ODE Child Nutrition Programs. Commodity Food Distribution Program Terminology

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Magdalen Chase
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1 ODE Child Nutrition Programs Commodity Food Distribution Program Terminology Agencies State Agency (SA) The Oregon Department of Education enters into an agreement with USDA for the distribution of commodities to eligible sponsors. Also referred to as Distributing Agency. Recipient Agency (RA, Sponsor) Organizations who enter in an agreement with the State Agency to receive commodities, examples are public, private and residential child care institution schools. Agriculture Marketing Service (AMS) - The USDA agency responsible for purchasing surplusremoval items such as meat, poultry, fruits, and vegetables. AMS also provides end product certification that, at a minimum, certifies against non-diversion and non-substitution of donated food. Farm Service Agency (FSA) - The USDA agency responsible for acquiring products such as grain, dairy, peanut and oil products. Food and Nutrition Service (FNS) - The USDA agency responsible for administering domestic food assistance programs. Food Distribution Division (FDD) - The FNS division responsible for administering the donation of commodities to domestic food assistance programs. Entitlement Entitlement - The dollar value of commodity assistance. It is earned based on the total number of lunches a sponsor claimed in the previous school year and is calculated by multiplying the number of lunches claimed in the prior school year by the current commodity rate of reimbursement. Commodity entitlement can t be exchanged for cash. It must be spent during the current school year. Any unspent entitlement is added to the total entitlement for the next year and distributed among all sponsors. Entitlement Used The dollar value of commodity assistance a sponsor has spent during the current school year. This includes all previous commodity orders, product diverted for processing and your current commodity order. The value of bonus commodities is not charged against your entitlement. Fair Share - A proportional quantity of an available commodity. State agencies are offered a fair share of the total amount of a given commodity that is calculated based on their percentage of the national entitlement. The State Agency uses a similar basis for allocating commodities to eligible sponsors. 7/06) Page 1 of 6

2 Commodity Types Commodity - Predominantly bulk foods donated or made available for donation to eligible recipients by USDA. Commodities are also referred to as donated foods. USDA Value of Commodities (Contract Value) - The price assigned by USDA to a commodity that reflects USDA s current acquisition price, transportation and, if applicable, processing costs related to the food. Entitlement Commodities Commodities (Group A, B or P) that are charged against a sponsor s entitlement. Each time you order an entitlement item the USDA value is deducted from your entitlement. Bonus Commodities Commodities that are not charged against a sponsor s entitlement. The value of bonus items does not reduce your entitlement funds. Bonus items will continue to be available to you after your entitlement reaches a zero balance. Although the value of bonus commodities is not charged against your entitlement, they will have a delivery fee and may have a processing fee that will be charged on your invoice. Allocated Commodities Commodities that are allocated to sponsors by the State Agency on a fair share basis. Allocated commodities may be bonus or entitlement. When commodities are allocated to sponsors, their USDA value is deducted from the sponsor s entitlement. When the allocation is cleared the USDA value of commodities not ordered is returned to the sponsor s entitlement. Surplus Commodities Commodities not ordered during the allocation order period. Surplus commodities are available for sponsors to request for themselves and order during the surplus order period. Surplus commodities may be bonus or entitlement. On the Surplus Request form the commodity type, bonus or entitlement, is listed under the Description column. Brown Box Commodities in their original state from USDA. They may be bonus or entitlement. Processed Commodities (End Products) A finished product containing any amount of commodity foods that has been commercially processed. Out-Of-Condition Commodities Commodities found to be infested, deteriorated, or contaminated as the result of improper storage or latent defects for which the vendor, processor, sponsor, State Agency, etc., is responsible. Commodity Groups Each commodity is assigned to one of three groups and has a code that identifies it and the group to which it belongs. The commodity code is an alpha letter A, B or P and a three-digit number such as A608 ground beef, B065 sliced cheese, or P004 mayonnaise. Group A Commodities - Fruits, vegetables, meat, poultry, and fish products purchased by AMS. Group B Commodities Grains, dairy, peanut, and oil products that are purchased by FSA. 7/06) Page 2 of 6

