Presenters: Blake Stanford, SW Human Development Services and Kati Wagner,

Wildwood CACFP

What is Funcomforatble? 1) Fun·com·fort·a·ble2) ˌfənˈkəmfərtəbəl,-ˈkəmftərbəl/

Funcomfortable is an adjective describing slight pain or discomfort that occurs when people explore awkward topics like money, sex, religion, politics in a group setting with people but in an open and frank way that is fun and exciting and leads to discovery.

Review of Resources:

Office of Management and Budget Circular A- 122, Cost Principles for Non-Profit Organizations

FNS Instruction 796-2, Revision 3, Allowable Labor Costs, Labor Cost Categories, and Allowable Costs.

State and local salary surveys for non-profits

Economic Research Institute database of compensation

Discussion on reasonable compensation policies, and independent board compensation committees

Mandated state salary restrictions on labor

Proposed CACFP salary survey

Things to consider in getting paid to work for a CACFP non-profit:1) Psychic income in furthering USDA’s goals

and helping child care providers succeed2) Doing the Lord’s work and the huge afterlife

reward package waiting on the other side3) Prestige and halo effect with non-CACFP

friends and neighbors, strangers at the grocery store

4) Where is my pension? How and when can I retire?

1) Start by entering your organization's total budget here: ________

Then enter the number of full time equivalent employees here:______

Then divide the budget by the number of FTE, write in here: __________

Then divide by 2 = ____________ Use this number as a base then change according to your answers to the questions below.

[Example: if your organization has a $1 million dollar budget and 25 FTEs, then divide $1,000,000 by 25 = $40,000. Divide that by 2 and you get the starting number of $20,000.]

Northeast Region + 10%

Mid Altantic Region + 8%

Southeast Region - 8 %

Midwest Region -8%

Southwest Region 0

Mountain Region -5%

Western Region +10%

I wait for my Board to act -5%

I ask whether I should receive a raise or not 0

I suggest the amount I want to receive +5%

My state agency sets my salary and wage increase -30%

Mabee Petroleum Corp. v. U.S., 203 F.2d 872 (5th Cir. 1953). The Tax Court has stated that, "[t]he law places no duty on individuals operating charitable organizations to donate their services; they are entitled to reasonable compensation for their efforts."

The Food and Nutrition Service (FNS) mission

is “to increase food security and reduce hunger in partnership with cooperating organizations by providing children and low income people access to food, a healthful diet, and nutrition education in a manner that supports American agriculture and inspires public confidence.”

Objective 4.1: Increase Access to Nutritious Food

Improve Access to Nutrition Assistance: Raise awareness and improving understanding of eligibility requirements to ensure eligible people, can access program benefits for which they are eligible easily and with dignity and respect.

Improve Program Integrity: Maintain public confidence and good stewardship through efficient program delivery, strong customer service, and reduced improper payments.

Objective 4.2: Promote Healthy Diet and Physical Activity Behaviors

Improve Nutrition: Improve the food served in schools and child care centers, and promote healthful choices in SNAP and other nutrition assistance programs, to support healthier choices and promote better health.

Money is the root of all _________________

All Economic Program Incentives to run the CACFP for providers and sponsors

ADMINISTRATIVE REIMBURSEMENT RATES FOR SPONSORING ORGANIZATIONS OF DAY CARE HOMES Per Home/Per Month Rates in U.S. Dollars

INITIAL 50 NEXT 150 NEXT 800 EACH ADDL

CONTIGUOUS STATES $109 $83 $65 $57

ALASKA $176 $134 $105 $92

HAWAII $127 $97 $76 $67

Global economic trends – boom or recession

Local and regional labor markets

Inflation

Demand for skills and specialization

Demand for goods and services

Size of the Organization

Type of organization – single or multipurpose

Rates X Homes formula

Number of Employees

Technological capabilities

Service Area

Independent Board compensation philosophy

State agency budget approval

OMB Circular A-122

Internal Revenue Service regulations

FNS Instructions 796-2

Written compensation policies by the Board of Directors

Competitive salary offers with private industry

Benefits in business life cycle of sponsor orgs

State agency budget approval process

Written compensation policies outlining all forms of compensation:

