Indiana Department of Education School and Community Nutrition Annual Financial Report and Non-Program Foods November 2016

Annual Financial Report (AFR) Log in to CNPweb 2016 Program Year Claims Tab Report covers 7/1/2015 to 6/30/2016

Annual Financial Report (AFR)

AFR – Income Section

AFR – Expenses Section

AFR - Summary Total amount, School lunch, and School Breakfast can be negative if excess funds cover negative amount

Account Balance All balances should match school business records. Popular SBOA finding Accounts Payable – amount owed to vendors Accounts Receivable – amount owed to the school Balance of Accounts – amount in students account. Does not become income until paid to school

AFR - Summary Please do not use “calculate” button, not working correctly Can save using “Submit” button without checking the “I Certify” box Once ready to Submit , check the “I Certify” box and then “Submit”

AFR - Resources

AFR - Resources

AFR - Worksheet

Common AFR Mistakes Over 3 Months average expenses Ending Balance Negative Indirect Cost too high No Indirect Cost Rate Non-Program Food Costs negative

Food Service Account Balance Cannot Exceed an Average of 3 Months Operating Expenses Total expenses/# operating months in a year x 3 Must provide a detailed plan if higher (saving for projects, purchases, etc) Negative Balances 7 CFR 210.19(a)(1) – www.ecfr.gov We review the AFR and use the total expenses from that to calculate the average 3 months operating expenses. It is important that the Annual Financial Report reflect your actual account balances because that is how we determine an excessive balance. If the food service account balance is higher than an average 3 months operating expenses, we will require the SFA to submit a detailed plan and timeline for the use of the excess funds. This plan will need to be approved before the AFR can be approved. The SBOA will be reviewing these plans in the future to ensure that SFAs are following the plan to reduce the cash balance. If the food service account balance is truly negative, we will require a plan to bring the account current or could require the SFA to transfer non-federal funds to cover the negative balance.

Ending Negative Balance Considerations if ending balance is negative: Did LEA cover costs? – If yes, amount should be recorded in other income Loan Gift Future plan to bring account current

Indirect Costs Public Schools - LEA must have indirect cost rate calculated by IDOE School Finance in order to charge indirect costs Private Schools – If LEA has never had a calculated indirect cost rate, the 10% De minimus rate may be charged. CFR §200.414    Indirect cost calculation: Total Expenses – (Food + Equipment) * indirect cost rate = Indirect Costs

Non-Program Food Costs Negative Column J on AFR Non-Program foods consist of Ala Carte sales, Adult Meals, extra entrees, milk only, catering Negative Column J – indicates that money was lost on non-program foods and that NSLP federal reimbursement funds are supplementing non-program foods

Common AFR Errors Beginning balance does not match ending balance from last year No Labor Expense allocated out to Non-Program Food Column J The total in column A does not equal the sum of the numbers ($) in columns B thru J

Non-Program Foods

Revenue from Non-Program Foods During an administrative review the field staff will review the non-program food costs and revenue. To ensure that revenue from the sale of non-program foods generate at least the same proportion as they contribute to the food costs. Revenue from reimbursable meals cannot support the costs of non-program foods.

Non-Program Foods Non-program Foods – Foods and beverages sold in a participating school that are purchased using funds from the non-profit school food service account. Includes a la carte items, adult meals, items purchased with non-profit food service account funds for vending machines, fundraisers, school stores and for catered or vended meals.

Non-Program Foods Revenue IDOE Website http://www.doe.in.gov/nutrition/snp-pricing-guidance

Non-program Revenues and Costs Be able to distinguish between: Food costs of reimbursable meals Food costs of non-program foods Revenue from non-program foods Total revenue Cost of Reimbursable Meal Food refers to the amount paid for food purchased to be a part of a reimbursable meal. Cost of Nonprogram Food refers to the amount paid for food sold in a participating school other than a reimbursable meal and is purchased using funds from the school food service account of the school. This is a broad definition and includes beverages, a la carte foods, and any exta reimbursable foods that are sold such as an extra slice of pizza or carton of milk Total Food Cost refers to the total amount paid for food for both reimbursable meals and nonprogram food purchased with the school food service account. Total Nonprogram Food Revenue refers to all funds accumulated to the school food service account associated with the sale of nonprogram foods. Total Revenue refers to all funds accumulated to the school food service account. Minimum portion of revenue to nonprogram funds – Cost of Nonprogram Food/Total Food Costs

Non-Program Foods IDOE field staff will review the following to determine risk and compliance: Food costs of reimbursable meals Food costs of non-program foods Revenue from non-program foods Total Revenue

Revenue from Non-Program Foods Revenue Ratio – non-program revenue _________________________________ (program revenue + non-program food revenue) Food Cost Ratio – cost of non-program foods ____________________________________ (cost of program foods + cost of non-program foods) Revenue Ratio – non-program revenue / total revenue Food Cost Ratio – cost of non-program food / total food costs

Revenue from Non-Program Foods Tool Non-program Revenue Calculator Enter the cost for reimbursable meal, cost of nonprogram food and total revenue Cost for Reimbursable Meal Food   Cost of Nonprogram Food Total Food Costs $ - Total Nonprogram Food Revenue Total Revenue Minimum portion of revenue from nonprogram funds 0% Minimum Revenue Required from the Sale of Nonprogram Foods $ - Additional Revenue Needed to Comply Cost of Nonprogram Food/ Total Food Costs Minimum portion of nonprogram funds x Total Revenue Minimum Revenue required from the Sale of Nonprogram Food - Total Nonprogram Food Revenue

Revenue from Non-Program Foods Example: Total Costs: $1,000,000 (all expenses) Total Food Costs: $500,000 Non-program Food Costs: $50,000 Reimbursable Meals Food Costs: $450,000 Total Revenue: $1,000,000 What is the minimum non-program food revenue?

