Orientation to School Nutrition Management Seminar Financial Management
Can you answer these financial management questions about the school nutrition program in your district? <ul><li>Main sour...
More questions? <ul><li>Cost to produce a meal </li></ul><ul><li>Percent of revenue spent for labor or food </li></ul><ul>...
More questions? <ul><li>Net gain or loss over the past 3 years </li></ul><ul><li>How many employees understand the importa...
Defining Financial Management <ul><li>Financial Management can be defined as:  </li></ul><ul><li>The process of defining t...
Activities for More Effective Financial Management <ul><li>School nutrition programs should </li></ul><ul><ul><li>use the ...
Role of the School Nutrition Director in Managing Finances <ul><li>Management of financial resources </li></ul><ul><li>Acc...
Development of a Financial Management Information System <ul><li>Objective:  </li></ul><ul><li>Know the basic financial re...
Financial Management Information System: <ul><li>Uniform and consistent financial reporting structure </li></ul><ul><li>Me...
NFSMI Financial Management Information System <ul><li>Available at: </li></ul><ul><li>http://www.nfsmi.org </li></ul>
Classification of Expenditures <ul><li>Labor </li></ul><ul><li>Employee Benefits </li></ul><ul><li>Professional and Techni...
Financial Reporting of Revenue and Expenditure Transactions <ul><li>Objective: </li></ul><ul><li>Know how to use financial...
Types of Financial Reports <ul><ul><li>Statement of Revenue and Expenditures (Net Gain/Loss Statement) </li></ul></ul><ul>...
Statement of Revenue and Expenditures <ul><li>Revenue by source </li></ul><ul><li>Expenditures by category </li></ul><ul><...
Statement of Net Assets <ul><li>Assets </li></ul><ul><ul><li>Cash balance, receivables due, and value of inventories </li>...
The Fund Balance <ul><li>The school nutrition director can use the Fund Balance reported on the Statement of Net Assets to...
The budget assists in managing the school nutrition program by: <ul><li>forecasting  revenue </li></ul><ul><li>identifying...
Methods of Budgeting <ul><li>Incremental   (baseline) –  Previous year’s budget is starting point.  Adjustments made to ea...
Setting a Meal Standard for Financial Management and Analysis <ul><li>Objective: </li></ul><ul><li>Know how to use financi...
Using Meal Equivalents in Program Analysis  <ul><li>By converting food sales to meal equivalents, the school nutrition dir...
Meal Equivalent Conversion Formulas <ul><li>1 lunch =  1  lunch </li></ul><ul><li>3  breakfasts =  2  lunches (2/3 = .66) ...
Managing Revenue in School Nutrition Programs <ul><li>Objective: </li></ul><ul><li>Know how to analyze, interpret, and use...
Revenue Management Accountability <ul><li>USDA mandates that the school food authority must maintain a high level of accou...
Comparing Revenue Earned per Meal with Meal Cost <ul><li>This comparison is useful because  </li></ul><ul><ul><li>It helps...
Pricing School Meals  <ul><li>Formula:  </li></ul><ul><li>Average Lunch Cost   minus   </li></ul><ul><li>Section 4 reimbur...
Considering State Funds When Setting Meal Prices <ul><li>Consider: </li></ul><ul><li>Is the state subsidy provided as  </l...
Focus of School Nutrition Programs <ul><li>The main focus of the school nutrition program is to provide  good nutrition  t...
Types of Nonreimbursable School Day Food Sales <ul><li>Adult  meals </li></ul><ul><li>Sale of a  second  meal to a student...
Nonreimbursable Foods Sold Away from Campus or Outside School Day <ul><li>Catered meals  </li></ul><ul><li>Contract meals ...
Managing Expenditures in the School Nutrition Program <ul><li>Objective: </li></ul><ul><li>Know how to analyze, interpret,...
Expenditure Analysis <ul><li>Analyzing financial reports can provide information about: </li></ul><ul><ul><li>Patterns  or...
Types of Expenditure Analysis  <ul><li>Total costs to produce a meal </li></ul><ul><li>Meal costs per expenditure category...
Meal Costs Deviations <ul><li>Higher food costs at the beginning of the year due to larger than normal purchases </li></ul...
Food Cost Percentage to Total Revenue <ul><li>Formula:  Costs of Purchased Food </li></ul><ul><li>Total Revenue </li></ul>...
What do Cost Percentages Mean? <ul><li>If total of all costs percentages is: </li></ul><ul><li>Less than 100%- operating b...
