This is a summary of major requirements from federal and state law for a financial management system and related requirements for the operation of the nonprofit school food service that apply to school food authorities (SFA) participating in School Nutrition Programs (SNPs).
SFAs must maintain a financial management system as required by the Minnesota Department of Education (MDE) to document the revenues and expenses of the nonprofit school food service. For school districts, the financial management system is the Uniform Financial Accounting and Reporting Standards (UFARS).
In the agreement to participate in SNP, an SFA agrees to:
Applicable sections of the federal regulations for the National School Lunch Program, 7 Code of Federal Regulations (CFR) 210 are:
7 CFR § 210.9(b): Agreement provisions regarding financial management.
7 CFR § 210.14: Resource management.
7 CFR § 210.19(a): Additional responsibilities.
An SFA must make its accounting system, including complete documentation of school food service revenues and expenses, available at the time of program administrative reviews and at any time upon request.
Public schools meet financial management standards for documentation of revenues and expenses by their required reporting in UFARS, Fund 02.
Nonpublic schools and residential child care institutions may need to implement procedures so that their financial management system meets program standards.
SFAs must limit net cash resources in the nonprofit school food service account to no more than the SFA’s average expenditures for three months.
At the end of each fiscal year, an SFA must compare its net cash resources to its average food service expenditures to determine whether it has any excess funds, that is, whether SFA’s net cash resources exceed three months average expenditures for the SFA. If using the Financial Report Form for Nonpublic Schools, this comparison of net cash resources to average expenditures is shown in the Net Cash Resources section of the form.
An SFA with excess funds in the school food service account must notify MDE-Food and Nutrition Service of the amount of excess funds and the plan to reduce excess funds. Allowable expenses that excess funds may be used for include:
SFAs are required to annually compare program and non-program funds to ensure that non-program foods generate sufficient revenues so that prices for non-program foods are not subsidized by revenues from program meals. For details, refer to Minimum Revenue from Nonprogram Foods on the SNP/Financial Management page of the MDE website.
State law requires public schools to attribute food service revenues and expenditures to a school food service fund. Public schools are required to adopt the UFARS system for financial management and reporting.
UFARS requires expenses to be allocated by program, i.e., by lunch, breakfast, milk, a la carte, and any other federal nutrition program that the SFA participates in such as Summer Food Service Program and Child and Adult Care Food Program.
The UFARS Manual is available online. View the UFARS Manual.
Costs that may be charged either to the food service fund or the general fund:
- Processing Applications for Educational Benefits to provide school meal benefits.
- Accounting for meals.
- Preparing and serving food.
- Providing kitchen custodial services.
- Other expenses involving the preparing of meals or the kitchen section of the lunchroom.
Costs that must be charged to the general fund:
- Lunchroom supervision.
- Lunchroom custodial services.
- Lunchroom utilities.
- In limited situations, if the food service fund has a surplus for three successive years, lunchroom costs charged to the general fund may be recoded to the food service fund.
- An SFA that participates in the Community Eligibility Provision (the SFA does not need to process Applications for Educational Benefits for the purpose of providing school meal benefits) and continues to process Applications for Educational Benefits must charge those costs to the general fund.
Capital expenditures must be made from the general fund, unless the unreserved balance in the food service fund from the last fiscal year is greater than the equipment cost. (MDE approval is no longer needed for food service capital expenditures.)
Capital expenditures are:
If a school district has a deficit in the food service fund on June 30 and the deficit is not eliminated during the following year, the deficit must be eliminated (by June 30 of the second year) by a permanent fund transfer from the general fund, unless a plan as described in the next paragraph has been approved by MDE-Food and Nutrition Service.*
An SFA may incur a deficit in the food service fund for up to three years, without any permanent transfer, if:
* Exception: If a school district with a food service deficit contracted with a food service management company during the period in which the deficit accrued, the deficit must be eliminated by a payment from the company in the year that the deficit occurred.
A school district with superintendent or fiscal manager costs that are attributable to the food service may charge those costs to the food service fund up to the maximum amount defined below, unless the SFA has a food service director or food service management company.
That portion of superintendent or fiscal manager costs attributable to the food service may be charged to the food service fund at a rate that does not exceed the average food service director wage in Minnesota as documented by the latest wage information available on the federal Bureau of Labor Statistics (BLS) website. View BLS information on Minnesota wages by occupation code. Scroll down to the row for Occupation Code 11-9051 - Food Service Managers and find the mean hourly wage.