Language Requirements for FDP Cooperatives

This management bulletin (MB) provides guidance for Child Nutrition Program operators who participate in cooperatives for goods and services. Cooperatives are a group of program operators who join together in the interest of increasing purchasing power. Per Title 7, Code of Federal Regulations (7 CFR), Section 250.59(e), all program operators who participate in a cooperative are required to sign written agreements with the administrative lead district of the cooperative outlining all school food service activities, including the use of U.S. Department of Agriculture (USDA) Foods. To protect the financial interests of all program operators involved within the cooperative and to ensure regulatory compliance, the California Department of Education (CDE) Food Distribution Program (FDP) requires that written agreements between member districts and the lead district contain, at minimum, the required language established in this MB.

The requirements established in this MB do not absolve member districts of the rules and responsibilities set forth by the cooperative, the FDP, and the USDA, including conditions for monitoring storage, control, and use of USDA Foods.

Required Cooperative Agreement Language

1. Language that clarifies applicable assignment of USDA Foods entitlement obtained through agency collaboration, as specified in 7 CFR, Section 250.19, as a recordkeeping requirement.
   
   Example: Through this written agreement, the cooperative’s lead district is assigned control of the member district’s fair share of USDA Foods entitlement for the applicable program year.

2. Language that clarifies applicable responsibility for ordering, receiving, storing, and distributing all USDA Foods on behalf of the cooperative, as specified in the CDE MB, NSD-FDP-04-2011, Private Cooperatives as Single Entities for Accountability for and Reporting of USDA Foods Activity.
   
   Example: The lead district is responsible for the ordering, receiving, storing, and distribution of all USDA Foods, on behalf of the member district.

3. Language that clarifies applicable responsibility for maintaining an inventory management system on behalf of the cooperative, as specified in 7 CFR, Section 250.59(a).

Example: The lead district will maintain an inventory management system for all items received on behalf of the cooperative.

4. Language that clarifies responsibility for USDA Foods loss due to theft, spoilage, damage, or other loss, and applicable reimbursement back to the member district(s), the CDE, or the USDA for the fair market value of the items.

The cooperative should ensure protections against losses that may occur at a USDA Foods approved processor or contracted commercial distributor that receives, stores, and distributes USDA Foods on behalf of the cooperative. A member of a cooperative may also be deemed responsible for losses if they do not fulfill the rules and responsibilities set forth by the cooperative. Each USDA Foods loss is unique, and reimbursement will be determined by the CDE and/or the USDA. Information regarding USDA Foods loss and reporting responsibilities can be found in 7 CFR, Section 250.14.

Example: Should a loss of USDA Foods being held for a member district occur due to theft, spoilage, damage or other loss, the cooperative is responsible to either the member district, the CDE, and/or the USDA for the fair market value of the food item(s), so long as the lead district is deemed responsible.

Recommended Cooperative Agreement Language

The following may not pertain to each cooperative, as each cooperative is unique in their own business operations; however, the CDE FDP strongly recommends adding the following language in all written agreements:

1. If applicable, language that ensures insurance is in place to protect the value of USDA Foods that are under direct control of the cooperative.

Reminder: Once USDA Foods are delivered and received at a cooperative’s storage facility, a USDA Foods processor, or commercial distributor, the CDE is no longer responsible for further monitoring of such foods per USDA Policy Memorandum FD-067, School Food Authorities Acting as a Collective Unit in the Control and Use of Donated Foods (Revised). Any questions arising among program operators in the cooperative with respect to subsequent distribution or use of USDA Foods must be resolved by the cooperative.

Example: The lead district maintains insurance coverage for the replacement of all losses of USDA Foods at fair market value, in the event that the lead district is deemed responsible for the loss of USDA Foods.

Note: Cooperatives that do not directly receive, store, or distribute USDA Foods and instead contract for these services should ensure contract language with the third party vendor clearly states applicable responsibility for the value of USDA Foods. 

2. Language that ensures USDA Foods are used in a timely manner to avoid potential loss of USDA Foods due to aging or other negative occurrence. Per 7 CFR, Section 250.12(c)(1), state level inventories of each category of USDA Foods may not exceed an amount needed for a six-month period; therefore, it is best practice for all participating agencies to follow the same guidelines when ordering and using USDA Foods.

Example: The cooperative requires that USDA Foods are used in a timely manner not to exceed six months of receipt. Members that are noncompliant of this requirement are subject to forfeiture of applicable food items and may be held responsible for any losses of USDA Foods that may occur as a result of noncompliance.

Contact Information

If you have any questions regarding this subject, please contact Marina Tapia, Private Cooperative Coordinator, Food Administration Unit, by phone at 916-324-0577 or by email at mtapia@cde.ca.gov.