Financial Management Course1

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Financial Management A Course for School
FoodService Directors
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Pretest
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Chapter One Communicating the Importance of
Effective Financial Management

• Objective
• Recognize the importance of effective
  communication regarding financial management of
  the school nutrition program(SNP)

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Chapter One Discussion Topics
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Question for Discussion

• Why do you think financial integrity is important?

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Financial Management Overview

• Program administrators responsibility for
  financial management of the SNP.

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Question for Discussion

• Based on your experiences, what is your
  definition of financial management?

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Financial Management

• Financial Management
• -the financial goals and program objectives for
  the school nutrition program, and
• -attaining those goals through the effective use
  of resources

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Question for Discussion

• What are some ways school food service directors
  can demonstrate financial accountability?

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School Environment
COMMUNICATIONS between
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Question for Discussion

• What do we mean by environment in a school
  setting?

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Question for Discussion

• Why is communication important?

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Communication
Speech
Writing
Signals
Behavior
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Key Concepts

• Financial goals of the school board
• School nutrition program self-supporting
• Efficient accounting system
• Accurate, timely financial management
• Adherence to submitted food service budget

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Key Concepts

• Financial objectives of the school nutrition
  program
• Basic financial management practices
• Customer satisfaction
• Well managed resources for cost containment
• Interpreting financial information for
  decision-making

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Question for Discussion

• What are examples of financial goals/objectives
  for a school nutrition program?

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Food Service Director to Administrators/Board

• Financial status of SNP
• Chain of command
• Accessibility to school board members
• Avenues of communication

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Food Service Director to School Business
Officials

• Business manager
• Secretaries
• Bookkeepers
• Accounting Clerks
• City/county business officials

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Food Service Director to Principals

• School activities affect participation
• Student increases/decreases in free/reduced price
  numbers
• Merchandising activities

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Food Service Director to Manager

• Policies and Procedures
• Menus
• Price changes
• Budget
• Explain yearly projections of revenues and
  expenditures
• Reporting forms
• Maintenance request procedures
• Special promotions

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Manager to Food Service Director

• Market and grocery orders
• Monthly inventory
• Meal costs
• Meals per labor hour
• Daily meal counts
• Daily cash reconciliation

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Manager to Food Service Director

• Product evaluation
• Guests to the program
• Power outages
• Equipment repair needs
• Accidents
• Special events
• Banking problems
• Clarification on policies/procedures

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A Communication Review
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Chapter Two Revenue Sources by Category

• Objective
• Identify school nutrition program revenue sources
  by category
• Local
• State
• Federal

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Chapter Two Discussion Topics
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Question for Discussion

• What do you consider your main source of revenue
  in your school nutrition program?

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Local Sources

• Local Government Aid
• Local Grants
• Contributions

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Student Meal Sales

• Full-Paid Meals
• Reduced-Price Meals
• Prepaid Meals
• Meal Charges
• Afterschool Care Program Snacks

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Question for Discussion

• What are other sources of local revenue?

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Other Local Sources of Revenue

• Adult payments
• Contract meal sales
• A la carte income
• Catering
• Interest
• Miscellaneous

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State Sources

• Cash payment from the state
• Matching funds
• Special milk reimbursement
• Grant money

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Question for Discussion

• Do any of you receive state funds for other
  purposes?

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Federal Sources

• Payment for breakfast and lunch meals
• Federal cash reimbursement for snacks
• Value of donated commodities
• Grant money awarded to school districts
• Funds for other federal nutrition programs

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Revenue Generation

• Identifying areas where revenue is being lost.

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Scenario for Discussion

• Students who choose not to eat school meals
  result in lost revenue to the program. Discuss
  how schools should go about setting participation
  goals and then follow-up with plans to increase
  participation.

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Scenario for Discussion

• Some parents do not complete application forms
  for their children to receive meal benefits
  although the children are eligible. Suggest ways
  that the school districts might approach these
  parents and their children to encourage them to
  participate.

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Scenario for Discussion

• More and more school districts are reporting
  student theft of food displayed on the serving
  line. Suggest ways the school district can
  eliminate theft of food items.

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Scenarios for Discussion

• Have program costs been analyzed according to
  categories of expenditure?
• How do program costs in the schools food service
  operation compare to other school programs or to
  industry standards?
• Have school food service staffs been included in
  the financial management of the operation?

