Financial Management: A Course for School Nutrition Directors (12 Hour)

1
Financial Management A Course for School
Nutrition Directors (12 Hour)

• National Food Service Management Institute

2
Importance of Financial Management

• Objective Know the importance of financial
  management to nutritional integrity and fiscally
  sound operations in the school nutrition program

2
3
Can you answer these financial management
questions about the school nutrition program in
your district?

• Main sources of revenue?
• Percentage of total revenue attributed to each
  source?
• Expenditure categories?

4
More questions?

• Cost to produce a meal?
• Percent of revenue spent for labor or food?
• Labor productivity index (meals per labor hour)?

5
More questions?

• Net gain or loss over the past 3 years?
• How many employees understand the importance of
  cost controls to the success of the program?

6
Defining Financial Management

• Financial Management can be defined as
• The process of defining the financial goals and
  program objectives for the school nutrition
  programs, and
• Implementing activities to attain those goals
  through the effective use of resources

7
Activities for More Effective Financial Management

• School nutrition programs should
• plan through the budget process,
• apply more efficient cost control measures,
• increase productivity, and
• identify ways to increase resources.

8
Role of the School Nutrition Director in Managing
Finances

• Management of financial resources
• Maintain financial accountability
• Involve administrators, board members, cafeteria
  managers, and nutrition staff to identify goals
• Promote team approach
• Assess, monitor, and evaluate program funds
• Maintain on-going training

9
Importance of Effective Communication and Ethical
Behavior

• Objective Know how to communicate effectively
  and behave ethically in the financial management
  of the school nutrition program

10
Definition of Communication

• Communication is the exchange of ideas, messages,
  and information by speech, signals, writing, and
  behavior
• Effective communication occurs only when the
  receiver understands the information or idea that
  the sender intended to transmit

11
How Much Do We Remember?

• ___ of what we hear?
• ___ of what we see?
• ___ of what we see and hear?
• ___ of what we see, hear, and say?
• ___ of what we see, hear, say, and do?

12
We Remember

• 20 of what we hear.
• 30 of what we see.
• 50 of what we see and hear.
• 70 of what we see, hear, and say.
• 90 of what we see, hear, say, and do.

13
Importance of Effective Comunication

• Communication is important to identify existing
  political issues in the district as they relate
  to school nutrition program finances

14
Stakeholders in the SN Program

• District administrators
• School board members
• School business officials
• Principals
• Teachers
• Cafeteria managers
• SN employees
• Students
• Parents
• Community

15
Importance of Ethics
16
Definition of Ethics

• Webster defines ethics as
• Principles of right or good conduct

17
Three Rs of Business Ethics

• Respect
• Responsibility
• Results

18
Development of a Financial Management System

• Objective Know the basic financial recording
  processes and procedures for directing the
  operation of a school nutrition program

19
Financial Management Information System

• Provides a uniform and consistent financial
  reporting structure
• Provides meaningful and timely financial
  management information
• Supports federal reporting requirements

20
Financial Management Information System (cont.)

• Adheres to Generally Accepted Accounting
  Principles (known as GAAP)
• Provides a basis for determining accountability

21
Generally Accepted Accounting Principles (GAAP)

• uniform standard of guidelines for financial
  accounting established by the Governmental
  Accounting Standards Board (GASB)
• used in school districts for compliance with the
  Federal Department of Education requirements

22
NFSMI Financial Management Information System

• Available at
• www.nfsmi.org

23
Classification of Expenditures

• Labor
• Employee Benefits
• Professional and Technical Services
• Property Services
• Food and USDA Foods

• Supplies
• Capital Equipment
• Miscellaneous
• Indirect Costs
• Fund Transfer-Out

24
Financial Reporting of Revenue and Expenditure
Transactions

• Objective Know how to use financial reports
  that are consistent with federal and state
  guidelines to achieve a financial management
  system that supports a cost effective program
  with high integrity

25
Types of Financial Reports

• Statement of Revenue and Expenditures (Net
  Gain/Loss Statement)
• Statement of Net Assets (Balance Sheet)
• Budget

26
Statement of Revenue and Expenditures

• Revenue by source
• Expenditures by category
• Net/gain loss for the statement period
• Comparison of current month with previous months
  information and year-to-date information

27
Statement of Net Assets

• Assets
• Cash balance, receivables due, and value of
  inventories
• Liabilities
• Outstanding payables
• Deferred revenue
• Sales tax owed (when appropriate)
• Fund Balance

28
The Budget as a Management Tool

• The budget assists in managing the
• school nutrition program by
• forecasting revenue,
• identifying how revenue will be allocated for
  expenditures, and
• predicting how much money will be in the fund
  balance at years end.

