VCA Performance Standards in the SFSP

This management bulletin provides guidance on performance standards, budgets, and management plans for the Summer Food Service Program (SFSP). The regulations and guidance in this management bulletin provide requirements for SFSP sponsors about financial viability and management, which includes: (1) financial records and risk assessment, (2) administrative budget, and (3) management plan. The management bulletin also addresses sponsor administrative capability, internal controls for program accountability, and other application approval requirements.

Overview

On September 19, 2022, the Food and Nutrition Service published the Final Rule: Streamlining Program Requirements and Improving Integrity in the SFSP. The final rule aligns SFSP requirements with integrity measures used in the Child and Adult Care Food Program (CACFP). New regulations were established in Title 7, Code of Federal Regulations (7 CFR), Section 225.6. These regulations clarify existing SFSP requirements, provide guidance to state agencies, and outline the requirements for submission of management plans. The U.S. Department of Agriculture issued Policy Memorandum SFSP 03-2023 and amended Policy Memorandum SFSP 01-2008 to reflect updated SFSP regulations implemented in the Final Rule.

SFSP performance standards are referred to as VCA, which stands for viability, capability, and accountability. All SFSP sponsors, regardless of sponsor type, must demonstrate they meet the VCA requirements as specified below. Financial viability is the sponsor’s ability to demonstrate they have resources and generate income to meet the program’s operating obligations and debt commitments. Administrative capability means having effective management practices to ensure the sponsor can operate the SFSP in accordance with regulations. Program accountability encompasses a sponsor’s financial system and monitoring activities that prevent the misuse of funds and maintains records that show compliance with program requirements.

In accordance with 7 CFR 225.6(d), the California Department of Education (CDE) must only approve a sponsor’s application if it meets all three VCA performance standards.

Financial Viability and Management

Per 7 CFR 225.6(d)(1), all SFSP sponsors must be financially viable and maintain responsible fiscal management.

Upon application to the CDE, potential new sponsors must demonstrate financial viability. The CDE’s financial viability evaluation consists of the review and approval of financial records and risk assessment, administrative budgets, and components of the management plan.

Returning SFSP sponsors that remain in good standing are required to undergo a financial records review and risk assessment once every three years. The CDE may perform a financial record review and risk assessment more frequently if needed. In addition to demonstrating financial viability, the CDE also requires that all sponsors submit an administrative budget and management plan for SFSP operations each year.

In addition, 7 CFR 225.6(d) requires the CDE to consider past performance in the SFSP or another Child Nutrition Program (e.g., CACFP), and any other factors it deems relevant when determining whether the sponsor's application meets the VCA standards.

Financial Records Review and Risk Assessment

The CDE will request financial records and assess a sponsor’s risk to determine a sponsor’s financial viability. Records and risk assessment encompasses the sponsor’s ability to demonstrate the following:

• Adequate nonfederal funds to pay debts and sufficient contingency funds to pay employees and suppliers.
• Appropriate documentation of fiscal activities, which include, but is not limited to, budgets, official ledgers, accounting records and reports, recent tax and bank statements, grant award notices, and single audits.
• Absence of audit findings and significant internal control deficiencies that may compromise the sponsor’s ability to maintain responsible fiscal management.

In addition, private nonprofit sponsor organizations must also demonstrate the following:

• Current nonprofit status with the Internal Revenue Service and California Secretary of State.
• In good standing with the California Secretary of State.
• Absence of high-risk indicators, which includes unresolved sponsor liens and judgements, pending bankruptcies, and unresolved audit findings.
• Absence of high-risk indicators for the sponsor’s responsible principles, which includes liens and judgements that appear to be related to the sponsoring entity.

Please note, for potential new sponsors, documentation to support the financial records and risk assessment are required to be submitted to the CDE no later than March 15 of the corresponding SFSP application year.

Administrative Budget

Each year, all SFSP sponsors must submit a complete administrative budget with their application for CDE review and approval. In accordance with 7 CFR 225.6(c)(2)(vii), administrative budgets serve as the sponsors’ financial plan for operating the SFSP for the program year. Federal regulations stipulate that reimbursement funds may only be used for the operation and improvement of the nonprofit food service operations.

The administrative budget must include enough information that enables the CDE to assess the sponsor’s ability to operate the SFSP within its estimated reimbursement. To fulfill this requirement, the SFSP budget must include all anticipated administrative and operational costs that the sponsor expects to incur during the operation of the SFSP. In accordance with the standards set forth in 7 CFR 225.6(d)(1)(iii), all planned expenses must be necessary, reasonable, allowable, and appropriately documented. During the review of the budget, the CDE will evaluate the ratio of administrative to operating costs to ensure that all costs are reasonable prior to budget approval. Additional information regarding allowable costs for SFSP is available in CDE management bulletin Financial Management Standards for the SFSP at https://www.cde.ca.gov/ls/nu/sf/mbsfsp022020.asp.

