SAVANNAH-CHATHAM COUNTY BOARD OF EDUCATION

Internal Audit Department

TO: Board of Education

THROUGH: M. Ann Levett, Ed.D., Superintendent of Schools

Vanessa Miller-Kaigler, Deputy Superintendent of Operations
Onetha Bonaparte, Senior Director of School Nutrition Program

FROM: Leah Underwood, Interim Director, Internal Audit

DATE: August 25, 2022

SUBJECT: Audit of School Nutrition Inventory Processes (#22-03)

We have completed our Audit of School Nutrition Inventory Processes. Our audit report
is presented in the sections listed below:

I. AUDIT OBJECTIVES
II. AUDIT SCOPE
III. BACKGROUND
IV. OBSERVATION
V. OTHER MATTERS

I. AUDIT OBJECTIVES

This audit was conducted due to the level of inventory errors we found during this year’s
Business Process School Nutrition inventory reviews. This audit was designed to meet
specific objectives to identify a possible root cause to the findings. The objectives of our
audit were as follows:

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 A. Identify and determine compliance with procedures on the purchasing, receiving,
and verification of physical inventory at the school sites.
B. Evaluate the effectiveness of the inventory control procedures to ensure cost
control is monitored and misuse of inventory is prevented.

II. AUDIT SCOPE

The District’s School Nutrition inventory procedures are developed by the School
Nutrition Department and financially accounted for by the Division of Finance. As of
June 2022, approximately $7,505,025 had been expended in food costs for the District.

We completed the audit by interviewing school level managers and District level school
nutrition staff in the areas of ordering, receiving, monitoring and inventory procedures.
We conducted onsite observations of the ordering and receiving processes and
conducted a District Wide physical inventory audit.

Our fieldwork was conducted during the period of February 2022 through June 2022.

Internal Audit conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that the audit be planned and
performed to obtain sufficient, appropriate evidence to provide a reasonable basis for
the findings and conclusions based on the audit objectives. Internal Audit believes that
the evidence obtained provides a reasonable basis for the findings and conclusions
based on the audit objectives.

At the end of each observation, we have identified the Board’s priority goals that are
most likely affected by our findings. Internal Audit has made recommendations to help
support the achievement of these goals. The Board’s Priority Goals are:
• Goal 1: Student Success, Academic Achievement, and Life Readiness.
• Goal 2: Family Engagement and Stakeholder Partnerships.
• Goal 3: Recruitment, Selection, Retentions, and Talent Development.
• Goal 4: Fiscal Responsibility and Resource Stewardship.

III. BACKGROUND

Inventory management is a multi-function process that includes menu planning,

forecasting, procurement, and inventory control. Menus should be designed to meet the
interest of the consumer while maximizing food costs. This process can be time
consuming but if planned and implemented effectively, it can create revenue for a
school nutrition program.

Food costs, according to the United States Department of Agriculture (USDA), account
for 46% of a school nutrition program’s revenue. There are a variety of sources where
food can be obtained by a school nutrition program. This includes purchasing food
directly from a vendor and/or utilizing the USDA commodities which helps to reduce
food costs. The Food and Nutrition Service (FNS) of the United States Department of
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Agriculture administers a National School Lunch program at the Federal level. They
work with the State level agencies that in turn operate through agreements at the local
education agencies (LEA) level. Savannah Chatham County Public School System
participates in the National School Lunch Program. By participating in this program, the
school district receives cash subsidies and USDA foods for each reimbursable meal
they serve to students.

Inventory procurement is driven by menu planning, forecasting of meal counts, and

inventory. Once a menu is developed, it is uploaded into Edison, the District’s cafeteria
management program. Inventory orders are identified through the program based on
the ingredients needed to develop the meal in relation to the inventory for each school.
Forecasting meal counts impacts how much food needs to be ordered. Without accurate
forecasting, food products can be over ordered, stored longer which impacts cash flow,
could spoil due to lack of usage and/or increase possible theft.

Procurement orders are placed by a school site level employee into the Edison program
and then approved by the zone Coordinator. The Coordinator batches the orders based
on vendors and sends the order to the Coordinator who manages the vendor of the
items that were batched. The orders are then submitted to the vendor. Within a week,
the goods are delivered to the school sites. Once an order is at the school site and prior
to the delivery driver’s departure, a school nutrition employee reviews the order for
spoilage, mis-delivery, and damage. The packing slip is cross referenced to the invoice
and signed by the school nutrition manager. The manager then electronically receives
the items within the Edison program by comparing the order within the system to the
invoice. Invoices are maintained at the school site and sent to the Accounts Payable
Department for payment.