29
Methods of Budgeting

• Incremental (baseline) Previous years budget
  is starting point. Adjustments made to each line
  item to reflect expected changes
• Zero Start with zero for each line item and
  build according to expectations.
• Combination Uses zero for some items and
  incremental for other items

30
School Budgets

• Public Documents
• The school nutrition program is a nonprofit
  operation conducted for the benefit of children.
• The program is tax supported.
• Public has a right to expect the nutritional
  needs of children are met in the most cost
  effective way.

31
Setting a Meal Standard for Financial Management
and Analysis

• Objective Know how to use financial
  management tools and standards to operate a
  financially and nutritionally accountable school
  nutrition program consistent with federal and
  state guidelines

32
Using Meal Equivalents in Program Analysis to
Measure Performance

• By converting food sales to meal equivalents,
  the school nutrition director can determine
• meal cost,
• labor productivity ratios, and
• the average revenue earned per meal/meal
  equivalent.

33
Meal Equivalent Conversion Formulas

• 1 lunch 1 lunch
• 3 breakfasts 2 lunches (2/3 .67)
• 3 snacks 1 lunch (1/3 .33)
• other food sales
• revenue from sales
• current free lunch reimbursement current USDA
  Foods value per lunch

34
Managing Revenue in School Nutrition Programs

• Objective Know how to analyze, interpret, and
  use revenue data for program evaluation and
  improvement.

35
Revenue Accountability

• USDA mandates accountability
• for all revenue received,
• how that revenue is dispersed, and
• that the revenue generated is sufficient to
  sustain a nutrition program that serves food high
  in quality and nutritional value.

36
Revenue Analysis

• Calculate average revenue per meal or meal
  equivalent
• Establish consistent guidelines for pricing meals
  and other food items for sale
• Compare revenue generated per meal with costs per
  meal

37
Why its important to compare revenue earned with
meal cost

• This comparison is useful because
• it helps determine if and where revenue needs to
  be increased,
• it allows you to analyze revenue by source, and
• it identifies areas in which revenue should be
  monitored for revenue loss.

38
Setting Meal Prices

• Average Lunch Cost (2.56) minus
• Section 4 reimbursement (0.24) minus
• USDA Foods Value (0.2/75) yields
• Lunch Base Price 2.1125
• The projected average lunch cost of 2.56 is a
  hypothetical figure for illustrative purposes
  only. Many school districts project meal costs
  for the new school year based on anticipated
  increases in food, labor, and other
  considerations, and then use the formula to
  determine a base price for each meal served.
• Rates shown in this slide are for school year
  2008-2009

39
Considering State Funds When Setting Meal Prices

• Consider
• Is the state subsidy provided as
• a guaranteed reimbursement per meal,
• lump sum that is subject to annual change, and/or
• supplement funds to cover specific costs?
• Is the school district nutrition program
  financially viable?

40
Focus of School Nutrition Programs

• The main focus of the school nutrition program is
  to provide good nutrition that promotes the
  health and wellness of students so they can be
  more productive in the classroom.

41
Types of Nonreimbursable School Day Food Sales

• Adult meals
• Sale of a second meal to a student
• Individual components of the reimbursable meal
  such as milk
• Other food items not on the menu (a la carte)

42
Desired Food Cost Percent Mark-up

• Steps to establish a base selling price
• Determine raw food costs.
• Identify the desired food-cost percentage for
  school nutrition program.
• Divide the food item raw cost by the
• desired food cost percent.