1) Salary or hourly wage

2) Salary range based on caseload

3) Hourly wage

4) Fee for service

Proscription Against Inurement

IRC 501(c)(3) prohibits inurement of the net income of an organization to any private shareholder or individual. Reg. 1.501(c)(3)-1(c)(2) states that an organization is not operated exclusively for one or more exempt purposes if its net earnings inure in whole or in part to the benefit of private individuals.

Criteria for determining if a CACFP sponsoring organization serves exclusively IRC 501(c)(3) purposes. In determining whether organizations that operate as CACFP sponsoring organizations serve exclusively IRC 501(c)(3) purposes, the Service has applied the following criteria:

1) Its governing body should be composed primarily of members of the community who are not financially interested in its activities (i.e., persons other than employees of the organization or sponsored day care providers) or related parties.

(2) Members of the governing body should not vote on decisions relating to their own compensation (or that of related parties).

(3) Decisions about compensation of employees and other parties providing services to the organization should be made by the governing body.

(4) No person receiving compensation for services under CACFP should receive compensation for services from any other sponsoring organization.

(5) Sponsoring organizations should agree to sponsor any qualified day care provider, consistent with their capacity to provide services, and not discriminate based on income or educational level or similar factors.

Factors affecting allowability of costs. To be allowable under an award, costs must meet the following general criteria:

a. Be reasonable for the performance of the award and be allocable there to under these principles.

b. Conform to any limitations or exclusions set forth in these principles or in the award as to types or amount of cost items.

c. Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the organization.

d. Be accorded consistent treatment.e. Be determined in accordance with generally accepted accounting

principles (GAAP).f. Not be included as a cost or used to meet cost sharing or

matching requirements of any other federally-financed program in either the current or a prior period.

g. Be adequately documented.

Reasonable costs. A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs. The question of the reasonableness of specific costs must be scrutinized with particular care in connection with organizations or separate divisions thereof which receive the preponderance of their support from awards made by Federal agencies. In determining the reasonableness of a given cost, consideration shall be given to:

a. Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the organization or the performance of the award.

b. The restraints or requirements imposed by such factors as generally accepted sound business practices, arms length bargaining, Federal and State laws and regulations, and terms and conditions of the award.

c. Whether the individuals concerned acted with prudence in the circumstances, considering their responsibilities to the organization, its members, employees, and clients, the public at large, and the Federal Government.

d. Significant deviations from the established practices of the organization which may unjustifiably increase the award costs.

Compensation for personal services.

a. Definition: Compensation for personal services includes all compensation paid currently or accrued by the organization for services of employees rendered during the period of the award (except as otherwise provided in subparagraph h). It includes, but is not limited to, salaries, wages, director's and executive committee member's fees, incentive awards, fringe benefits, pension plan costs, allowances for off-site pay, incentive pay, location allowances, hardship pay, and cost of living differentials.

b. Allowability: Except as otherwise specifically provided in this paragraph, the costs of such compensation are allowable to the extent that:

(1) Total compensation to individual employees is reasonable for the services rendered and conforms to the established policy of the organization consistently applied to both Federal and non-Federal activities

c. Reasonableness: (1) When the organization is predominantly engaged in

activities other than those sponsored by the Federal Government, compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is consistent with that paid for similar work in the organization's other activities.

c. Reasonableness (continued):

(2) When the organization is predominantly engaged in federally-sponsored activities and in cases where the kind of employees required for the Federal activities are not found in the organization's other activities, compensation for employees on federally-sponsored work will be considered reasonable to the extent that it is comparable to that paid for similar work in the labor markets in which the organization competes for the kind of employees involved.

d. Incentive compensation:

Incentive compensation to employees based on cost reduction, or efficient performance, suggestion awards, safety awards, etc., are allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued pursuant to an agreement entered into in good faith between the organization and the employees before the services were rendered, or pursuant to an established plan followed by the organization so consistently as to imply, in effect, an agreement to make such payment.

