Financial Management Tools for Program Accountability

Financial Management Tools for Program Accountability

Robert Leshin, MPAAssistant Director, Office for Nutrition Health and Safety Programs

Massachusetts Department of Elementary and Secondary Education

2

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


3

Overview Allowable Costs Source Documentation Accounting Records Financial Reporting Internal Controls Budget Controls Cash Management


4

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!


5

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


6

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


7

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.


8

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?


9

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


10

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)


11

Source Documentation POS system General Ledger Payroll Paid bills Time and attendance records Communication is key: Food Service

Director and Business Manager.


12

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?


13

Why Account for Revenues and Expenditures?

Two Reasons:

Official and,

Sensible!


14

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


15

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


16

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


17

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.


18

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.


19

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.


20

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.


21

Resource Management Budget Controls

Internal Controls

Cash Management


22

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


23

How does your food service control theft or loss?


24

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


25

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


26

Cash

Cash is a liquid, portable and desirable asset. Therefore, districts must have adequate controls to prevent theft or other misuses of cash.


27

New Meaning to “Cold Hard Cash”


28

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


29

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?


30

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


31

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

http://www.olemiss.edu/depts/nfsmi/Information/fmis/fmis_booklet.htm





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

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

http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&sid=b1239e07dc80865bec89e9e7456cbb74&rgn=div5&view=text&node=7:4.1.1.1.3&idno=7



Documents

Financial Management Tools for Program Accountability