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Revenue from Nonprogram Foods--Updated Guidance


Nutrition Services Division Management Bulletin
Purpose: Policy, Beneficial Information, Action Required
To: School Nutrition Program Sponsors Number: USDA-SNP-36-2012
Attention: Food Service Director Date: September 2012
Subject: Revenue from Nonprogram Foods – Updated Guidance
Reference: U.S. Department of Agriculture (USDA) Interim Rule: School Food Service Account Revenue Amendments Related to the Healthy, Hunger-Free Kids Act of 2010 (June 2011); USDA Policy Memo SP 39-2011 - Revised (October 24, 2011)

This Management Bulletin (MB) provides School Food Authorities (SFA) [Local Educational Agencies (LEA) participating in School Nutrition Programs (SNP)] updated policy information from the U.S. Department of Agriculture (USDA) regarding new requirements for Revenue from Nonprogram Foods in Section 206 of the 2010 Healthy, Hunger-Free Kids Act (HHFKA).

In June 2011, the USDA published an Interim Rule pertaining to [Paid Lunch Equity and] Revenue from Nonprogram Foods to ensure that revenues from the sales of nonprogram foods generate at least the same proportion of SFA revenues as they contribute to SFA food costs.

The California Department of Education (CDE) Nutrition Services Division (NSD) has been working closely with the USDA to obtain guidance to assist NSD staff and SFAs with implementing this comprehensive new law. To date, the NSD has done the following:

The CDE will continue to distribute new information as the USDA provides further guidance in this area.

Due to the complexity of these new federal requirements, the CDE strongly encourages SFAs to read the USDA’s Nonprogram Revenue policy memos and utilize the USDA’s Nonprogram Revenue Calculator so they may comply with the Nonprogram Revenue requirements.

The USDA’s Policy Memo SP 39-2011 — Revised, Child Nutrition Reauthorization 2010: Guidance on Paid Lunch Equity and Revenue from Nonprogram Foods is located on the USDA Food and Nutrition Service Web site at http://www.fns.usda.gov/school-meals/policy, and it provides updated questions and answers about Nonprogram Food Revenues.

Revenue from Nonprogram Foods (Section 206)

To ensure clarity of the new requirements, the CDE is listing the language from the HFFKA regarding Revenue from Nonprogram Foods. Section 206 of the HHFKA (Public Law 111-296) amends Section 12 of the National School Lunch Program (NSLP), adding paragraph (q), “Nonprogram Food Sales” and defining “Nonprogram Food” and [Nonprogram] “Revenues” as follows:

(q) NONPROGRAM FOOD SALES.—

 (1) DEFINITION OF NONPROGRAM FOOD.—In this subsection:

 (A) IN GENERAL. The term ‘nonprogram food’ means food that is—

 (i) sold in a participating school other than a reimbursable meal provided under this Act or the Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.); and

 (ii) purchased using funds from the nonprofit school food service account of the school food authority of the school.

 (B) INCLUSION. The term ‘nonprogram food’ includes food that is sold in competition with a program established under this Act or the Child Nutrition Act of 1966 (42 U.S.C. 1771 et seq.).

 (2) REVENUES.—

(A) IN GENERAL. The proportion of total school food service revenue provided by the sale of nonprogram foods to the total revenue of the school food service account shall be equal to or greater than the proportion of total food costs associated with obtaining nonprogram foods to the total costs associated with obtaining program and nonprogram foods from the account.

 (B) ACCRUAL. All revenue from the sale of nonprogram foods shall accrue to the nonprofit school food service account of a participating school food authority.

 (C) EFFECTIVE DATE. This subsection shall be effective beginning on July 1, 2011.

Section 206 of the HHFKA, is codified under Title 7, Code of Federal Regulations, Section 210.14(f) of the Interim Rule. The Interim Rule:

  1. Defines nonprogram foods as those foods and beverages sold in a participating school other than reimbursable meals and meat supplements, such as:

1) A la carte and other food items which are sold in competition with the reimbursable meal programs as provided in Section 10 of the Act and;

2) Purchased using funds from the nonprofit school food service account.

Please note: Nonprogram beverages are also considered nonprogram foods.