The first criterion a cost must meet to be allowed is that of “Necessary”. This means the cost must represent an activity or function that is generally recognized as ordinary and necessary for the operation of the program and which must be accomplished to fulfill regulatory requirements for proper and efficient administration of the program.

Factors that are used to determine reasonableness include:

(1) The restraints imposed by generally accepted sound business practices.

(2) Arms-length bargaining, which means that buyers and sellers act independently from each other when negotiating a price, and they have no relationship to each other that might result in a price that does not reflect the actual fair market value of the good or service.

(3) Other applicable Federal and state laws and regulations.

(4) Whether the individuals acted with prudence considering their responsibilities to the organization.

(5) Whether there are significant deviations from established practices which may unjustifiably increase costs.

The decision that a cost is reasonable is a judgment made using the prudent person standard. Consideration is given to:

1) The institution’s needs2) The institution’s financial condition (in other

words, can the institution afford to incur the cost?)

3) The conditions of the market place—what would anyone else pay for this type of good or service? What is the per unit cost? What does the labor department say about the salary for this type of position?

Laurance Hoagland Jr., Chief Investment Officer, William and Flora Hewlett Foundation, Menlo Park, CA - $2.5 million

John Seffrin, CEO, American Cancer Society, Atlanta, GA - $2.1 million

Roxanne Spillett, president, Boys & Girls Clubs of America, Atlanta, GA -$1.8 million

Reynold Levy, President, Lincoln Center for the Performing Arts, New York, NY- $1.4 million

Placido Domingo, General Director, Los Angeles Opera, CA - $1.35 million

Michael Kaiser, President, JFK Center for the Performing Arts, Washington D.C. - $1.348 million

Peter Gelb, General Manager, Metropolitan Opera Association, New York - $1.3 million

Glenn Lowry, Chief Executive, Museum of Modern Art, New York, NY -$1.2 million

Non Profit Times Survey

Economic Research Institute reports

State or Regional Non-Profit Salary Surveys

Comparative 990s

National Council of Non Profits

Salary.com

Guidestar Non Profit Compensation Report

Public employee compensation profile:

a. pay ranges commensurate with length of service, pay grade, occupational category

b. pay subject to legislative or executive discretion

c. unionized or organizesd. public pension and health care plan (If

you have a pension that pays you $3,000 per month, that pension is worth $540,000.)

Private Contractor compensation profile:

a. Pay based on performance of success oforganization

b. Pay based on size of organization

c. Pay based on labor market for skill level and experience

d. No public pension or retiree health plan

Sponsoring agencies’ Board of Directors are not able to adjust salaries or compensation for effective management of the Program

Executive and employee turnover

State agency caps in place restricting the percentage of budget for salaries and wages

Sponsoring organizations return substantial sums of revenue to USDA due to labor restrictions in budget

Incentives to expand USDA program are stifled or removed

Increased responsibilities/duties not congruent with pay level

CACFP managers cannot make best employee hiring and retention decisions

Excessive turnover, loss of program continuity

CACFP managers are not adequately compensated for services in line with other federal awards programs

Independent Board authority for compensation is usurped or limited

Mountain – Rejection of reasonable merit and/or fringe benefits increases approved by Board of Directors

Midwest – Salaries capped at 75% of total administrative Revenues; Salaries/wages based on state agency pay scales; limited increase below USDA annual adjustment increase; pay caps tied to state pay increases; no SA written guidance on compensation or salary surveys

Western – Salaries fixed by state agency for management and field staff; fixed salaries unless union employee, then not applicable; salary increase limited to USDA COLA; no current salary survey performed to determine reasonable pay

Challenges:◦ Limited participation

◦ Small survey base

◦ Regional differences

◦ Organizational differences

◦ State mandated salary skew