Budget calculations may be estimates based on prior years’ operations or cost estimates based on market research. Upon request, the CDE may require the sponsor to submit the following documents (including, but not limited to): dated receipts and invoices for all goods and services, and written price quotes and estimates for goods and services to substantiate administrative and operational costs.

Sponsors must adhere to CDE approved budgets and submit any amendments in a timely manner to the CDE for review and approval. If the sponsor’s level of site participation or the number of meals served and claimed changes significantly, a budget amendment will be required to be submitted and approved by the CDE prior to the end of SFSP service (7 CFR 225.6[b][7]).

Administrative Capability

Per 7 CFR 225.6(d)(2), all SFSP sponsors must be administratively capable. Administrative capability means having effective management practices to ensure the sponsor can operate the SFSP in accordance with regulations. Sponsors can achieve this by practicing the following:

• Employing qualified staff that have the skills and training to fulfill program responsibilities.
• Employing enough qualified staff to ensure successful operation of the SFSP.
• Maintaining written policies and procedures that assign program responsibilities and duties.
• Ensuring compliance with civil rights requirements.

All sponsors must maintain documentation to demonstrate appropriate management practices, such as written policies and procedures for administrative duties, recruiting qualified staff, and staff training. This documentation must be provided to the CDE upon request.

Internal Controls for Program Accountability

The purpose of internal controls is to help sponsors comply with program requirements and prevent waste, fraud, and abuse. In accordance with 7 CFR 225.6(d)(3), all SFSP sponsors must have written internal controls and management systems in place to ensure fiscal accountability and operation of SFSP.

To demonstrate program accountability, sponsors must have a financial system with management controls specified in written operational policies that will ensure the following:

• All funds and property received are handled with fiscal integrity and accountability.
• All expenses are incurred with integrity and accountability.
• Claims will be processed accurately, and in a timely manner.
• Funds and property are properly safeguarded and used, and expenses incurred, for authorized SFSP purposes.
• A system of safeguards and controls is in place to prevent improper financial activities by employees.
• Appropriate records to document compliance with SFSP requirements, including budgets, approved budget amendments, accounting records, management plans, and site operations.

SFSP sponsors may refer to the United States Government Accountability Office’s Standards for Internal Control in the Federal Government at https://www.gao.gov/assets/gao-14-704g.pdf for internal control practices.

Management Plan

Each year, the CDE requires all sponsors to submit a management plan. A management plan is a comprehensive description of the sponsor’s management and administrative structure, including details about the sponsor’s financial viability and management.

The SFSP management plan documents the following sponsor activities:

• Describing the community’s need for summer meals.
• Recruiting of summer meal sites.
• Fiscal resources and financial history.
• Organizational structure and staffing.
• Training at an appropriate frequency.
• Monitoring in accordance with regulations.
• Complying with meal service, recordkeeping, and all other operational requirements.
  • Operational requirements include providing meal pattern compliant meals, conducting meal service in accordance with State and local health and sanitation requirements, complying with civil rights requirements, and claiming reimbursement for only eligible meals.

The CDE may ask for supporting documentation such as job descriptions, employee handbooks, and training materials to substantiate information submitted in a sponsor’s management plan. The sponsor must retain accurate records and make those records available to the CDE during an Administrative Review or at any time as requested by the CDE.

A complete management plan must include enough detail to demonstrate compliance with VCA performance standards. As stated previously, the CDE assesses financial viability for new private nonprofit sponsors, and then every three years unless a sponsor experienced significant operational problems.

Application Approval

All sponsors must demonstrate compliance with all three VCA performance standards during the annual application period. The CDE must only approve a sponsor’s application if it meets all three VCA performance standards (7 CFR 225.6[d]). Failure to submit documents on time or provide additional requested information to the CDE to demonstrate compliance with VCA performance standards may result in a denial of the sponsor’s application.

In addition, the CDE is prohibited from approving the application of any applicant sponsor identifiable through its organization or responsible principals as a sponsor which has been determined to be seriously deficient as described in 7 CFR, Section 225.11(c).

Contact Information

If you have questions regarding this subject, please contact the Summer Nutrition Programs and Grants Unit by email at SFSP@cde.ca.gov.