Comparing Revenue to Expenditures <ul><li>Comparing revenue to expenditures  tells us </li></ul><ul><li>Total net gain/los...
Controlling Food and Labor Costs in School Nutrition Programs <ul><li>Objective: </li></ul><ul><li>Know how to apply cost ...
Meals Per Labor Hour <ul><li>Number Meals/Meal Equivalents </li></ul><ul><li>Number of Paid Labor Hours </li></ul><ul><li>...
Using Participation as a Financial Management Tool <ul><li>Used as a forecasting tool to: </li></ul><ul><li>Prevent waste ...
Planning and Budgeting <ul><li>Objective: </li></ul><ul><li>Understand the importance of the budget as a control document....
Budget Planning <ul><li>Establish long-term goals 5 to 10 years </li></ul><ul><li>Project revenue based on </li></ul><ul><...
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Orientation to

  1. 1. Orientation to School Nutrition Management Seminar Financial Management
  2. 2. Can you answer these financial management questions about the school nutrition program in your district? <ul><li>Main sources of revenue </li></ul><ul><li>Percentage of total revenue attributed to each sources </li></ul><ul><li>Expenditure categories </li></ul>
  3. 3. More questions? <ul><li>Cost to produce a meal </li></ul><ul><li>Percent of revenue spent for labor or food </li></ul><ul><li>Labor productivity index (meals per labor hour) </li></ul>
  4. 4. More questions? <ul><li>Net gain or loss over the past 3 years </li></ul><ul><li>How many employees understand the importance of cost controls to the success of the program </li></ul>
  5. 5. Defining Financial Management <ul><li>Financial Management can be defined as: </li></ul><ul><li>The process of defining the financial goals and program objectives for the school nutrition programs, and </li></ul><ul><li>Implementing activities to attain those goals through the effective use of resources </li></ul>
  6. 6. Activities for More Effective Financial Management <ul><li>School nutrition programs should </li></ul><ul><ul><li>use the budget process to plan, </li></ul></ul><ul><ul><li>apply more efficient cost control measures, </li></ul></ul><ul><ul><li>increase productivity , and </li></ul></ul><ul><ul><li>identify ways to increase resources . </li></ul></ul>
  7. 7. Role of the School Nutrition Director in Managing Finances <ul><li>Management of financial resources </li></ul><ul><li>Accountability </li></ul><ul><li>Involve administrators, board members, managers, and staff to identify goals </li></ul><ul><li>Promote team approach </li></ul><ul><li>Assess, monitor, and evaluate program funds </li></ul><ul><li>Training </li></ul>
  8. 8. Development of a Financial Management Information System <ul><li>Objective: </li></ul><ul><li>Know the basic financial recording and reporting processes and procedures for directing the operation of a school nutrition program. </li></ul>
  9. 9. Financial Management Information System: <ul><li>Uniform and consistent financial reporting structure </li></ul><ul><li>Meaningful and timely financial management information </li></ul><ul><li>Tool to assist in decision-making </li></ul><ul><li>Support federal reporting requirements and adhere to generally accepted accounting principles (known as GAAP). </li></ul><ul><li>Basis for determining accountability </li></ul>
  10. 10. NFSMI Financial Management Information System <ul><li>Available at: </li></ul><ul><li>http://www.nfsmi.org </li></ul>
  11. 11. Classification of Expenditures <ul><li>Labor </li></ul><ul><li>Employee Benefits </li></ul><ul><li>Professional and Technical Services </li></ul><ul><li>Property Services </li></ul><ul><li>Food and Commodities </li></ul><ul><li>Supplies </li></ul><ul><li>Capital Equipment </li></ul><ul><li>Miscellaneous </li></ul><ul><li>Indirect Costs </li></ul><ul><li>Fund Transfer-Out </li></ul>
  12. 12. Financial Reporting of Revenue and Expenditure Transactions <ul><li>Objective: </li></ul><ul><li>Know how to use financial reports that are consistent with federal and state guidelines to achieve a financial management system that provides a cost effective program with high integrity. </li></ul>
  13. 13. Types of Financial Reports <ul><ul><li>Statement of Revenue and Expenditures (Net Gain/Loss Statement) </li></ul></ul><ul><ul><li>Statement of Net Assets (Balance Sheet) </li></ul></ul><ul><ul><li>Budget </li></ul></ul>