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Scenarios for Discussion

• Do staff have an understanding of the importance
  of cost controls to the success of the operation?
• If there is a need to reduce costs, are the
  reductions being made in activities that have
  less value to the customers?

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Chapter Three Expenditure Sources by Category

• Objective
• Identify SNP expenditure sources by category
• Labor (Salaries and Wages)
• Employee Benefits
• Purchased Professional Services
• Purchased Property Services
• Purchased Food Donated Commodities
• Other Purchased Services
• Supplies
• Property
• Miscellaneous
• Fund Transfers Out

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Chapter Three Discussion Topics
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Labor Expenditure

• Salaries and Wages
• Fringe Benefits
• Unemployment Insurance

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Food Expenditure

• Food cost
• Purchased
• Donated
• Food Production Supplies

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Supply Costs
General Supplies
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OVERHEAD
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Question for Discussion

• What are other overhead costs that the school
  nutrition program pays for in your school
  district?

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Capital Equipment and Furniture
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Indirect Costs
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Chapter Four Accountability in Financial
Reporting

• Objectives
• Define the essential financial reports used in
  the school nutrition program.
• Recognize the importance of ethical standards in
  developing school nutrition program financial
  reports.

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Chapter Four Discussion Topics
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Financial Reports

• Balance Sheet
• Statement of Revenues and Expenditures

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The Balance Sheet

• The Statement of Financial Position

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Question for Discussion

• How many of you use your balance sheet to monitor
  your financial status each month?

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The Balance Sheet

• Assets include cash on deposit sales tax
  collected investments accounts receivable
  funds from other sources inventories and other
  assets.
• Liabilities include accounts payable accrued
  salaries wages, and benefits amounts due to
  other school district funds deferred income and
  taxes.

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The Balance Sheet

• Fund Balance Funds reserved for encumbrances,
  inventory, capital equipment, undesignated or
• unreserved funds.

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Statement of Revenues and Expenditures
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Statement of Revenues and Expenditures

• Total revenue available to the program by source
• Total expenditure by category
• Net profit (gain) or loss (deficit) to the program

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Who is responsible for acting ethically?
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Question for Discussion

• Do any of you have examples of unethical
  procedures or practices related to preparation of
  school nutrition program finance reports?

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Three Rs of Business Ethics

• Respect
• Responsibility
• Result

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Chapter Five Using Financial Reports to Analyze
Program Efficiency

• Objectives
• Interpret basic financial management reports
• Analyze financial data based on performance
  measures
• Recognize methods to increase revenue and
  decrease expenditures

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Chapter Five Discussion TopicsSession 1

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Chapter Five Discussion TopicsSession 2
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Financial Management Analysis

• Analysis is important to ensure that the school
  district
• Manages expenditures within the revenues received
• Operates without a need for transfers from the
  general fund
• Has sufficient funds to reimburse the school
  district for costs

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Question for Discussion

• Why is analysis of financial data useful?

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Financial Management Analysis

• Financial data
• Helps to determine the efficiency of a school
  food service operation
• Provides information about program profitability
• Promotes basic financial management decisions
• Generates performance benchmarks
• Identifies areas for improvement
• Staffing decisions

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Financial Management Analysis

• Evaluating and maximizing revenue
• Evaluating and controlling costs
• Evaluating program efficiency

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Financial Management Analysis Tools

• Performance Measures
• Meal Equivalents
• Per Meal Costs
• Percentage Ratios
• Productivity Rates
• Meal Participation Reports

• Financial Reports
• Revenue Detail
• Expenditure Detail
• Financial Analysis Report

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Evaluating Revenue

• Identify revenue sources by category
• Calculate average revenue per meal
• Identify sources for increasing revenue
• Establish appropriate prices for meals and
  non-reimbursable food items

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Setting Meal Prices

• Revenue from meals served to students and adults
  provide the bulk of revenue to the school
  nutrition program.
• Paid student meal prices program costs less
  federal reimbursement and value of USDA
  commodities (lunch only)
• Adult meal prices - total program costs

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Questions to ask when considering a meal price
change

• How long has it been since lunch prices have
  increased in your school district?
• What are some of the reasons for the increase
  this year?

