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Annual Physical Inventory


Nutrition Services Division Management Bulletin

To: Commodity Supplemental Food Program Agencies

Number: NSD-FDP-02-2007

Attention: Program Directors

Date: April 2007

Subject: Annual Physical Inventory — Reconciliation and Offsetting

Reference: Title 7, Code of Federal Regulations, Part 247-28 (b)

This Management Bulletin disseminates guidance to Commodity Supplemental Food Program (CSFP) recipient agencies on the United States Department of Agriculture (USDA) requirements for conducting an annual physical inventory of donated food.

Specifically, the USDA requires CSFP agencies to reconcile their physical inventory with perpetual inventory records in order to identify shortages and overages in the inventory of donated foods. A shortage occurs when the physical inventory count is less than the perpetual inventory count; an overage occurs when the physical inventory count is greater than the perpetual inventory count. Agencies may use any overages to offset any shortages, thus reducing any claim against the agency for the value of donated foods that are not in the physical inventory.

Our State Agency Plan of Program Operation and Administration for the CSFP requires local CSFP agencies to perform a physical inventory each month and to report any differences between the month-end physical inventory and the perpetual inventory as adjustments. Commodity losses due to known causes (e.g., loss through failure to provide proper storage, freezer failure, theft, warehouse damage, etc.) and not related to adjustments for shortages and overages also must be reported monthly. The California Department of Education, Nutrition Services Division (NSD), will review these reported losses on a monthly basis and determine whether or not to issue a claim.

To meet the requirement of the annual inventory reconciliation, we have determined that the physical inventory conducted at the end of September each year will be considered the formal annual inventory. NSD staff will review the adjustments reported by CSFP agencies on a federal fiscal year (FFY) basis and will determine if a claim should be assessed for shortages based on data provided throughout the FFY. We will also notify CSFP agencies in writing if a claim will be assessed as a result of the annual review. Please note that the monthly inventory requirement of the State Plan is still applicable.

Questions:   Nutrition Services Division | 800-952-5609
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