Thought Leadership

Does Your District Use a Food Service Management Company? If So, Prepare Now For Scrutiny by the Texas Department of Agriculture

Over the past few years, the Texas Department of Agriculture (TDA) has stepped up its auditing and enforcement efforts regarding school districts that contract with Food Service Management Companies (FSMCs) to manage their child nutrition programs. Because of the complexity, potential for food service disruption, and risk of financial penalties associated with TDA audits of school districts that use FSMCs, districts should act now to ensure they and their FSMCs comply with all state and federal rules and regulations.

What Has TDA Required of Districts with FSMCs? 

Based on adverse findings during TDA’s Administrative and Procurement Review processes, TDA has required some school districts to re-bid contracts with FSMCs despite the significant disruption the bidding process can have on food services. TDA is also imposing fiscal action on school districts it deems to exercise insufficient oversight over their FSMCs in areas such as procurement of food and equipment, and accurate preparation, counting, and claiming of meals served. The fiscal action imposed can include repayment of substantial sums of money for equipment improperly procured and meals improperly counted or claimed. TDA can also order complete holds on all child nutrition reimbursements for months while critical audit findings are resolved.

What Are Major Areas of Concern?

Areas of particular concern for TDA include:

• Whether school districts exercise sufficient oversight over FSMCs to ensure child nutrition programs are operating in compliance with relevant laws and regulations
• Whether school districts require FSMCs to follow the unique procurement rules outlined in TDA’s standard FSMC contract and relevant laws and regulations
• Whether an FSMC’s provision of goods or services outside the scope of TDA’s standard FSMC contract constitutes a material changes to the contract
• Whether school districts allow FSMCs to incur prohibited costs in the operation of the child nutrition programs

What Should School Districts Do Now?

Maintaining a good working relationship with TDA is imperative to ensure child nutrition programs operate smoothly and are properly funded, and students are provided with healthy and desirable meals. Before a TDA audit occurs, school districts should verify that their FSMCs are properly operating within TDA’s expectations. By doing so, you will be better prepared to endorse your district’s program when it is audited by TDA. Having an advisor who understands the TDA audit process and TDA’s expectations is also essential to ensure fair treatment and mitigate the risk of fiscal action or re-procurement requirements when such actions are not warranted. Our team at Thompson & Horton, LLP has experienced attorneys who can help answer your questions related to FSMCs, help your child nutrition programs run smoothly, and protect your interests during any TDA audit or review process. For specific questions, please contact Adam Rothey at arothey@thompsonhorton.com.