  14. 14. Statement of Revenue and Expenditures <ul><li>Revenue by source </li></ul><ul><li>Expenditures by category </li></ul><ul><li>Net/gain loss for the statement period </li></ul><ul><li>Comparison with previous month’s information and year-to-date information. </li></ul>
  15. 15. Statement of Net Assets <ul><li>Assets </li></ul><ul><ul><li>Cash balance, receivables due, and value of inventories </li></ul></ul><ul><li>Liabilities </li></ul><ul><ul><li>Outstanding payables </li></ul></ul><ul><ul><li>Deferred revenue </li></ul></ul><ul><ul><li>Sales tax owed (when appropriate) </li></ul></ul><ul><li>Fund Balance </li></ul>
  16. 16. The Fund Balance <ul><li>The school nutrition director can use the Fund Balance reported on the Statement of Net Assets to: </li></ul><ul><ul><li>Verify how much of the fund balance is reserved for encumbrances </li></ul></ul><ul><ul><li>Determine how much money is available for expenditures </li></ul></ul><ul><ul><li>Gauge how the program is performing financially </li></ul></ul>
  17. 17. The budget assists in managing the school nutrition program by: <ul><li>forecasting revenue </li></ul><ul><li>identifying how revenue will be allocated for expenditures </li></ul><ul><li>predicting how much money will be in the fund balance at year’s end </li></ul>
  18. 18. Methods of Budgeting <ul><li>Incremental (baseline) – Previous year’s budget is starting point. Adjustments made to each line item to reflect expected changes. </li></ul><ul><li>Zero – Start with zero for each line item and build according to expectations. </li></ul><ul><li>Combination – Uses zero for some items and incremental for other items. </li></ul>
  19. 19. Setting a Meal Standard for Financial Management and Analysis <ul><li>Objective: </li></ul><ul><li>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. </li></ul>
  20. 20. Using Meal Equivalents in Program Analysis <ul><li>By converting food sales to meal equivalents, the school nutrition director can determine: </li></ul><ul><ul><li>Meal cost </li></ul></ul><ul><ul><li>Labor productivity ratios </li></ul></ul><ul><ul><li>The average revenue earned per meal/meal equivalent </li></ul></ul>
  21. 21. Meal Equivalent Conversion Formulas <ul><li>1 lunch = 1 lunch </li></ul><ul><li>3 breakfasts = 2 lunches (2/3 = .66) </li></ul><ul><li>3 snacks = 1 lunch </li></ul><ul><li>other food sales </li></ul><ul><li>revenue from other food sales </li></ul><ul><li>current free lunch reimbursement + current commodity value per meal </li></ul>
  22. 22. Managing Revenue in School Nutrition Programs <ul><li>Objective: </li></ul><ul><li>Know how to analyze, interpret, and use revenue data for program evaluation and improvement. </li></ul>
  23. 23. Revenue Management Accountability <ul><li>USDA mandates that the school food authority must maintain a high level of accountability </li></ul><ul><li>for all revenue received, </li></ul><ul><li>how that revenue is dispersed, and </li></ul><ul><li>whether the revenue is sufficient to sustain a nutrition program that serves food high in quality and nutritional value. </li></ul>
  24. 24. Comparing Revenue Earned per Meal with Meal Cost <ul><li>This comparison is useful because </li></ul><ul><ul><li>It helps determine if and where revenue needs to be increased. </li></ul></ul><ul><ul><li>It allows you to analyze revenue by source. </li></ul></ul><ul><ul><li>It identifies areas in which revenue should be monitored for revenue loss. </li></ul></ul>
  25. 25. Pricing School Meals <ul><li>Formula: </li></ul><ul><li>Average Lunch Cost minus </li></ul><ul><li>Section 4 reimbursement minus </li></ul><ul><li>USDA Commodity Value </li></ul><ul><li>= Meal Base Price </li></ul><ul><li>Example: $2.40 - $0.23 - $0.17 = $ 2.00 </li></ul><ul><li>* Rates shown are for school year 2006-2007 </li></ul>
  26. 26. Considering State Funds When Setting Meal Prices <ul><li>Consider: </li></ul><ul><li>Is the state subsidy provided as </li></ul><ul><ul><li>a guaranteed reimbursement per meal, </li></ul></ul><ul><ul><li>lump sum that is subject to annual change, </li></ul></ul><ul><ul><li>supplement funds to cover specific costs? </li></ul></ul><ul><li>Is the school district nutrition program financially viable? </li></ul>
