Fiscal Management is the process of keeping an organization running efficiently within its allotted budget. Fiscal accountability in food service departments is imperative, especially given the challenge of operating in a highly regulated environment, often with limited revenue, inadequate facilities, and the high personnel costs. With shifts in the operational model to scratch-cooked meals, meticulous fiscal management becomes even more crucial. With this knowledge, food service directors can lead with full transparency and accountability, enabling them to make informed decisions when developing and growing their programs. Need a crash course in School Food Finance? Enroll in the School Food Institute course and learn best practices for managing finance in a scratch cook school setting.
Fiscal Management is the process of keeping an organization running efficiently within its allotted budget. Fiscal accountability in food service departments is imperative, especially given the challenge of operating in a highly regulated environment, often with limited revenue, inadequate facilities, and the high personnel costs. With shifts in the operational model to scratch-cooked meals, meticulous fiscal management becomes even more crucial. With this knowledge, food service directors can lead with full transparency and accountability, enabling them to make informed decisions when developing and growing their programs. Need a crash course in School Food Finance? Enroll in the School Food Institute course and learn best practices for managing finance in a scratch cook school setting.
District size can often determine the extent of the food service director’s fiscal management responsibilities. In smaller districts (those with fewer than 2,499 students), the accounting department may manage much of the food service budget and advise as needed on financial issues. The district’s business manager may view food services simply as a line item without regard to the greater vision of the department’s impact on students’ well-being and the school community. For the food service director in a smaller district, envisioning a change of their food service department will require learning new processes and using tools for oversight to make informed decisions. They must be able to explain their plan to the business manager with adequate analysis as back-up. In larger districts, the food service director is generally more involved in the processes related to their fund. They may have budgetary responsibility and a detailed understanding of both food and payroll costs. In these districts, the accounting department may support food services by providing basic accounting services such as bank deposits, check writing, and other accounting functions. But typically, the expectation is that the food service director makes the decisions regarding their fund’s operation, including payroll and food expenditures. Although federal regulation mandates that food service department funds should be budget neutral, in some cases food services will need additional support from the district’s general fund. District administration may attempt to reduce the transfer of funds from the general fund to the food services fund, and a common response is to cut expenditures without considering strategies to increase revenue and participation. This produces a culture that sabotages the creative problem-solving necessary to improve food quality and student participation, and, as a result, increase revenue. This is why the food service director must take charge of the fiscal management of the program; it is the key to a successful and sustainable food program.
“. the food service director must take charge of the fiscal management of the program; it is the key to a successful and sustainable food program.”
“. the food service director must take charge of the fiscal management of the program; it is the key to a successful and sustainable food program.”
Trusted and effective calculation tools can help food services directors manage their funds efficiently. The ability to correlate statistics and make accurate projections allows the department to navigate through unforeseen changes and events, which may be internal to the department or extend to the overall district. These tools can create a common language for discussing changes and reorganization with the district administration and accounting department. The most innovative districts have a thorough understanding of their bottom line and can articulate how a robust food service is a vital part of the educational program. The Management Tools & Resources page contains easy-to–use, downloadable spreadsheets that can be used in conjunction with district-wide financial systems, Point-of-Sale software (POS—meal counts by eligibility used to claim reimbursement), and back-office software (back of the house software—recipe management, menu cycles, purchasing records, inventory, and production records). Very small districts that do not have any of the software mentioned above can use the Lunch Box tools as stand-alone management tools. All of these tools provide a benchmark to evaluate the progress and success of potential program changes such as universal breakfast, centralizing production, labor shifts, or menu shifts to increase participation. The tools can also be used to create projections by developing “what if” scenarios for shifts in labor assignment or a full reorganization.
Labor costs generally account for 45–50% of a food service department’s budget. However, depending on the location, minimum wage adjustments, and negotiated agreements, the percentage of labor expenditures can reach much higher.
It is vital to accurately project this budget and ensure that you have the correct staffing in place to produce quality meals in a timely manner. Most districts develop their personnel budgets with software tied to the payroll system. Typically, this software does not provide all of the information needed by the food service department to manage current personnel or to plan for future change; when planning any change to the department’s programs, food services must be able to forecast the staffing requirements for the changes and then monitor the results.
Labor costs generally account for 45–50% of a food service department’s budget. However, depending on the location, minimum wage adjustments, and negotiated agreements, the percentage of labor expenditures can reach much higher.
