Financial Management Tools for Program Accountability
Robert Leshin, MPAAssistant Director, Office for Nutrition Health and Safety Programs
Massachusetts Department of Elementary and Secondary Education
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Objectives Understand and become familiar with USDA school
lunch resource management regulations
Understand and become familiar with standardized federal resource management regulations for usage of federal funds
Understand and become familiar with standardized program controls used to strengthen financial effectiveness
Understand the ‘why’ behind the regulations
Massachusetts Department of Elementary and Secondary Education
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Overview Allowable Costs Source Documentation Accounting Records Financial Reporting Internal Controls Budget Controls Cash Management
Massachusetts Department of Elementary and Secondary Education
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Why so many rules and regulations?
As the steward of the nonprofit school food service account you must safeguard limited assets and ensure they are used only for authorized school food service purposes
Protect against non school food service charges!
Massachusetts Department of Elementary and Secondary Education
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Allowable Costs USDA Program regulation 7 CFR Parts 210.14 and 220.13
(i) require a school food authority to establish a nonprofit school food service account, in which all reimbursements and other revenues from SFA operations are retained and used only for the operation and improvement of the nonprofit school food service
All expenditures must conform to Federal Cost Principles 2 CFR Part 225 (formerly OMB Circular A-87) Necessary; Reasonable; Allocable
Massachusetts Department of Elementary and Secondary Education
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Necessary A cost is necessary if the Child Nutrition
Program’s authorizing statute, program regulations or applicable FNS policy establish that the nonprofit school food service cannot be operated without incurring the cost
e.g., a school food service cannot be operated without incurring the cost of appropriate food
Massachusetts Department of Elementary and Secondary Education
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Reasonable A cost is reasonable if, in its nature and
amount, it does not exceed a price that is consistent with what a reasonable person would pay under the same or similar circumstances.
Massachusetts Department of Elementary and Secondary Education
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Criteria to Help Determine Necessary & Reasonable Costs How does the cost contribute to
achieving an objective of the school food service?
Is the cost recognized as ordinary and reasonable for the operation of the school food service?
Would a prudent person find the cost to be reasonable under the circumstances?
Massachusetts Department of Elementary and Secondary Education
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Allocable A cost must be assigned to the
programs, functions, activities or other cost objectives that benefited from the school district having incurred the cost (cost allocation plan needed)
For example, school food service cannot be billed a higher share of utility costs just because the school district doesn’t have the funds
Such an action would assign the cost to a cost objective that did not benefit from it
Massachusetts Department of Elementary and Secondary Education
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Allowable or Unallowable? Food
Hamburger patties (allowable) Labor
School secretary (depends) Food service assistant (allowable)
Other Unpaid charges/bad debt (unallowable) School board dinner (depends) A new refrigerator (allowable w/ prior approval) Renovating a kitchen (depends)
Massachusetts Department of Elementary and Secondary Education
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Source Documentation POS system General Ledger Payroll Paid bills Time and attendance records Communication is key: Food Service
Director and Business Manager.
Massachusetts Department of Elementary and Secondary Education
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Accounting Records How does your program track revenues
and expenditures? Who is involved?
Do you maintain consistent methods in doing so?
Do you know how much money you take in and spend out daily/monthly?
Massachusetts Department of Elementary and Secondary Education
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Why Account for Revenues and Expenditures?
Two Reasons:
Official and,
Sensible!
Massachusetts Department of Elementary and Secondary Education
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Official Reasons 7 CFR Part 3016.20 states, “Grantees and
sub grantees must maintain records which adequately identify the source and application of funds provided for financially assisted activities.”
Proper record keeping a principle of the Generally Accepted Accounting Principles (GAAP), which is the uniform standard of guidelines for financial accounting used in school districts for compliance with Federal requirements
Massachusetts Department of Elementary and Secondary Education
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Sensible Reasons All businesses (nonprofit and for profit)
need to account for every penny of their financials in order to be successful
Need to trace all funds coming in and going out to achieve financial accountability
Protect employees (including yourself!) Be able to answer financial questions
easily and accurately from local, state and federal officials
Massachusetts Department of Elementary and Secondary Education
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Adequately Documented There is no standard definition for what
“adequately documented” means
The record of a school food service’s operation must be solid and able to stand on its own without depending on interpretation or “spin” by the program operator
Massachusetts Department of Elementary and Secondary Education
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What You Need to Track Revenue Defined as income received in exchange
for goods or services provided by the school food service department (National Food Service Management Institute NFSMI).
Examples: sales to students, prepaid sales, reimbursements, adult sales, interest, catering, vending sales etc.
