Financial RequirementsChild Nutrition Programs

Oregon Department of Education

First…..some definitions

• Net Cash Resources

• Nonprofit school food service

• Revenue

Net Cash Resources

• All money that has been received or accrued to a SFA’s nonprofit food service at any given time, less cash payable.

• These can include:– Cash on hand– Cash Received– Earnings on Investments (interest earned on

food service fund)– Cash on deposit and the value of stocks– Bonds or other negotiable securities

Ref. 7 CFR 210.2/220.2

Nonprofit School Food Service

• All food service operations conducted by the SFA principally for the benefit of school children, all of the revenue from which is used solely for the operation or improvement of such food services.

Ref. 7 CFR 210.2/220.2

Revenue

• Means all money received by or accruing to the nonprofit school food service, including but not limited to:

– Children’s payments– Earning on investments– Other local revenues– State revenues– Federal cash reimbursements

Ref. 7 CFR 210.2/220.2

When you signed agreement with State Agency (ODE), you agreed to:

• Maintain a nonprofit school food service and observe limitations on the use of school food service revenues set forth in 210.14 and limitations on any competitive school food service set forth in 210.11

• Limit net cash resources to an amount that does not exceed 3 months average expenditures for its nonprofit school food service (210.19)

• Maintain a financial management system as prescribed in 210.14 (c)

• Comply with the requirements of the Department’s regulations regarding financial management (7 CFR 3016 public schools, 7 CFR 3019 private non-profits)

Allowable costs

• 7 CFR 3016/3019 state that food service funds may be used only for allowable costs.

• Organizations in the Federal government have principles for determining allowable costs. Those that affect child nutrition programs are Office of Management and Budget (OMB) circular A-87 for public schools and A-122 for private non-profits.

Allowable Costs from OMB Circulars 87 and 122 :

• Food purchases and costs directly related to the storage, handling, processing and transportation of food.

• Labor, which includes payments for labor and other costs directly related to operating the child nutrition programs. This includes employer’s share of retirement, Social Security, insurance payments and fringe benefits.

• Other supplies and expendable equipment used directly in the operation of the school food service. This includes items that must be replaced from time to time, such as pot and pans, serving trays, dishes, glassware, silverware, linen, mops, brooms, cleaning supplies, etc.

• Replacement of non-expendable items generally classified as movable property and used directly in preparing, storing or serving meals. This includes ranges, steam equipment, refrigerators, freezers, steam tables, mixers, storage cabinets, garbage containers, table, chairs, hot water heaters, portable fans, and other equipment. This category may include such item as charges for installing equipment and connecting to utilities in the building in which the program is operated as well as service for maintenance and repair of equipment.

• Travel on food service business such as workshops, conferences and training programs.

• District training for food service employees.

Allowable Costs from OMB Circulars 87 and 122 :

Allowable Costs from OMB Circulars 87 and 122 :

• Memberships, subscriptions, books and audiovisual equipment used to benefit food services

• Rental of non-publicly owned food storage facilities or equipment as required for program needs.

• Cash register, calculators, computers, computer software, communication equipment or other office equipment used exclusively for the food service operation.

• Printing or reproduction equipment or services.• Employee information publications.• Automotive equipment used exclusively in

transporting food.

• Services, such as pest control, trash removal, security and janitorial.

• Utilities, when accounted for separately (actual costs) or prorated to charge only the portion used by food service. The best proration method is using separate meters; the next best is survey by utility company; otherwise, use a reasonable method (square foot percent, gas/electric bill months when school is not heated, etc.)

• Advertising for the recruitment of personnel, for the solicitation of bids, for the procurement of good and services required and for the disposal of scrap or surplus materials.

• Promotional materials, exhibits relating specifically to the program and advisory councils related to parental and student involvement.

Allowable Costs from OMB Circulars 87 and 122 :

Non-allowable Expenditures from OMB Circulars 87 and 122:• No income accruing to the food service program may

be used to purchase land, acquire or construct buildings or make alterations to existing buildings that materially increase the value of capital assets, However, paint and decorator items would not be considered capital expenditures. Only those improvements that materially increase the value or life of the building would be considered capital expenditures.

• Contributions or donations.• Entertainment, amusements, social activities,

gratuities and related activities.• Interest on borrowing.• Rent or usage fees for program sponsor owned

facilities.• Cafeteria monitors. School food service funds may

not be used to pay salaries of monitoring.

Indirect Costs• In theory, all costs should be charged as direct costs.

But when practical limitations and considerations of efficiency are taken into account, an indirect cost rate is an acceptable alternative.

• Indirect cost rate is simply a device for determining the proportion of indirect costs a program should bear.

• Indirect costs are those costs that are not easily identified but are incurred for the joint benefit of all activities of the sponsor. Accounting, auditing, payroll, personnel, budgeting, purchasing, and maintenance are examples.

• If sponsor is charging the food service fund an indirect cost rate approved by ODE, the sponsor cannot then charge the food service fund again for anything that was included in the rate as a direct cost.

• The sponsor cannot charge the food service fund a higher indirect cost rate than approved by ODE.

Why is there so much financial regulation? Shouldn’t we be able to use the money how we see fit?

• These regulations are intended to ensure taxpayer funds are used solely for the benefit of child nutrition programs.