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Questions to ask when considering a meal price
change

• How do school meal prices in your school district
  compare with other nearby school districts?
• Is my child receiving the nutrient he/she needs
  from school meals?

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Meal Price Calculation

• 2.32 Cost of Lunch
• .21 Paid Reimbursement
• .1725 Value of USDA Commodities
• 1.9375 (1.94 Rounded)

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Revenue Generation

• Increasing meal prices
• Determining non-reimbursable meal prices

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Responses for Discussion

• If meal prices are increased, will the benefits
  offset the possible decrease in participation?
• Can catering activities be added to the school
  nutrition program operation in lieu of raising
  prices?

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Responses for Discussion

• What about implementing a marketing plan to
  increase participation?
• If the school does not have a breakfast program,
  would it be feasible to start one?

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Responses for Discussion

• How about surveying the customers? Are they
  satisfied with the program?
• What changes would they make?

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Revenue Generation

• Determining nonreimbursable food prices or a la
  carte

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Influencing Factors

• Demand
• Perception of value
• Prices charged in nearby school districts
• Prices charged in vending machines
• Relationship between sales prices and volume
• Total costs to prepare item
• Nutrition value

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Establishing the Base Price

• Determine the raw food cost of the item offered
  for sale.
• Identify the desired food cost percentage for the
  operation.
• Calculate a base selling price by dividing the
  items raw food cost by the desired food cost
  percent.

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Nonreimbursable Meal Price Calculation

• Raw Food Cost 0.52
• Desired Food Cost 0.38
• 1.37 (Base Selling Price)

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Evaluating Expenditures

• Identify sources for expenditures by category
• Analyze Program Costs
• Cost of food used
• Cost per meal/meal equivalent served

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Performance Measures

• Cost of food used
• Cost percentages to total revenue
• Total meal cost
• Meal cost per category
• Productivity ratios

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Cost of Purchased Food Used

• Determine whether costs are within guidelines.
• Ascertain if there is sufficient money to cover
  expenditures.
• Establish the plate cost for each meal served.
• Prevent waste and theft of food items through
  careful monitoring of food used.

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Cost of Purchased Food Used

• Beginning Purchased Food Inventory
• Food Purchases
• Total Purchased Food Available
• Ending Purchased Food Inventory
• Cost of Purchased Food Used

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Cost of Purchased Food Used
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Streamlined Commodity Inventory

• USDA Single Inventory Guidance
• Inventories of donated foods are no longer
  separate from inventories of other foods
• Most commodities are packed with commercial
  labels instead of USDA labels.
• Procedures differ from state to state.

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Cost Percentages Performance Measures

• Cost percentages relate expenses to revenues.
• Two of the most critical percentages are
• Food cost percentage
• Labor cost percentage

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Food Cost Percentage

• Food Cost Percentage Cost of Food
• Total Revenue
• 16,500 (Food Cost)
  30,000 (Total Revenue) .55 or 55

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Question for Discussion

• Can you think of examples that would result in
  higher food costs than normal for a given month?

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Labor Costs

• Salaries and wages
• Benefits
• Professional development
• Educational hours

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Labor Cost Percentage

• Labor Cost Percentage
• Total Labor (Salaries and Benefits)
• Total Revenue
• 400,000 (Total Annual Labor)
• 800,000 (Total Revenue)
• .50 or 50

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Question for Discussion

• What does the 50 labor cost percentage tell the
  school food service directors?

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Case Study 1 Part I
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Chapter Five Discussion TopicsSession 2
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Meal Equivalents Analysis Tool

• Meal equivalents - a statistical tool used to
  allocate costs based on a unit of production
• Meal Units
• Lunch
• Breakfast
• Afterschool snacks
• Nonreimbursable food sales

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Calculating Meal Equivalents

• The NFSMI Financial Management Information System
  uses the following ratio to determine a meal
  equivalent.
• 3 breakfast 2 lunches
• 3 snacks 1 lunch
• Dollar amount in sales of nonreimbursable food
  
• Free lunch reimbursement Commodity Value

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• Converting nonreimburseable food sales into meal
  equivalents formula.
• Calculation
• 300
• 2.24.1725(2.4125) 124 meal equivalents

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Determining the Average Revenue Earned Per Meal
Equivalent

• Forecast revenue from all sources.
• Total the forecasted revenue amounts.
• Determine meal equivalents.
• Divide revenue generated by total meal
  equivalents.

