Financial Management

School Nutrition Programs

Financial Management System Requirements

This memorandum describes the School Nutrition Programs (SNP) requirements for school food authorities to maintain a financial management system that documents the revenues and expenses of the nonprofit school food service, and related requirements for the operation of the nonprofit school food service.

Nonpublic schools and residential child care institutions with financial management systems that are not already in compliance with these requirements must implement the financial management systems as described in this memorandum effective July 1, 2011. Public schools are already in compliance with the financial management system requirements, as described below.

As part of the agreement to participate in SNP, school food authorities agree to:

- Maintain a nonprofit school food service, which is defined as “all food service operations conducted by the school food authority principally for the benefit of schoolchildren, all of the revenue from which is used solely for the operation or improvement of such food services.”
- Limit net cash resources to an amount that does not exceed three months average expenditures for its nonprofit school food service;
- Maintain a financial management system that documents the revenues and expenses of the nonprofit school food service, in accordance with U.S. Department of Agriculture and Minnesota Department of Education (MDE) requirements.

(7 CFR § 210.2, § 210.9, § 210.14, § 210.19)

All school food authorities must make their accounting system, including complete documentation of school food service revenues and expenses, available at the time of administrative review and at any time upon request.

Public Schools

Public schools meet financial management standards for documentation of revenues and expenses by their required reporting in Uniform Accounting and Reporting Standards (UFARS), Fund 02.

If a public school food authority has excess funds in the school food service account, that is, its net cash resources exceed its limitation amount, the school food authority must contact MDE-Food and Nutrition Service (FNS) and develop a plan to reduce excess cash resources.

Nonpublic Schools and Residential Child Care Institutions

Nonpublic schools and residential child care institutions may need to implement procedures as described here to bring their financial management system into compliance. These procedures must be implemented effective July 1, 2011.

Documentation of Revenues and Expenses

The Annual Financial Report form (Excel) is available on the Financial Management – SNP page of the MDE website. The Instructions for completing the Annual Financial Report form are attached to this memorandum.

A nonpublic school or residential child care institution must use the Annual Financial Report form to document food service revenues and expenses each month, unless it already has a financial management system in place for the food service that meets requirements. For example, a nonpublic school or an institution may already be meeting this requirement by having a separate checking account for the school food service or maintaining a ledger of revenues and expenses that are specific to the school food service.

Limitation on Net Cash Resources / Reduction of Excess Funds

At the end of each fiscal year, a nonpublic school or an institution must compare its net cash resources to its average food service expenditures and ensure that the food service does not have excess funds. See the Net Cash Resources section in the lower corner of the Annual Financial Report (Excel file). Also refer to the Instructions for the Annual Financial Report form that are attached to this memorandum. The limitation on net cash resources must be checked each year, regardless of whether the Annual Financial Report, or another system, is used to record revenues and expenses.

Program regulations limit net cash resources in the nonprofit school food service to no more than three months average expenditures in the school food service. If your school food authority’s net cash resources exceed that amount, notify MDE-FNS of how much “excess funds” you have in the food service account, and establish a plan to reduce excess cash resources. Excess funds might be reduced by increased food purchases, by purchasing needed food service equipment, etc. Excess funds may not be used to reduce paid lunch prices except to the extent that the school food authority’s average paid lunch prices exceed the minimum paid lunch price required by program regulations.

If you have any questions about these requirements, contact MDE-FNS at 651-582-8526, 800-366-8922 (Minnesota toll-free) or e-mail mde.fns@state.mn.us.

Instructions

School Nutrition Programs - Annual Financial Report

These instructions apply to the Annual Financial Report form (Excel), which is available on the Financial Management – SNP page of the Minnesota Department of Education (MDE) website.

1. Monthly Recording of Revenues and Expenses

(If a ledger or separate checking account is used to record food service revenues and expenses, skip to # 2.)

If needed, reorder the monthly columns to correspond to your fiscal year.

Each month, record in the shaded cells all of the revenues and expenses by category for the nonprofit school food service.

The cell for Profit/Loss for the month will self-populate, based on the revenues and expenses that have been entered.

Enter the number of meals served during the month in the shaded cell. The cell for Cost per Meal for the month will self-populate.

Yearly totals for each row will self-populate at the right side of the spreadsheet.

2. Annual Review of Net Cash Resources

At the end of your fiscal year, complete the shaded cells in the Net Cash Resources section located in the corner of the Annual Financial Report. If a ledger or separate checking account has been used to record revenues and expenses, complete only this Net Cash Resources section of the Annual Financial Report and attach it to the ledger or checking account information.

To complete the Net Cash Resources section, enter your Cash/Investments/Current Receivables and your Current Payables as of the end of the fiscal year. See definitions of terms below. The amount of Net Cash Resources will self-populate. The “limitation” on Net Cash Resources, which is three months average food service expenditures during the year, will self-populate.

If your Net Cash Resources do not exceed the Limitation, your food service does not have excess funds and Excess Funds will self-populate as “N/A.”

If your Net Cash Resources exceed the Limitation, your school food service has excess funds that must be reduced in order to comply with the program requirements for a nonprofit school food service. Notify MDE-FNS (651-582-8526, 800-366-8922 or e-mail mde.fns@state.mn.us) of the amount of excess funds and your plan to reduce excess cash resources.

Definitions

“Net cash resources” means current nonprofit food service assets net of current nonprofit food service liabilities.

“Current receivables” means amounts due to the nonprofit food service expected to be collected within the current accounting fiscal year or within three months of the end of the current accounting fiscal year.

“Current payables” amounts owed to vendors, employees, etc, expected to be paid within the current accounting fiscal year or within three months of the end of the current accounting fiscal year.

“Limitation” means average monthly food service expenditures times three. For schools, determine average monthly expenditures by dividing the expenditures for the full year by nine, unless the school is year-round or has a summer program.

“Excess funds” means the amount by which Net Cash Resources exceeds the Limitation. If this amount is positive, contact MDE-FNS as described above. If the cell for excess funds displays “N/A,” then your nonprofit food service’s net cash resources do not exceed the limitation.