Unpaid Meal Charges and Excess Account Balances

This Management Bulletin provides policy clarification about the requirement for school food authorities (SFA) to establish and communicate a meal charge policy. In addition, this Management Bulletin clarifies that the requirement to establish a meal charge policy is not required for SFAs that operate the California Universal Meals Program (UMP) or Provision at all sites.

Background

Beginning July 1, 2017, the U.S. Department of Agriculture (USDA) issued policy SP 46-2016 which required SFAs participating in the National School Lunch Program (NSLP) and School Breakfast Program (SBP) to establish and communicate a meal charge policy to households.

In addition, in October 2019, the California state legislature amended California Education Code (EC) 49557.5 to prevent the shaming of children who do not have the money to pay for a meal or whose family has unpaid meal debt. Subsequently, in July 2021, the California state legislature established the UMP under EC 49501.5. Commencing in School Year 2022–23, this requires public school districts, county offices of education, and charter schools serving students in grades transitional kindergarten through grade 12 (TK–12) to provide two meals free of charge (breakfast and lunch) during each school day to students requesting a meal, regardless of their free or reduced-price meal eligibility.

Meal Charge Policy for Schools Operating the UMP, Community Eligibility Program (CEP), Provision 2

The requirement to develop a meal charge policy applies to the SFA, rather than to individual schools within the SFA. If all school sites in an SFA operate a non-pricing program or provision (such as UMP, the CEP, or Provision 2), the SFA is not required to develop a meal charge policy, as no students are charged for meals.

However, if any school in the SFA is charging for meals because it does not operate UMP, CEP, or Provision 2 at all sites, the SFA must develop a meal charge policy. For example, public school districts that sponsor the meal administration for private schools should have a meal charge policy, because private schools do not operate UMP.

Notification Requirements

SFAs that are not otherwise exempt are required to have a written and clearly communicated meal charge policy in order to ensure a consistent and transparent approach to the requirements set forth in 7 CFR, Section 245.5, and with the regulations in 7 CFR, Section 210.12. This notification informs households of the impact and process in place when students have insufficient funds to purchase a meal, and helps ensure that all students have access to nutritionally adequate school meals.

The meal charge policy must be communicated in writing to households at the start of each school year and to households transferring to the school throughout the year. SFAs are encouraged to include the policy in student handbooks and/or in online portals households use to access student accounts. SFAs are encouraged to use multiple methods to disseminate the policy. The written policy also could be provided again to the household through mail or email the first time the policy is applied to a specific student.

In accordance with USDA Policy Memo SP 46-2016, SFAs should share the policy with local educational agency staff and are required to provide this policy to the state agency during their School Nutrition Programs administrative review.

Meal Charge Policy Components and Prohibited Practices

Unless a state has more restrictive laws, USDA Policy Memo SP 46-2016 states that SFAs may adopt policies that allow children to receive the nutrition they need to stay focused during the school day, minimize identification of children with insufficient funds to pay for school meals, and maintain the financial integrity of the nonprofit school food service account (NSFSA). Further, if permissible in state law, SFAs may develop policies that allow students to charge all types of available reimbursable meals, offer alternate meals, impose a limit on charges, or allow neither meal charges nor offer alternate meals, and are consistent for all students or vary based on student grade levels. USDA policy stipulates that SFAs must assure a student’s eligibility status is not disclosed at any point in the process of providing free or reduced-price meals, including notification of the availability of free or reduced-price benefits; certification and notification of eligibility; provision of meals in the cafeteria; and the point of service.

Also, meal charge policies must include information regarding the collection process for delinquent meal charge debt. SFAs are encouraged to consider the benefits of potential collections in the context of the costs that would be incurred to achieve those collections.