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Per Meal Cost Calculation

• Example
• Costs of purchased food used
• Total lunches meal equivalents
• Per meal cost Total expenditures
• Total lunches meal
• equivalents

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Questions for Discussion

• Why is it important to calculate the food cost
  and labor cost percentages?
• Why is the cost of producing a meal a critical
  piece of information for school food service
  directors?

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Measuring Productivity

• Meals per labor hour
• Participation rates
• Average daily participation
• Participation rate per category of meal
  eligibility

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Meals Per Labor Hour

• Meals per labor hour
• Number meals/meal equivalents
• Number of paid labor hours
• 338 meals/meal equivalents
• 24 paid labor hours 14.08 or 14 meals per labor
  hour

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Meals Per Labor Hour

• Staffing Guideline in Policies and Procedures
• Meals Per Labor Hour Table

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Participation

• Lunch
• Actual ( lunches/ days)
• Percent of attendance (ADP/Enrollment or ADA)
• Breakfast
• Actual
• Percent of attendance

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• Participation is determined separately for
  breakfast and lunch.
• The formula for calculating ADP
• Number of meals served (month)
• Number of operating days (month)

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Case Study 1 Part II
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Chapter Six Monitoring Operational Revenue and
Expenditures studying trends that will impact
both

• Objectives
• Recognize the importance of developing a budget
  based on forecasted operational revenues and
  expenditures.
• Recall the value of identifying industry trends
  in developing a budget.

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Chapter Six Discussion Topics
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Forecasting the Future

• Customer satisfaction
• Internal organization
• Financial aspects
• Innovation

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Forecasting the Future

• Customer Satisfaction
• Environment
• Sensory
• Interpersonal
• Procedural
• Deliverable
• Informational
• Financial

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Forecasting the Future

• Internal organization
• People
• Machinery
• Systems

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Questions for Discussion

• How well does the SNP serve the internal
  customers, specifically other departments in the
  school/school district?
• How well does the SNP director listen to or
  understand their concerns?

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Questions for Discussion

• How well is the SNP director solving
  problems/supporting other entities to help the
  organization succeed?
• How well does SNP value not only its own
  employees but also employees in other
  departments?
• For example, how well does the catering
  department work with custodial staff in a school
  or school district?

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Forecasting the Future

• Financial aspects
• Revenue
• Expenditures

116
Forecasting the Future

• Innovation
• Future trends

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Budget Planners
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Question for Discussion

• Who is involved in the budget planning process in
  your school nutrition program operation?

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Methods Used in Budget Planning

• Baseline budgeting
• Zero-based budgeting
• Combination baseline and
• zero-based budgeting

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Methods Used in Budget Planning

• Baseline or incremental budgeting

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Advantages of Baseline Budgeting

• Less time consuming
• Best method for budgeting basic cost items.

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Disadvantagesof Baseline Budgeting

• Existing budget errors may not be corrected
• Less planning may go into the budget process
• May not take into account changing program needs

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Methods Used in Budget Planning

• Zero-based budgeting

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Advantages of Zero-based Budgeting

• Better equips management to make decisions
• Gives a better estimate of revenue projections
• Creates a model for spending by breaking the
  habit of budgeting nonessential costs

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Disadvantages of Zero-based Budgeting

• Time consuming
• Some categories in budget are difficult to
  calculate from zero

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Methods Used in Budget Planning

• Combination baseline and
• zero-based budgeting

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Some items in the budget should be based on
need without preconceived estimates based on the
previous year.
For other items, the budget need only be
adjusted to accommodate price changes.
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Bonus of a Budget

• Establish specific future goals
• Forecast revenue
• Predict expenditures
• Compare actual over-projected revenues and
  expenditures
• Identify potential problems
• Calculate what is available at the end of a
  budget period

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Factors to Consider

• Historical trends
• Participation rates
• Federal and state reimbursements
• Operational and/or program changes
• Increased or decreased program costs
• Changes in meal prices

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Discuss Historical Trends

• Look at the number of reimbursable meals sold
  over the past two to three years. Is there a
  trend emerging?
• Apply that same process to the percentage of a la
  carte sales or extra sales to total sales. Is
  there and increase/decrease in that percentage?
• Consider the status of catering services and
  special functions in your school district.
• Is there a tendency for those services to
  increase/decrease or remain the same?