Each month, a physical count of all inventories is conducted by the school site level staff
and uploaded to the Edison program. Any difference between what is documented
electronically to the physical count is adjusted at this time. An Inventory on Hand Report
is provided to the School Nutrition and Accounting Departments to document monthly
inventory counts and costs. This process of perpetual inventory allows for ongoing
analysis of inventory costs and turnover rates.

Within the scope of this audit, we conducted a follow up inventory audit to identify if the
control issues that existed during our Business Process Reviews still existed. We
judgmentally sampled 355 items across elementary, K-8, Middle, and High School
levels. Seventy-six percent (76%) of the sample was located. Twenty-four percent
(24%) of the items could not be located. This included items that were not located onsite
but documented into the Edison system.

The National Food Service Management Institute was authorized by Congress in 1989
and established at the University of Mississippi in Oxford. The Institute operates under a
grant agreement with the USDA for the purpose of improving the operation of child
nutrition programs through research, education, training, and information dissemination.
We are using their resources and best practices in business management as the criteria
for this audit.
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 IV. OBSERVATION

Observation A. Guidance, Training and Monitoring of Inventory Processes

(DAS Goal 4)
Guidance over inventory processes is not streamlined into one document and stored in
a centralized location. Training of the inventory processes is not provided consistently to
school site staff. Most of the training occurs peer to peer. Monitoring of the processes
does not occur on a continuous and uniformed basis.

Guidance
Food inventory procedures should be designed for efficiency and cost control. They
should include processes for the procurement, receiving, physical accounting for items,
food storage and food safety. These procedures should be easy to understand and
streamlined into one document for accessibility.

In our request for inventory procedures, we were provided multiple documents

addressing inventory control from different sources. In addition, we received a response
that stated there was not a formal procedure related to the perpetual inventory process.
Below are the documents provided:
• Receiving Procedures for William’s USDA – This was documented through an
email to school site managers.
• Edison Cafeteria Management program instructions for the procurement,
receiving, and inventory of food/paper products. This provides the technical how-
to of completing tasks within the computer program.
• School Nutrition Program Policy and Procedure Manual – The information within
this manual is either incomplete, outdated, and does not provide step by step
instructions for completing work tasks for the subject area. Generalized
statements of work tasks are provided. We did identify areas that had updated
and detailed information. These items were provided through other information
channels.
• Opening of School Packet – We found a reference to the invoice process and to
the Inventory on Hand Report, which is part of a checklist, that should be
submitted to management.

Procedural Manuals should have procedures of current work tasks needed to complete
a job function. Any changes to the work tasks, should not be addressed in other
information channels. They should be reflected as a change to the manual. A manual
not only provides employee instructions to ensure adherence to Federal, State, and
local laws and policies, but it also establishes instructions so that all employees are
consistently handling inventory to control costs and improves productivity.

Training
Guidance resources initially provide a roadmap for employee accountability and
adherence to job expectations. The next step is the training of the employee. The
training should be aligned with the guidance available to employees.
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The District’s School Nutrition Resource Manager(s) (based on the job description) are
responsible for providing local and mandated training for school site staff. In addition,
they function as a floating manager. In our discussions with the resource managers, we
found they do not conduct the training tasks as described in their job description. In
SY20/21, a revision to each employee’s job duties was provided to staff. In review of
these changes in comparison to the job descriptions held by the Human Resources
Department, most of the job duties of all staff did not correspond with their job
description. This shift in duties impacted the ability to build an effective training program.
The only training that has been consistently followed is the training required to meet
USDA requirements for school nutrition programs. The USDA requirement is based on
the total number of hours of training. There is no requirement for content area. In review
of the training provided to staff and in discussions with staff, the School Nutrition
Training options are 30-to-45-minute segments that are not directly related to each
other. We could not identify a uniformed training plan for school nutrition staff.

Training in the areas of inventory procedures, inventory turnover, and inventory’s

relationship with meal counts/plate costs has not occurred consistently with all staff. We
held discussions with over half of the District’s School Nutrition Site Managers. They all
referenced that training of inventory procedures was conducted on site with their
managers when they were Lead Assistants, or they had a mentor if they were new to
the District. The training provided through the managers were for the procurement,
receiving, and physical count processes only. They did not receive training that would
provide more in-depth knowledge of the relationships between meal counts, plate costs,
yields, and inventory. Some of the long-term managers (over 10 years) referred that
training in these areas of inventory controls were received over a decade ago.