Massachusetts Department of Elementary and Secondary Education
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What You Need to Track Cont’d
Expenditures Defined as costs that can be indentified
specifically with the operation of the school foodservice program (NFSMI)
Examples: Food, labor, equipment, sanitation, outreach, promotional, fees, licenses, etc.
Massachusetts Department of Elementary and Secondary Education
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Required Financial ReportingProfit & Loss Displays the results of operations for a certain time
period, showing the income received and expenses paid for a particular month
Shows financial performance for one month No beginning cash balance (starts at $0 everyone
month) Must be tracked and recorded separate from
supplemental financial report Why? You want to know your performance for a
particular month separate from your overall balance sheet.
Massachusetts Department of Elementary and Secondary Education
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Financial Reporting Cont’dSupplemental Financial Report
Balance sheet- end of month cash flow statement and status of assets and liabilities
Pulls all of your record keeping (revenues, expenditures, inventory, payroll, liabilities etc. together)
Should be filled out monthly via the ESE security portal
Why? You want to know your financial status for a period of time (throughout the whole year) not just a particular month.
Massachusetts Department of Elementary and Secondary Education
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Resource Management Budget Controls
Internal Controls
Cash Management
Massachusetts Department of Elementary and Secondary Education
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Why resource management?
Lunch aide steals more than $13,000 running a la carte line- Louisiana 2012.
FSD pleads guilty to embezzling more than $100,000- Oklahoma 2012.
Lots of smaller thefts, but all have lack of basic management controls in common
Keeps your food service operation from reaching its financial potential and from increasing its financial independence from the District
Protects employees
Massachusetts Department of Elementary and Secondary Education
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How does your food service control theft or loss?
Massachusetts Department of Elementary and Secondary Education
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Budget Control Compare actual vs. budget Who is reviewing this? (FSD, Business
Manager, both?) How often do you compare
expenditures? Cost of food & supplies used Cost of labor Food & labor percentages (of total revenue) Meals Per Labor Hour (MPLH) Cost of producing a meal
Massachusetts Department of Elementary and Secondary Education
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Internal Control Effective control and accountability for all cash, property
and other assets.
Do you have written policies/procedures with employee sign off?
Inventories- monthly (stay on top) Purchased food, commodities & non-food supplies Equipment (mark equipment)
Revenue Average Daily Participation (ADP) Meal count trends Pricing- student & adult meals, a la carte Cash handling procedures
Massachusetts Department of Elementary and Secondary Education
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Cash
Cash is a liquid, portable and desirable asset. Therefore, districts must have adequate controls to prevent theft or other misuses of cash.
Massachusetts Department of Elementary and Secondary Education
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New Meaning to “Cold Hard Cash”
Massachusetts Department of Elementary and Secondary Education
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Cash Management Written policies
How cash is handled and deposits are made Training
Ensure staff understands policies and sign off Cash Controls
Segregation of duties Proper authorization and designation of cash
handlers Adequate documents & records Physical controls Independent checks on performance
Massachusetts Department of Elementary and Secondary Education
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Cash Management Cont’dCash Controls at the Register
Minimize Time and Confusion 25 cent increments in pricing
Encourage families to pay online or times other than lunch service
Count out cash drawers after each shift Reduce suspicion
Reconcile daily cash register readings to cash deposits What is the process for discrepancies?
Massachusetts Department of Elementary and Secondary Education
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Cash Management Cont’dCash Controls at the Register
Set Overage and Shortage Limits Decide on a reasonable tolerance
Document transfers between drawers Account for inter-register exchanges in order
to properly reconcile
Massachusetts Department of Elementary and Secondary Education
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ResourcesNFSMI Financial Management Information Systemhttp://www.olemiss.edu/depts/nfsmi/Information/fmis/fmis_booklet.htm
2 CFR Part 225 (formerly OMB Circular A-87) Cost Principles for State, Local, and Indian Tribal Governments
http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=/ecfrbrowse/Title02/2cfr225_main_02.tpl
7 CFR Part 3016 Uniform Administrative Requirementshttp://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=/ecfrbrowse/Title07/7cfr3016_main_02.tpl
7 CFR 210.14 Resource Management http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=02dde6ef8db07a90198929f18099722e&rgn=div5&view=text&node=7:4.1.1.1.1&idno=7#7:4.1.1.1.1.3.1.6
7 CFR 220.13.(i) Record Keepinghttp://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=b1239e07dc80865bec89e9e7456cbb74&rgn=div5&view=text&node=7:4.1.1.1.3&idno=7#7:4.1.1.1.3.0.1.13