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Discuss Participation Rates

• Look at changes in the economy of the area. Have
  there been layoffs/plants shut down? Have the
  demographics changed from young families with
  children to retirees? Are new school openings on
  an upward spiral?

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Discuss Federal and State Reimbursements

• Speculate what the Federal reimbursement rates
  will be for the upcoming school year. Will there
  be an increase or decrease in those figures? If
  there is a state reimbursement, will it continue
  and how much will it be? Question whether the
  commodity delivery charge will increase or remain
  the same.

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Discuss Operational and/or Program Changes

• Since Federal program regulations frequently are
  being revised, consider that implementation of
  the final changes may be at an additional cost to
  the SNP.

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Discuss Increased or Decreased Program Costs

• Examples of increased costs to the SNP are
• Salary raises and a more costly health insurance
  plan.
• Flood and storm damage to citrus crops in Florida
  could substantially increase the price of oranges
  to the SNP.
• Other examples

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Discuss Changes in Meal Prices

• Consider the possibility that student/adult
  participation in SNP will decrease if meal prices
  are raised.

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Budget Building Case Study 2
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MIND MAPPING ACTIVITY
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Chapter Seven Tools to Analyze the Financial
Status

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

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Chapter Seven Discussion Topics
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Analysis of Financial Data

• Financial management software
• Microsoft Excel
• NFSMI FUNDamentals
• Financial Management for FSDs

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Analysis of Financial Data

• Microsoft Excel

X
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Analysis of Financial Data

• NFSMI FUNDamentals
• Financial
• Understanding
• for
• Necessary
• Decision making

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Expenditures
Sample Elementary

• What categories are included in the other
  category in this pie chart?
• Answers
• Miscellaneous (.25)
• Purchased Technical Services (.41)

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Expenditures
Sample Elementary

• If the user sets the cutoff value at 5, what
  category will disappear from the pie chart and be
  included in the other category?
• Answer
• Property Operation, Maintenance, Energy (4.16)

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Expenditures
Sample Elementary

• What percent of the total will the other
  component represent if the cutoff value is set at
  5?
• Answer
• 4.82 (4.16.25.41)

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Revenues
Sample Elementary

• What category did the school district anticipate
  would provide the greatest percent of revenue for
  Sample Elementary?
• Answer
• Federal

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Revenues
Sample Elementary

• What categories are included in the other slice
  of the pie chart for Sample Elementary?
• Answers
• Fund Transfer-In Miscellaneous Other
• Interest State Source Revenue

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Revenues
Sample Elementary

• If the cutoff value is set at 5, what category
  will disappear from the pie chart and be included
  in the other category?
• Answer
• Other Food Sales (3.54)

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Meals
Served-Student Lunch

• In which category is the largest number of
  students served?
• Answer
• Paid

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Question for Discussion
NFSMI FUNDamentals Budget Pie Chart-Meals
Served-Student Lunch

• If the cutoff value was set at 5, what category
  would disappear from the pie chart and be
  included in the other category?
• Answer
• Adult (4.20)

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Questions for Discussion
NFSMI FUNDamentals Consolidated NSLP and NSBP
Cost Allocation and Analysis Report

• What is the total YTD average cost per meal for
  this district?
• Answer
• 2.2582
• How much revenue has been generated YTD on a per
  meal basis?
• Answer
• 2.4072

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Analysis of Financial Data

• Financial Management for Food Service Directors
• A Year in the Life of a Food Service Director

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Chapter Eight Evaluation

• Participants will achieve four objectives.

169
Objective 1

• Relate the importance of why the NFSMI Financial
  Management Information System and this training
  manual were developed.

170
Objective 2

• Relate the importance of accounting procedures
  that are consistent with the U.S. Department of
  Education and uniform across the school nutrition
  profession.

171
Objective 3

• Describe ethical and effective financial
  management practices to use in School Nutrition
  Programs.

172
Objective 4

• Establish implementation goals for using
  principles from the NFSMI Financial Management
  Instructor Guide in School Nutrition Programs.

173
Posttest
174
Financial Management

• Action Plans

175
EVALUATION