Revenue from Non-Program Foods Tool Non-program Revenue Calculator Enter the cost for reimbursable meal, cost of nonprogram food and total revenue Cost for Reimbursable Meal Food   Cost of Nonprogram Food Total Food Costs Total Nonprogram Food Revenue Total Revenue Minimum portion of revenue from nonprogram funds  (50,000/500,000) Minimum Revenue Required from the Sale of Nonprogram Foods Additional Revenue Needed to Comply $ $450,000 $50,000 $500,000 $1,000,000 Using the information from the previous screen here is a partially completed tool. If the amount in the Total Nonprogram Food Revenue box (YELLOW) is greater than the Minimum Revenue Required from the Sale of Nonprogram Foods (BLUE) then you are meeting the requirements. If it is less than the minimum then you would need additional revenue to meet the requirement (RED). That would mean you need to raise the prices of your Nonprogram Foods in order to be in compliance. 10% $100,000 - needs to be >

Revenue from Non-Program Foods Revenue Requirement Minimum proportion of revenue required from non-program food sales $50,000/$500,000 = 10% revenue for non-program foods Minimum dollar revenue required from non-program food sales 10% x $1,000,000 = $100,000 In this example if the SFA earns $100,000 in revenue from non-program food sales, it is in compliance. So, if the SFA has less than $100,000 in revenue from non-program foods, the SFA needs to _______ non-program food prices. Proportion of revenue for non-program foods: non-program food costs / total food costs ($50,000 / $500,000) Multiply that percentage by the total revenue (10% x $1,000,000 = $100,000) INCREASE

How to track? Point of Sale System Production Records Add keys for additional items, extra entrees, etc Is there a cost component? Some POS systems allow for SFA costs of items to be entered into system Production Records Use production records to help calculate number of extra entrees or sides Also can be used to calculate the number of entrees sold as extras

How to track? Spreadsheet Description Price Our Cost 15-Aug 15-Sep 15-Oct Total Revenue Costs Profit Milk Low Fat 8oz. $0.50 $0.22 4,310 3,132 1,921 31,098 $15,549.00 $6,841.56 $8,707.44 Milk Low Fat Pint $1.50 $0.72 7,542 5,419 2,495 40,053 $60,079.50 $28,838.16 $31,241.34 Bottled Water 12oz. $0.75 $0.25 3,201 3,458 1,762 29,117 $21,837.75 $7,279.25 $14,558.50 Large Drink $1.25 $0.74 2,492 3,412 1,902 22,185 $27,731.25 $16,416.90 $11,314.35 String Cheese $0.40 $0.21 1,106 903 617 7,995 $3,198.00 $1,678.95 $1,519.05 DejaBlue Water $1.00 $0.61 6,147 5,495 3,736 44,717 $44,717.00 $27,277.37 $17,439.63 Juicy Juice Box $0.28 1,007 1,203 880 9,825 $7,368.75 $2,751.00 $4,617.75 Granola Bar Assorted $0.29 1,047 229 153 3,979 $2,984.25 $1,153.91 $1,830.34 WG Cookie 10,725 9,896 4,602 72,988 $36,494.00 $16,057.36 $20,436.64 Fruit Snacks $0.80 $0.52 3,802 5,237 3,246 40,212 $32,169.60 $20,910.24 $11,259.36 Assorted Large Chips $0.27 21,770 19,963 12,181 187,595 $187,595.00 $50,650.65 $136,944.35 Ice Cream Cup $0.31 1,492 2,104 1,187 13,816 $10,362.00 $4,282.96 $6,079.04 Large Ice Cream $0.43 4,516 7,850 3,647 54,773 $54,773.00 $23,552.39 $31,220.61 $504,859.10 $207,690.70 $297,168.40

Adult Meal Prices Adult meal prices must be high enough so they are not supported by reimbursable meal revenue as well. Adult meals must be the same food and quanity that is included in the student meal. A couple different approved methods to calculate the minimum adult meal price.

Adult Meal Prices Free meal reimbursement + Value of USDA entitlement (per meal) + Value of any bonus USDA foods used to prepare meals $3.22 (16-17 free reimbursement rate + extra $0.06) + $0.23 (commodity value rounded up) = $3.45 (or higher if bonus USDA foods are received)

Adult Meal Prices Student Paid Meal Price + Paid Reimbursement + Value of USDA entitlement (per meal) + Value of any bonus USDA foods used to prepare meals $2.50 (16-17 student paid lunch price) + $0.36 (15-16 paid reimbursement rate + extra $0.06) + $0.23 (commodity value) = $3.09 (or higher if bonus USDA foods are received)

Resources USDA Policy Memo SP 39-2011 – Revised, Child Nutrition Reauthorization 2010: Guidance on paid Lunch Equity and Revenue from Non-Program Foods USDA Policy Memo SP 13-2014 – School Food Service Account Revenue from the Sale of Non-Program Foods Guidance on Paid Lunch Equity and Revenue from Non-Program Foods

QUESTIONS

State Agency Contact For questions about Paid Lunch Equity, or Financial Management of the Food Service Account, contact: Tina Herzog Dani Powers cherzog@doe.in.gov dpowers@doe.in.gov (317) 232-0872 (317) 234-4378