The information below addresses follow-up questions the California Department of Education (CDE) has received from school food authorities (SFA) regarding allowable usage of the American Recovery and Reinvestment Act (ARRA) of 2009 funds. We will continue posting questions and corresponding answers to this Web page on a weekly basis. Please submit questions to firstname.lastname@example.org.
Q1: Our district purchases food service equipment in bulk and stores it in our central warehouse. As each school’s cafeteria requires equipment, they requisition it from the warehouse. The food service is then charged with the acquisition cost, plus a 15 percent markup for a warehousing and transport fee. May we request grant funds for the equipment that is purchased and stored, and if so, can we include the warehousing fee in the cost of the equipment?
A1: If the school district has already obtained the equipment and placed it in the warehouse, it defeats the purpose of the grant, which is to help stimulate the economy. The grant funds must be used to purchase the equipment for immediate use and not for reimbursing the SFA for equipment that was purchased earlier. Warehousing fees are unallowable charges to school food service, and as such, are unallowable charges under this grant.
Q2: When we begin getting quotes, I understand there is a $5,000 minimum. Is there a per site maximum?
A2: There is no per site maximum, although we may have to implement a per district maximum. The $5,000 minimum applies to individual items of equipment and can be lower if the district has a lower capitalization threshold.
Q3: Can you please tell me how we are to determine the dollar amount we are allowed to spend on the equipment funded by the assistance grant?
A3: There is no limit on how much you may request. We encourage SFAs to limit requests to equipment that meets critical needs. The Request for Applications provides target maximum funding amounts that the CDE will use if the funding requested exceeds the per SFA funding available.
Q4: At this time, we have just over 50 percent of children eligible for free or reduced-price meals. In October 2008, we had just under 50 percent. Can we use our current percentage to be competitive in applying for this grant funding?
A4: The United States Department of Agriculture (USDA) was very specific that the month for reporting the level of free and reduced-price students is October 2008.
Q5: Can applicants attach narrative to the grant that explains why they need certain equipment and how it will improve the National School Lunch Program (NSLP) at their sites? Or will such additional pages not be taken into consideration?
A5: Applicants may attach a narrative and it may be taken into consideration as part of demonstrating the need for the equipment.
Q6: I have a walk-in freezer that I had planned to submit for repairs under this grant. Unfortunately, it gave up on me on April 20, 2009. Will I be able to use funds from this grant, if awarded, to repair the freezer? Additionally, since it is in need of immediate repair, I called our regular contractor to repair and did not get three quotes. Generally, we do not obtain three quotes for repairs. Is this necessary?
A6: Grant funds may be used to replace or repair equipment. If the existing equipment is not energy efficient, you may want to replace with an energy efficient one as in the long run, it will be cheaper. Under the NSLP, all expenditures paid from food service revenues must be competitively procured. SFAs are required to obtain three price quotes and select the least expensive.
Q7: In the instructions for completing the site information, you ask that the “Percent Needy” be entered as 0.5055 percent, not 51 percent. Please note that putting a decimal point in front of the number with a percentage sign indicates ½ percent, not 50.55 percent. Is this an error or do you want me to write 0.9058 percent for 90.58 percent?
A7: Thank you for pointing out the error in our instructions. Since USDA does not allow the percentage of needy students to be rounded up, we need to see the percentage carried out to two decimal places. Please enter it as 90.58 percent.
Q8: Our district enrollment is 7,000. The two schools we have in mind for the grant have an enrollment of approximately 2,000 and 2,200. How do we determine the budget? It is based on the district enrollment, school enrollment, or does the free and reduced rate at each school factor into the equation?
A8: Grants will be awarded at the school level with priority to schools with 50 percent or greater free and reduced-price eligible students. In terms of how much to request, you should request everything you need to meet your critical needs at each school. We established district limits that we will use if requests exceed available funding.
Q9: Does the debarment and suspension certificate need to be signed by each vendor giving a quote or only by the vendors that are awarded the quote?
A9: The USDA requires recipients and subrecipients of $25,000 or more in federal funds to submit this form with their grant application. Before you contract with a vendor for equipment, the vendor needs to sign and return this form with their bid if the equipment costs $25,000 or more. Additionally, if you are requesting $25,000 or more in funding, you must sign and return the debarment and suspension certification.
Q10: Can a piece of equipment cost $2,000 and be allowable under the grant?
A10: The USDA defines equipment as an article of non-tangible personal property, with a useful life of more than one year and a per unit acquisition cost of $5,000 or greater. A school district, with school board approval, can establish a lower capitalization threshold, thereby allowing the per unit acquisition cost to be lower than $5,000.
Unless your district has established a capitalization threshold of $2,000, the piece of equipment would not be allowable under the grant. However, the cost of the equipment should include tax, shipping and handling, and installation. If by adding in these costs, the equipments total purchase price equals or exceeds $5,000, it would be allowable.