Employee training helps improve knowledge and skills of an employee (improved job
satisfaction, less employee turnover), improve productivity (employee job effectiveness),
and create a more efficient work environment.

Monitoring
Monitoring of work tasks is the first step in identifying an employee’s work performance
and documenting the actions. It also serves as a resource for identifying weaknesses
within a function/department/organization and therefore providing an opportunity for
growth and development.

The School Nutrition program does not have a formal walk-through checklist for onsite
reviews. In discussions with various staff members, we found weekly visits to school
sites are conducted; however, there is not a formal inventory checklist of required items
to review during these visits. Each School Nutrition Coordinator has their own method of
determining what they need to review. Senior Management does not require any formal
documentation of these processes.

Monitoring instruments should be aligned with an organizations/department’s procedure

manuals. They should be used consistently among all staff charged with conducting the
review. Using a multi-purpose tool that can document work performance for employee
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growth or termination, identify training needs for an individual or school site, and/or
provide evidence to reflect weaknesses in procedures strengthens the monitoring
controls designed to ensure the department is meeting its goals and objectives.

The purpose of this audit was to identify the root cause of the inventory errors within our
Business Process Reviews. Based on our observations, we are concluding the errors
occurred due to the structure of inventory procedures, insufficient training of inventory
processes, and inconsistent monitoring of inventory practices in each school. Based on
the evidence provided during this audit and discussions with staff, it appears there may
be other areas within the School Nutrition Program that need improvement. Our
recommendations are based on addressing inventory processes while identifying other
areas of operational improvement.

Recommendations

To the School Nutrition Department:

• Conduct a comprehensive examination of the District’s school nutrition program
in relation to Federal, State, and local requirements to establish qualitative and
quantitative Key Performance Indicators that ensures compliance with school
nutrition requirements while increasing revenue and employee/customer growth.
This should include but not limited to operating ratios, meal equivalents, meals
per labor hour, meals cost, inventory cost, etc.
 Develop Standard Operating Procedures (SOP) that align with the
outcomes identified in the examination.
 Using the SOP as a foundation, develop a strategic model of training for
school nutrition employees that provides growth in content knowledge of
the school nutrition program in relation to the goals of the department
along with the skill sets (professional and soft skills) needed for each
position. The model should also include a training pathway for
transitioning into higher level positions.
• Develop a monitoring program that is built in assessing performance outcomes in
relation to the established KPI’s and ensures compliance with Federal, State, and
local laws, policies, and procedures for school nutrition programs.

V. Other Matters

Effective menu planning within a school setting requires understanding of the nutritional
requirements, program related guidelines and product availability for cost savings while
balancing customer (student) interest. The District does not have a cross functional team
to provide input in the development of the District’s school nutrition menus. In addition,
meal testing is not conducted District-wide nor across school levels.

The District’s School Nutrition program has a position that is responsible for leading a
menu planning committee, develop cycle menus, create standardized recipes, and tests
them for use in school kitchens. In our discussions with the employee, we were informed
a menu planning committee existed prior to the pandemic but when we asked the last
time the committee met and who was in attendance, no information could be provided.
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The same information was provided concerning the testing of recipes with the exception
that most of the testing was conducted onsite at the school the employee is located. No
documentation or calendar events could be provided to document events prior to the
pandemic. We also found very little input is asked of school site staff as well. In our
discussions with school site managers, we asked if they were given an opportunity to
provide input into the school menus. Those with a “no” response included a statement
that the menu was already created when it is provided to them. The managers with a
“yes” response stated that they were only allowed to inform the employee if the meal was
popular or not. A few employees informed us that they had tried to provide feedback but
that their suggestions were not considered. One employee stated feedback did occur
when there was a committee.

Menu planning is the foundation to which the school nutrition programs build their
resources around to support and fulfill the program’s goals and objectives while remaining
in compliance with all school nutrition requirements. Our recommendation is based on
best practice in menu planning within a school nutrition program.

Recommendation

To the School Nutrition Department:

• Develop a menu planning committee that is a cross sectional representation of the
staff, students, and parents. This committee should be tasked to, but not be limited
to. providing input into meal ideas, sampling vendor products, and used as one of
the focus groups for testing recipes that are being considered for meal production.
In addition, the school nutritional department should consider using the District’s
Wellness Committee as a tool to communicate the menu planning committee.