When contracting with a Food Service Management Company (FSMC), a school food authority (SFA) has several fiduciary responsibilities that must periodically take place during the term of the contract to ensure the fiscal integrity of its child nutrition programs, for example: administrative oversight, monitoring, reviewing invoices and record keeping.

It is imperative that the SFA understands and accepts the responsibilities of the contract which it has signed. The SFA will be held responsible for areas of monitoring and subsequent fiscal action found during a Coordinated Review Effort (CRE) review since the New York State Education Department agreement to administer the programs is with the SFA. The SFA will be responsible and must recoup all of the improperly paid federal and State funds from the FSMC for certain program violations related to menu planning, meal service, etc.

Administrative oversight includes, but is not limited to the SFA reviewing and auditing monthly operating statements and invoices, which must adhere to the selected format described in the contract between the SFA and the FSMC. Invoices must list all products purchased and the accompanying dollar amounts of rebates, discounts and credits. All reported expenditures must be allocable, allowable costs that are incurred solely for the SFA’s on-site operations, not corporate or administrative costs. These allowable direct costs must be supported by source documentation (i.e., food and supply invoices, payroll records, benefits/taxes, insurance, permits) and maintained by the SFA.

Payment to the FSMC is limited to the extent of annual program income which is defined as monies generated by sales of meals to children, accrued State and federal reimbursement, and student and adult a la carte sales, less the annual guaranteed return to the district, if applicable. The FSMC cannot be paid during July and August when the SFA is not participating in a Summer Food Service Program, or not claiming reimbursement for the School Breakfast Program or the National School Lunch Program. If employees work for 10 months (e.g. September – June) their health benefits need to be pro-rated for the 10 months they are actually working. The SFA is only required to pay the FSMC the direct costs incurred per meal, which may be below the contractual per meal bid price for the month. State and federal reimbursement funds can only be held in the School Food Service account, hence SFA monthly overpayment to the FSMC cannot occur.

Questions regarding Contracting with School Food Service Management Companies should be directed to Jamie McMillian or Linda St. Pierre  (518) 473-8781.