Q11: Over the past five years we have had issues with power failures due to weather and forest fires for multiple days at a time. This has caused loss of some frozen and refrigerated product. We are wondering if purchasing a generator would be allowable to ensure the safety of our food supply.
A11: The grant specifies four focus areas for the equipment grant. The second area focuses on “equipment that improves the safety of food served in the school meal programs." In this case, the generator can be purchased by itself for the purpose of keeping the food safe during power outages. This being said, the SFA must specify and ensure that the generator is being solely used for school meal programs and not for other uses.
If the generator is to be shared for other purposes, then the cost must be prorated and the SFA must furnish evidence that the ARRA grant’s share of the cost is proportionate with the benefit the SFA’s federally-assisted school food service operations will receive from using the equipment.
Q12: Do we write up bid specifications for the equipment we need, or can we use the specifications for a specific brand, or do we use the brand’s specifications without using the brand? Do we have to go out to bid? If so, do we contact companies to bid on the equipment? On the other hand, can we go to at least three different vendors to give us prices?
A12: You must write your own specifications and your specifications cannot be brand specific. You may not use vendor-developed specifications, and if you do, you may not purchase from that vendor. Yes, everything must be competitively procured by following either a formal or informal bid process. If you use an informal bid process, you must obtain price quotes from a minimum of three companies, and you must provide your written specifications to each company you contact so that they are all bidding on the same items.
Q13: If a school site is a central kitchen for other sites, and the central site has greater than 50 percent free and reduced but the satellite sites do not, will that be a problem for obtaining equipment at the central site?
A13: In this situation, the central kitchen will be given priority for a grant, and the other sites must be listed on the central kitchen site list.
Q14: We need walk-in freezers. Does the grant only cover the actual equipment or does it allow for site preparation (cement pad, electrical, etc.)?
A14: Only the cost of the freezer would be allowed. The cement pad and electrical would be SFA expenses.
Q15: Do the funds for the equipment grants get taken out of the ARRA monies the District has just applied to receive? (This is the application sent to all local educational agencies that is due on May 4, 2009, and is just a series of assurances.) Or is it a separate stream of money?
A15: The equipment grants are funded through the USDA, and represent a separate stream of money from that funded by the United States Department of Education. Your SFA may apply for all grants for which you are eligible.
Q16: Does "equipment" refer exclusively to "kitchen equipment" for purposes of this grant? Or could "equipment" also refer to technology such as computerized point-of-purchase card readers, or upgrades to servers and systems that help automate (improve efficiency of) moving the students through the food lines with quick/easy payment and processing?
A16: Use the four focus areas to help determine if the equipment meets one or more of them. If at least one focus area is met, the equipment qualifies. Since point of purchase card readers shorten the time it takes students to get through the lunch line, they likely also help to increase participation. The additional revenue could help improve food quality as well. Remember that each piece of equipment must cost either $5,000 or your capitalization threshold, whichever is lower. Additionally, the cost of any equipment that will be utilized by other programs outside of food service must be prorated among all user programs. If you are planning to purchase a server that will benefit the whole agency and not just food service, then the cost of the server must be prorated according to usage.
Q17: Can a different format be approved for our grant applications to save time due to the numerous site applications we will be submitting? We would like to submit the required information on the pages for each school as either an Excel Spreadsheet or a Filemaker Pro Format that will answer all questions, and also for the equipment parts of the application.
A17: We will consider alternative application formats, such as an Excel spreadsheet, as long as the format provides all the same data as the site application would. If your packet is bulky and would be expensive to mail, you may mail pages 1 and 2, which are the signature pages (we must have an original signature) and e-mail the spreadsheet to email@example.com.
Q18: Last year we applied for a Fruits and Vegetable grant and didn't make the cut because our district's NSLP count was 49 percent. Do you think this will disqualify us for the equipment grant?
A18: No. The equipment grant is not requesting a district percentage, it is requesting a school percentage. You will not be disqualified; however, sites where the percentage of free and reduced-price eligible students is less than fifty percent may not be awarded a grant. It all depends on how many requests we get from schools at 50 percent and higher compared to how much money we have.
Q19: Can we use district-wide student eligibility rather than site specific eligibility to determine the amount of money that would be made available to our district? We are currently constructing a central kitchen and would like to use this grant money to purchase a POS system that would benefit the entire district not just a specific site.
A19: We encourage all SFAs to request the level of funding necessary to meet their needs. The proposed funding limits provided in the Information Alert are “proposed” and are based on district-wide enrollment. POS systems are requested on the Central Kitchen Information sheet, and must provide data for all sites that will benefit from the system.