  1. Requires all food sold in a school and purchased with funds from the non profit school food service account other than meals and meal supplements reimbursed by the USDA, must generate revenue at least equal to the cost of such foods.
  2. Requires SFAs to ensure that their nonprogram food revenues are equal to or greater than their nonprogram food costs. For the purpose of this provision, nonprogram food costs do not include labor or other expenses. All revenue from the sale of nonprogram foods accrues to the nonprofit school food service account of the SFA.
  3. Assumes that a 10 percent increase in prices for a la carte foods will reduce the purchase and consumption of those foods by three percent.
  4. Assumes that 46 percent of lost demand for a la carte foods due to price increases will be redirected to additional participation in the SNP.
  5. Asserts that USDA research from the School Lunch and Breakfast Cost Study–II [in school year (SY) 2005–06] showed that revenue from non-reimbursable (nonprogram) meals fell short of the cost of those meals by 29 percent, and the average SFA used revenues from reimbursable meals to offset the cost of producing a la carte and other reimbursable meals.
Action Required

The USDA requires all SFAs to ensure that revenues from the sales of nonprogram foods generate at least the same proportion of SFA revenues as they contribute to SFA food costs. SFAs must calculate their Nonprogram Food Revenues and make all documentation of such calculations available upon request and/or during CDE Administrative Reviews (formerly termed Coordinated Review Effort) to ensure compliance.

To implement this requirement, SFAs must identify and track the following for an entire school year (e.g., for 2012–13, SFAs must have data from SY 2011–12 available):

  1. Total food costs and proportion of nonprogram food costs to total food costs
  2. Total food revenues and proportion of nonprogram food revenues to ensure that the nonprogram revenues meet or exceed nonprogram food costs

The following example demonstrates how to calculate compliance with this provision:

Annual
School Nutrition Program Costs

Amount

Total Program Costs

$  1,000,000

   Total Food Costs

$     500,000

     ٠ Nonprogram Food Costs

$       50,000

     ٠ Reimbursable Meals Food Costs

$     450,000

Total Revenue

$  1,000,000

Note: Nonprogram Food Costs are 10 percent of Total Food Costs

Since the nonprogram food costs are 10 percent of the total food costs ($50,000 of $500,000), the revenue from the nonprogram foods must equal ten percent or more of the total program revenue: $1,000,000 x 10 percent = $100,000 (Nonprogram Food Revenue target).

For this example, the SFA must receive $100,000 or more in revenue from the sale of nonprogram foods. To the extent that these revenues fall short of the revenue target, SFAs must take action to either increase á la carte prices or invest additional funds to the food service account from sources outside the food service account.

SFAs must keep all records related to program and nonprogram food costs/revenues in order to document compliance in this area.

Resources

A copy of the Interim Rule, National School Lunch Program School Food Service Account Revenue Amendments Related to the Healthy, Hunger-Free Kids Act of 2010, is available in the following USDA Web document at http://www.fns.usda.gov/sites/default/files/2011-06-17.pdf.

The USDA’s Policy Memos are available on their USDA Food and Nutrition Service Web site at http://www.fns.usda.gov/school-meals/policy. Search for the word, “Nonprogram” to find related policies, revenue calculator, etc.

The USDA’s Policy Memo SP 39-2011 – Revised, Child Nutrition Reauthorization 2010: Guidance on Paid Lunch Equity and Revenue from Nonprogram Foods is located at http://www.fns.usda.gov/guidance-paid-lunch-equity-and-revenue-nonprogram-foods-0.

The USDA Nonprogram Food Tool (Calculator) is located at http://www.fns.usda.gov/sites/default/files/SP39-2011ar.xls.

SFAs may also want to consult guidance from the National Food Service Management Institute (NFSMI). While the NFSMI does not currently have guidance specific to Section 206 of the HHFKA, it does have guidance on nonprogram food pricing and school food service account management. SFAs may find this information helpful as they price their nonprogram foods at: http://www.nfsmi.org/documentlibraryfiles/PDF/20080225031916.pdf.

Please note that SFAs should ensure that they are in compliance with the requirements of Section 206 of the HHFKA when using any outside resource(s).

If you have any questions regarding this MB or cafeteria fund policy or regulations, please contact the School Nutrition Programs Unit at 800-952-5609, or you can submit your questions to the SNP Cafeteria Fund Team at SNPCafeFundQuestions@cde.ca.gov.

Questions:   Nutrition Services Division | 800-952-5609
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