However, California law, EC 49557.5, is more restrictive than federal law as it relates to meal charge policies. As such, public school districts, County Offices of Education and charter schools shall not allow any disciplinary action against a student that results in the denial or delay of a nutritionally adequate breakfast or lunch. Therefore, meal charge policies may not include the following practices:

• Providing alternate meals or limiting choices of reimbursable meal
• Establishing reimbursable meal debt limits
• Denying or delaying a student a school meal for any reason
  
• Shaming or treating a student differently because of unpaid meals; students must be able to select a reimbursable meal of choice regardless of unpaid status
  
• Taking any action directed at a student to collect unpaid meal debt; efforts must be directed to the parent or guardian without the use of a debt collector
  
• Publicizing or announcing eligible households or children’s names;
  
• Using different mediums of exchange, such as meal cards, tickets, or tokens
  
• Having separate dining areas, service times or serving lines
  
• Requiring that children work for their meals

In addition, EC 49557.5 requires SFAs to take the following action:

• Within 10 days of a student reaching a negative balance, conduct direct certification or encourage the household to submit a meal application. Direct certification is required a minimum of three times per year, although more frequent direct certification is encouraged
  
• Reimburse school meal fees paid during the time the students would have been determined eligible (Note: The preceding information is no longer valid due to a revision to EC 49557.5)

Recovering Unrecovered or Delinquent Debt

To avoid confusion when referring to repayment deadlines, this Management Bulletin will use the term Fiscal Year, July 1 to June 30, in lieu of using the term school year.

Title 2, Code of Federal Regulations (2 CFR), Section 200.426: Bad debts are an unallowable cost to federal programs. According to federal guidance, unpaid meal charges are designated as unrecovered or delinquent debt until it is deemed uncollectible, at which time it becomes bad debt. The difference between unrecovered or delinquent debt and bad debt is described below:

• Unrecovered or delinquent debt refers to meal charges that have not been paid by the student(s) or parent(s) during the fiscal year.
  
• Bad debt is considered unrecovered or delinquent debt that, after all reasonable steps have been taken, has not been recovered by, or before, the end of the fiscal year in which the debt was incurred.

Bad Debt Recordkeeping Requirements

Once unrecovered or delinquent debt becomes bad debt, records relating to those charges must be maintained in accordance with the record retention requirements in 7 CFR, sections 210.9(b)(17) and 210.15(b). The following records should be maintained to document the appropriate establishment and handling of bad debt:

• Evidence of efforts to collect unpaid meal charges in accordance with the CDE or local unpaid meal charge policy
  
• Evidence the collection efforts fell within the timeframe and methods established by the CDE or local meal charge policy
  
• Financial documentation showing when the unpaid meal charge(s) became an operating loss
  
• Documentation showing when the repayment plan was agreed to by all parties (as applicable)
  
• Evidence any funds written off as bad debt were restored to the NSFSA using nonfederal funding sources

Student Account with Excess Balances

For SFAs with excess fund balances on their student accounts, either from the student leaving the district or after graduating, etc., the State Controller’s Office (SCO) provides guidance on the reporting requirements for unclaimed property.

The California Government Code, Section 50050, provides:

For purposes of this article, "local agency" includes all districts. Except as otherwise provided by law, money, excluding restitution to victims, that is not the property of a local agency that remains unclaimed in its treasury or in the official custody of its officers for three years is the property of the local agency after notice if not claimed or if no verified complaint is filed and served. At any time after the expiration of the three-year period, the treasurer of the local agency may cause a notice to be published once a week for two successive weeks in a newspaper of general circulation published in the local agency.

References

For additional information regarding unpaid meal charges best practices, guidance, and resources, visit the USDA FNS Unpaid Meal Charges web page at https://www.fns.usda.gov/cn/unpaid-meal-charges which includes:

• A handbook summarizing best practices that the USDA collected from state agencies, SFAs, and other key stakeholders
  
• The 2017 USDA Guide, Overcoming the Unpaid Meal Challenge: Proven Strategies from Our Nation’s Schools is “. . . designed to support program operators in their efforts to find workable solutions to this challenge and ensure children continue to have access to healthy school meals.
  
• Webinars that share ideas and strategies submitted by local operators
  
• Other relevant policy memoranda and guidance documents developed by the USDA; such as SP 17-2014, https://www.fns.usda.gov/cn/discretionary-elimination-reduced-price-charges-school-meal-programs.
  

For a detailed description of the unclaimed property program, applicable laws and regulations, and forms required for reporting, please visit the California SCO Reporting Resources web page at https://www.sco.ca.gov/upd_rptg.html.

Contact Information

If you have any questions regarding this subject, please contact the Resource Management Unit by email at snpcafefundquestions@cde.ca.gov.