the totals of the bank deposit slips. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 13
Sponsors must use the Daily Income, Sales & Deposit Report as issued by KSDE or an alternate form must be approved annually by KSDE prior to use. Forms can be downloaded from, School Nutrition Programs, Food Service Facts, Chapter 10. Form 10-A is an Excel document that automatically computes totals. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 14
Lets take a few minutes to look over the form. As you can see, it is divided between student and adult accounts plus additional sales. Lets just discuss a few general principles: Column B Cash or checks received for a student s account. Column C Money received from web payments. If web payments are not used, leave blank. Column D Money taken from the students account for reimbursable meals served. Column E Money taken from the students account for a la carte sales including extra milk Column F Refunds paid from the cash at the school site. If refunds are made at the district office, have a form there to record the refunds. Column G Cash or checks received for an adult s account. Column H Money received from web payments. If web payments are not used, leave blank. Column I Money taken from the adult account for meals OR for a la carte sales. Column J Refunds paid from the cash at the school site. If refunds are made at the district office, have a form there to record the refunds. Column K Cash sales for a la carte items or from adults that pay cash at the point of sale. This money is not deposited in a student or adult account. Column L Income from internal catering & contracts to provide meals to another Sponsor. Column M Total amount actually taken to the bank Column N Computed total that should have been taken to the bank (according to math). Column O Total computed receipts including web payments. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 15
Now we will provide answers to frequently asked questions about the Daily Income Sales and Deposit Report. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 16
A separate 10-A is needed for each location where money is received any time through out the school year. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 17
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Read slide. To calculate total monthly sales for Column D, take the total number of paid meals times the paid meal price, plus reduced meals times the reduced meal price. Add breakfast and lunch together and record in Column D. If a la carte is milk only, take the total number of extra milk served for the month times the price charged to the students and enter that in Column F. Calculate adult sales and charges and record in Column I. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 21
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Read from slide. After the Monthly Financial Report is completed, be sure to submit the Annual Financial Report. An error message will be received until all months have been submitted but that s ok. Submitting the Annual Financial Report on a monthly basis will provide a year to date total on all line items. The Annual Financial Report has been submitted correctly when the closing balance on the Annual Financial Report is the same as the closing balance on the most recent month submitted. Food Service should ensure the closing balance on the AFR matches the districts closing balance for food service in their fund accounting. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 27
Line 1510 Interest received on food service balance Section 1600 Second page of Form 10-A Section 3000 KN-CLAIM payment tab Section 4000 KN-CLAIM payment tab Line 5206 Transfer for PLE Non-federal funds to cover low PLE, Transfer for Low- Priced Adult Meals - low and gratis adult meal charge transfer; Transfer for Other All other transfers Line 100 All food service employees gross salary Line 210 Employers share of any insurance plan Line 220 Employers share of social security Line 290 Tuition reimbursement, unemployment, workers comp Line 520 Property, liability, fidelity insurance Line 570 Contract for meals (FSMC or Sponsor) Line 590 Pest control, laundry, specialized cleaning Line 630 All food & milk, subtract cash rebates Line 680 Non-food items, uniforms, utensils, paper, cleaning supplies Line 700 Equipment, attachments, delivery, set-up Line 840 License fee, registration, mileage, bank & credit card charges Line 850 (100+200+520+590+680+840) x Unrestricted Rate Monthly Difference in Computed & Actual Bank Deposit Form 10-A Reimbursable Sales & Charges (Students ONLY) Form 10-A Non-Reimbursable Sales & Charges (Students & Adults) Form 10-A End-of-Year Balance of Uncollected Charges AFR only amount of money owed by students & adults Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 28
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Sponsors may only use non-federal sources that are provided to directly support paid lunches. Examples of non-federal sources: Per-lunch reimbursements for paid lunches provided by states, counties, school districts and others Funds provided by organizations, such as school-related or community groups, to support paid lunches Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 30
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Regardless of if the food service fund has a strong balance or not, money must still be transferred for the low adult meal prices. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 32
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Indirect costs are not readily identified with a specific program but are paid by the sponsor to benefit all of its programs. When food service makes wonderful homemade rolls, the ovens use gas or electricity. When dishes are washed, the dish machine uses water that is heated either with gas or electricity. Child Nutrition programs generate trash and the school must pay to have the trash removed. If the kitchen has a separate meter to monitor electric use, then the cost of electricity would be a direct expense. Most buildings have just one meter so it is not clear how much of this expense results from the food service. In this case, the electricity cost becomes an indirect expense. Custodial services are always an indirect cost unless a food service worker does custodial duties. Generally any activity that would be done even if there was not a food service program is considered an indirect cost. When the food service program pays indirect costs, the sponsor s general fund is reimbursed for a fair share of costs not readily identified with a specific program. Annually, KSDE notifies the Sponsor of its indirect cost rate. (The rate is negotiated with KSDE and is based on past budget spending.) Private schools use the statewide average to compute indirect costs. The statewide average for 2014-2015 is 14.98%. Indirect Cost Rates can be found at www.kn-eat.org under What s New, scroll down under Administration and Guidance to Indirect Cost Rates. Public Schools can click on the diamond and it will take you to KSDE Indirect Cost Rates. You can download the 2014-2015 Indirect Cost Rate for Kansas Public Schools. Look for your school district s unrestricted rate (far right hand column). Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 39
When indirect costs are not paid from the Food Service Fund, these costs are being paid from other funds. Districts may or may not charge the school food service any indirect costs. Districts also have the option of charging only a portion of the indirect costs generated by the grogram. Costs that are charged to the school nutrition program as indirect costs cannot also be charged as direct costs. For example, the district cannot place an electric meter on the school cafeteria and then have the nutrition program pay both the metered bill and full indirect costs. When Sponsors report that Indirect Costs are being charged to food service in KN-CLAIM as part of the Annual Financial Report, KN-CLAIM will conduct an edit check and will notify the Sponsor if the maximum allowable Indirect Cost has been exceeded. To determine the value of these Indirect Costs, calculate the maximum allowable Indirect Costs for the program. This is done by multiplying the subtotal of the direct costs (salaries, employee benefits, misc. supplies, other purchased services, other direct costs, etc) by the Sponsor s indirect cost rate. This amount is the maximum allowable indirect cost that the district may charge to the food service fund. School nutrition directors and mangers should check the KSDE web site (www.kn-eat.org) annually for the indirect cost rate. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 40
Use these forms to help you increase financial efficiency. To access the forms go to: www.kn-eat.org, School Nutrition Programs, KN-CLAIM, Applications, Financial Management. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 41
Read slide. Coming Soon- Meals per Labor Hour Report. This is the reason we are asking that labor hours per site be recorded on the Site Application! Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 42
Data about each sponsor s meal costs are provided to them on KN-CLAIM. Sponsors are encouraged to use this data in evaluating the financial status of the program, and to find ways to manage the program more efficiently. The Per Meal Expenditures are calculated from the data that is submitted to KSDE on the Annual Financial Report, due by Aug. 15 each year. The data is only as good as what sponsors submit on the AFR and through training such as this we are providing assistance to help sponsors report data needed to make financial reports more accurate. Once the 2014 Annual Financial Report is submitted, you will be able to access the 2014 report of Meal Equivalents and Per Meal Expenditures. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 43
If you have other questions or to request technical assistance for financial management call Child Nutrition & Wellness at 785-296-2276 or contact your area Child Nutrition Consultant. Financial Management Webinar, SY 2014-15 * Child Nutrition & Wellness, KSDE 44