  27. 27. Focus of School Nutrition Programs <ul><li>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. </li></ul>
  28. 28. Types of Nonreimbursable School Day Food Sales <ul><li>Adult meals </li></ul><ul><li>Sale of a second meal to a student </li></ul><ul><li>Individual components of the reimbursable meal such as milk </li></ul><ul><li>Other food items not on the menu (a la carte) </li></ul>
  29. 29. Nonreimbursable Foods Sold Away from Campus or Outside School Day <ul><li>Catered meals </li></ul><ul><li>Contract meals that do not qualify for reimbursement (some meals such as day care might qualify for reimbursement) </li></ul><ul><li>3. Special school function meals such as athletic banquets </li></ul>
  30. 30. Managing Expenditures in the School Nutrition Program <ul><li>Objective: </li></ul><ul><li>Know how to analyze, interpret, and use expenditure data for program evaluation and improvement. </li></ul>
  31. 31. Expenditure Analysis <ul><li>Analyzing financial reports can provide information about: </li></ul><ul><ul><li>Patterns or trends </li></ul></ul><ul><ul><li>Significant changes in costs categories </li></ul></ul><ul><ul><li>Deviations from financial goals </li></ul></ul><ul><ul><li>Possible abuse or theft </li></ul></ul><ul><ul><li>Transaction errors </li></ul></ul>
  32. 32. Types of Expenditure Analysis <ul><li>Total costs to produce a meal </li></ul><ul><li>Meal costs per expenditure category </li></ul><ul><li>Percentages of operational costs to total revenue </li></ul><ul><li>Costs to produce a meal compared with the average revenue generated per meal </li></ul>
  33. 33. Meal Costs Deviations <ul><li>Higher food costs at the beginning of the year due to larger than normal purchases </li></ul><ul><li>Purchase of a big ticket item </li></ul><ul><li>Unplanned large repair bills </li></ul>
  34. 34. Food Cost Percentage to Total Revenue <ul><li>Formula: Costs of Purchased Food </li></ul><ul><li>Total Revenue </li></ul><ul><li>Example: $16,500 (food costs) </li></ul><ul><li>$30,000 (revenue) </li></ul><ul><li>= .55 x 100 or 55% </li></ul><ul><li>55% of all revenue generated was used to purchase food </li></ul>
  35. 35. What do Cost Percentages Mean? <ul><li>If total of all costs percentages is: </li></ul><ul><li>Less than 100%- operating balance increases </li></ul><ul><li>Equal to 100%- program breaks-even </li></ul><ul><li>More than 100%- operating balance decreases </li></ul>
  36. 36. Comparing Revenue to Expenditures <ul><li>Comparing revenue to expenditures tells us </li></ul><ul><li>Total net gain/loss to the school nutrition program expressed in dollars. </li></ul><ul><li>Percent of gain/loss expressed in percentage of revenue </li></ul><ul><li>Net gain/loss per meal or meal equivalent </li></ul>
  37. 37. Controlling Food and Labor Costs in School Nutrition Programs <ul><li>Objective: </li></ul><ul><li>Know how to apply cost control measures to operate a financially sound program with nutritional integrity. </li></ul>
  38. 38. Meals Per Labor Hour <ul><li>Number Meals/Meal Equivalents </li></ul><ul><li>Number of Paid Labor Hours </li></ul><ul><li>Example: </li></ul><ul><li>338 total meals/meal equivalents </li></ul><ul><li>24 paid labor hours </li></ul><ul><li>= 14.08 or 14 meals per labor hour </li></ul>
  39. 39. Using Participation as a Financial Management Tool <ul><li>Used as a forecasting tool to: </li></ul><ul><li>Prevent waste in excess labor hours and overproduction of food </li></ul><ul><li>Reduce customer dissatisfaction because of inadequate staff and too little food prepared for the number served </li></ul>
  40. 40. Planning and Budgeting <ul><li>Objective: </li></ul><ul><li>Understand the importance of the budget as a control document. </li></ul>
  41. 41. Budget Planning <ul><li>Establish long-term goals 5 to 10 years </li></ul><ul><li>Project revenue based on </li></ul><ul><ul><li>Amount of revenue expected from various sources </li></ul></ul><ul><ul><li>Increases or decreases in enrollment </li></ul></ul><ul><li>Estimate expenditures based on: </li></ul><ul><ul><li>Historical trends </li></ul></ul><ul><ul><li>Participation </li></ul></ul><ul><ul><li>Reimbursement rates </li></ul></ul><ul><li>Budget for entire year. </li></ul>
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