Q20: Does the district apply for the full amount needed for equipment costs or do we use the funding calculation from the Proposed SFA Funding Limits regardless of not being able to meet the $5,000 threshold limit? Our site specific enrollment will not meet that $5,000 limit.
A20: The district applies for the full amount needed to cover equipment costs. The funding calculation will be used by the CDE only if funding requests exceeds available funding.
Q21: What does “capitalization threshold” for equipment mean? Also, is there a limit to the amount of funds I can ask for with the equipment purchasing grant?
A21: The Capitalization Threshold is the per-unit cost at which an item of equipment will be depreciated over time rather than all at once. You may ask for as much funding as needed to meet your critical needs.
Q22: Are sixth grade science camps eligible for the equipment grants?
A22: No. The USDA determined that, based on the nature of camps, they do not meet the intent of the ARRA and are ineligible to apply.
Q23: The equipment grant application asks SFAs to provide enrollment and eligibility data as of October 31, 2008; however, my agency was approved for NSLP as of February 1, 2009. How do I report this data when I don’t have it for October 31, 2008?
A23: New SFAs would use the data on file as of the end of their first month of operation. An SFA approved as of February 1, 2009, would provide enrollment and eligibility data as of February 28, 2009.
Q24: My agency participates in Provision 2, and our base year was 2006-07. We do not have enrollment and eligibility data for October 31, 2008, so what do we use?
A24: Use the enrollment and eligibility data for October 31 of your base year.
Q25: A district needs to upgrade their electrical and plumbing systems in order to utilize a new piece of equipment funded by the ARRA. Part of the cost of upgrade is required to conform to current building codes. In the event an upgrade serves dual purposes, should the state approve the portion considered to be an acquisition expense and not fund the portion to comply with the current building codes because it is considered a capital improvement?
A25: Whether the cost is allowable or not depends on the extent of the upgrade. Electrical and plumbing costs needed to get the new equipment up and running is part of the equipment’s acquisition cost and could be funded with the ARRA equipment assistance grant funds. For example, replacing a two-prong plug with a grounded plug would be allowable, whereas running all new wiring would not. Question 19 in USDA SP 23-2009, states that it is allowable to cut a hole in the wall to access the (existing) electrical and/or plumbing. Further, Question 14 in USDA SP 20-2009 gives the example: “The costs associated with the…installation of the replacement refrigerator to existing wiring and plumbing,…is allowable.”
Installing electrical and plumbing are improvements to a building that materially increases the useful life of the building and are unallowable food service expenses. They are considered building construction costs and are district expenses.
Costs associated with bringing the building up to code is not part of the equipment’s acquisition cost because it relates to the building rather than the equipment and must not be paid for with the ARRA equipment assistance grant funds.
Q26: I am a small school district in need of a POS system. The cost of the system is $3,500, which is below both our capitalization threshold and the $5,000 definition of equipment. How can we purchase a POS system for our district?
A26: Your district has a couple of options. The first option is to reduce your Capitalization Threshold to the point that the equipment would be allowable. Another option is to ensure that you have included everything necessary to make the POS usable. The unit cost of equipment can include the cost of the unit, plus tax, shipping and handling, installation, hardware, software, training, and costs associated with removal and disposal of old equipment.
Q27: I have a central warehouse that needs some electrical pallet jacks and lifters to streamline operations. These equipment expenditures will generate additional revenue by reducing operating costs, increasing food safety, improving employee safety, minimizing the number of weekly deliveries, and cutting fuel expenses and greenhouse emissions thereby freeing up operating funds in order to improve menu offerings at the sites. Do I treat the warehouse like a central kitchen in the grant application? If so, the warehouse does not have a CNIPS number since it does not prepare or serve meals. Do I leave the CNIPS number blank?
A27: Yes, treat the warehouse like a central kitchen, naming the site as a central warehouse, and leave the CNIPS site number field blank. Provide the requested data for all schools in the district that benefit from this warehouse. If the warehouse equipment is used by the district for other purposes, the cost of the equipment in the application must reflect only that portion of use by food services, for example fifty percent for food service and fifty percent for other district use.
Q28: In the Information Alert, it states that the proposed funding, if approved, would be based on enrollment limits. Our enrollment as of October 31, 2008, is 456 so would our award be based on maximum funding per student of $10 if approved, which means we are only eligible for $4,560? If so, am I correct that we would not be eligible for any equipment since this is below both our capitalization threshold and the $5,000 equipment definition?
A28: If your district is selected to receive a grant, it would be funded for at least one item of equipment that equals or exceeds the lesser of your capitalization threshold or not less than $5,000. Do not limit your equipment requests based on the proposed funding model. Please refer to the Information Alert Number USDA-SNP-03-2009, page 3 under Proposed SFA Funding Limits. Funding limits will only be used in the event that requests exceed available funding.