43
Nonreimbursable Foods Sold Away from Campus or
Outside School Day

• Catered meals
• Contract meals that do not qualify for
  reimbursement (Some meals such as day care might
  qualify for reimbursement.)
• 3. Special school function meals such as athletic
  banquets

44
Managing Expenditures in the School Nutrition
Program

• Objective Know how to analyze, interpret, and
  use expenditure data for program evaluation and
  improvement

45
Expenditure Analysis

• Analyzing financial reports can provide
  information about
• patterns or trends,
• significant changes in costs categories,
• deviations from financial goals,
• possible abuse or theft, and
• transaction errors.

46
Types of Expenditure Analysis

• Total costs to produce a meal
• Meal costs per expenditure category
• Percentages of operational costs to total revenue
• Costs to produce a meal compared with the average
  revenue generated per meal

47
Meal Costs Deviations

• Higher food costs at the beginning of the year
  due to larger than normal food purchases
• Purchase of a large ticket item
• Unplanned large repair bills

48
Food Cost Percentage to Total Revenue

• Formula Costs of Purchased Food
• Total Revenue
• Example 16,500 (food costs)
• 30,000 (revenue)
  
  
• .55 x 100 or 55
• 55 cents from each dollar generated was used to
  purchase food.

49
What do Cost Percentages Mean?

• If total of all cost percentages is
• less than 100, operating balance increases.
• equal to 100, program breaks-even.
• more than 100, operating balance decreases.

50
Comparing Revenue to Expenditures

• Comparing revenue to expenditures tells us
• total net gain/loss to the school nutrition
  program expressed in dollars,
• percent of gain/loss expressed in percentage of
  revenue, and
• net gain/loss per meal or meal equivalent.

51
Controlling Food and Labor Costs in School
Nutrition Programs

• Objective Know how to apply cost control
  measures to operate a financially sound program
  with nutritional integrity

52
Meals Per Labor Hour

• Number Meals/Meal Equivalents
• Number of Paid Productive Labor Hours
• Example
• 338 total meals/meal equivalents
• 24 paid productive labor hours
• 14.08 or 14 meals per labor hour

53
Using Participation as a Financial Management Tool

• Used as a forecasting tool to
• prevent waste in excess labor hours and
  overproduction of food.
• reduce customer dissatisfaction because of
  inadequate staff and too little food prepared for
  the number served.

54
Calculating the cost of food used helps to

• determine if costs are within guidelines,
• ascertain if there are sufficient funds to pay
  expenditures,
• establish the cost for each meal equivalent
  served, and
• prevent waste and food theft through monitoring
  food use.

55
Calculating Cost of Food Used

• Beginning Inventory (purchased and USDA Foods)
• Total Purchases (purchased and USDA Foods)
• Total Food Available
• - Ending Inventory (purchased and USDA Foods)
• Cost of Food Used

56
Example of Calculations for Cost of Food Used
Example Annually Monthly
Beginning Inventory 8,000 8,000
Food Purchases 300,000 25,000
Food Available 308,000 33,000
Less ending inventory - 7,000 - 7,000
Cost of Food Used 301,000 26,000
57
USDA Single Inventory Guidance

• Inventories of donated USDA Foods no longer must
  be separate from inventories of other foods.
• Most USDA Foods are packed with commercial labels
  instead of USDA labels.
• Procedures differ from state to state, and some
  states continue to maintain two inventories.
• Follow the policies of your state and district.

58
Financial Planning and Budget Development

• Objective Know the importance of using
  forecasted operational revenues and expenditures
  when developing a financial plan and budget for
  school nutrition programs

59
Financial Planning and Budgeting Categories for
Consideration

1. Customer Satisfaction
2. Internal Organization
3. Financial Aspects
4. Innovation
5. Trends

60
Developing and Analyzing a School Nutrition Budget

• Objective It is important for school nutrition
  directors to understand the importance of using
  the budget as an analysis tool and control
  document

61
Tools to Analyze the Financial Status of School
Nutrition Programs

• Objective Identify appropriate tools and
  resources to analyze the school nutrition
  programs financial status

62
Internet Resources for Child Nutrition
Programs

• United States Department of Agriculture (USDA)
• National Food Service Management Institute
  (NFSMI)
• School Nutrition Association (SNA)

62
63
Follow-up Suggestions, Post Assessment, and
Course Evaluation

• Objective Recall the benefits of financial
  information as it relates to your school
  nutrition programs