It is vital to accurately project this budget and ensure that you have the correct staffing in place to produce quality meals in a timely manner. Most districts develop their personnel budgets with software tied to the payroll system. Typically, this software does not provide all of the information needed by the food service department to manage current personnel or to plan for future change; when planning any change to the department’s programs, food services must be able to forecast the staffing requirements for the changes and then monitor the results.
An easily manipulated worksheet to identify personnel by site; provides details of each employee’s associated costs, such as health and welfare, number of days, etc.
An easily manipulated worksheet to identify personnel by site; provides details of each employee’s associated costs, such as health and welfare, number of days, etc.
The food service department’s labor cost requires strong management and planning, as it represents one of the largest portions of the expenditures. The annual cost for each operationally-necessary position is calculated based on the salary of the current employee (or an estimate if the position is open), as well as the other incremental costs (aka fringe benefits) associated with that position: pension payments, FICA, Medicare, and healthcare. Variable attributes such as job title, pay range, collective bargaining affiliation, location, available health plans, retirement, work calendar, and allotted hours are also assigned to each position. As soon as people are hired for open positions, their unique information—such as date of hire, placement on the salary schedule, and health plan selection—should be updated in the calculations.
The food service department’s labor cost requires strong management and planning, as it represents one of the largest portions of the expenditures. The annual cost for each operationally-necessary position is calculated based on the salary of the current employee (or an estimate if the position is open), as well as the other incremental costs (aka fringe benefits) associated with that position: pension payments, FICA, Medicare, and healthcare. Variable attributes such as job title, pay range, collective bargaining affiliation, location, available health plans, retirement, work calendar, and allotted hours are also assigned to each position. As soon as people are hired for open positions, their unique information—such as date of hire, placement on the salary schedule, and health plan selection—should be updated in the calculations.
Though some districts try to accomplish at least some of the USDA Professional Standard training requirements within the regular work day, for districts shifting to scratch-cooking, budgeting for professional development provides the necessary and cost-saving opportunity to establish new skills and refresh forgotten ones. We recommend budgeting 2 - 3 days of professional development per school year for all site leads and other key management personnel. At least one 8-hour training day should be budgeted for staff who work 20 hours a week or less. If your district is undergoing a major shift in operations, additional one-time training time is incredibly useful in setting up the next stages for success.
In fiscal management, the Position Control Worksheet is the basis for approving positions for the department’s budget. Most district accounting systems have a position control module, which can export a spreadsheet of personnel data that is similar to this tool. This worksheet must be as accurate as possible to ensure the reliability of the personnel budget, and can regularly compare to the actual personnel expenditure by the department. As a cost controlling tool, the position control worksheet should be a living document that reflects your current plan to produce quality meals and service for your students. If the personnel budget changes, you should inform the accounting office so the district financial system mirrors your budget.
Tracking labor activity across all positions is powerful information for fiscal accountability. Some districts use time clock systems for this purpose, which can enhance the ease of the task, but manual timesheets can function in the same way. Once the assigned hours are identified, it is essential to perform a monthly comparison to the actual hours worked to make sure that the hours are within the expected budget. Some payroll systems have “exception reports” that can provide information about hours worked in excess of the assigned or contracted hours; however most school payroll departments do not provide this type of vital information to the departments.
In the absence of an exception report, you can establish your own process for comparing hours assigned to hours worked by creating a report that shows the actual paid hours by employee and comparing those to assigned hours. Because there are many different kinds of payroll systems and pay periods, we cannot provide “the best” tool. However, we have provided the Hours Assigned to Hours Worked Worksheet as an example to help you understand the concept. You can develop a format that fits your department’s needs.
This tracking is important because if hours worked are greater than the assigned hours, then your department will exceed its payroll budget before the year is complete unless the extra hours are to backfill a vacant position. In some cases, this is reasonable and expected, but you need to be prepared to explain the discrepancy. For example, you may have adjusted labor assignments due to enhanced programming—like adding breakfast in the classroom—which may have required an hour or two more a day over the cafeteria-based model. In this particular example, the increased revenue from the program expansion balances the increased labor assignment.
Conversely, additional hours can simply happen without cause. Regularly-occurring extra minutes worked across each site can add up and throw the budgeted labor out of sync with revenue and other expense areas. Establishing clear protocols for approving additional or overtime hours is important to the fiscal health of your department. Performing hours worked to hours assigned comparisons on a routine basis will give you the ability to respond quickly to imbalances and to make necessary changes.