3 Group P Commodities - Purchased by AMS as Group A Commodities or by FSA as Group B Commodities and diverted by the State Agency to a processor. The P signifies processed. There is always a processing fee attached to these items. An example is oil that is processed into mayonnaise (P004). USDA purchases oil as a Group B commodity then the State Agency has it diverted to a processor for conversion into mayonnaise. Ordering Allocation - The method used by the State Agency to distribute commodities to sponsors, on a fair share basis, for each order cycle. Offer and Acceptance System - The method by which the State Agency offers commodities to sponsors. The sponsor accepts only the amount and varieties it wishes to take. Order Cycle The time period, designated by the State Agency, in which a sponsor can place a commodity order. Order Cycle by Counties A list that designates which counties are in each order cycle. Sponsors may use the list to determine if they are assigned to the first or second order cycle. Commodity Order and Delivery Schedule There are two Commodity Order and Delivery Schedules, one for each order cycle. The schedules list the times and dates sponsors can place commodity orders. Surveys Annual Survey ODE uses the Annual Survey to determine the commodities and quantities that will be offered for the next school year. The Annual Survey is available for sponsors to respond to in February of each year. This is your opportunity to have input into what commodities will be offered. Processing Surveys - ODE uses Processing Surveys to determine the commodities sponsors want processed and which processors they want them diverted to for the next school year. Processing Surveys are available for sponsors to respond to in March of each year. Reports and Documents Bill of Lading A shipping document that lists the commodities being delivered. At the time of delivery, the sponsor is to count and verify the accuracy of the product count with the Bill of Lading and sign it. Any variations such as damages, shortages, overages, etc. should be noted on the Bill of Lading before the driver leaves. Invoice A bill sent to sponsors after each distribution for payment of commodity processing, shipping and handling charges. Invoices will reflect any adjustments made on the Bill of Lading (shorts and overages) and will list the shipping and handling charges and processing fees. Commodity Forecast A chart that shows what commodities are projected to be available for each distribution period. It includes the estimated USDA value of the commodities and the processing fee for processed items. The forecast is updated as needed and posted to the Commodity Food Distribution Program website. 7/06) Page 3 of 6

4 Value of Commodities Received A report that lists the code, description, units, value and extended value of commodities shipped. It will reflect any adjustments made on the Bill of Lading (shorts and overages). This report will be sent to sponsors with their invoice. Commodity File - A USDA list of commodities that includes: pack sizes, prices per pound, unit gross and net weights, commodity codes, and other information. The November 15 th commodity file is used to determine the contract value to use on the end product data schedule for the upcoming agreement year. Delivery Sites Delivery Site The location where commodities are delivered. Two or more sponsors may use the same delivery site. The case counts of dry commodities or frozen/refrigerated commodities of each sponsor are combined to reach the minimum number of cases needed for delivery. Processing Processor - Any commercial facility which processes or repackages commodities. Processing - The conversion of commodities into finished end products by food manufacturers. End Product A product containing any amount of commodity food which has been processed. Summary End Product Data Schedule (SEPDS) A summary document showing information about multiple end products from a processor. The information includes the end product code and description, number of pounds of a commodity needed to produce a case of end product, case weight and yield information, and the value of the commodity to be drawn down from a sponsor s or state s inventory for the end product. Agreement- Commodity Food, Processing - A legal document entered into between a processor and a distributing agency that provides for the further processing of USDA commodities. Processing agreements are not viable until the distributing agency approves them prior to the commencement of processing. State Processing Contract The State Agency enters into a bid contract with a food processor for the conversion of commodity food into processed product. The State Agency takes possession of the processed product and pays the processor for the processing charges. The processed product is allocated to sponsors as part of their regular commodity allocation. All processed items on the Allocation have a P code. The P signifies processed. There is always a processing fee attached to these items. The processing fee will be charged on your invoice. Master Processing Agreement (MPA) The State Agency enters into Master Processing Agreements (MPA) with processors for the conversion of commodity items into processed product. Through the Annual Survey and Processing Survey, in the spring of each year, sponsors have the option of requesting commodities be diverted for processing. When the diversion is made, the value of the commodities diverted for processing is drawn down from the sponsor s entitlement. Sponsors who divert commodities must work with the processor to determine the processed product they want, arrange for delivery of the product and ensure the commodity value is returned to them. 7/06) Page 4 of 6

5 National Processing Agreements (NPA) - Permanent agreements with processors intended to streamline and reduce paperwork for states and processors and make processing more accessible to sponsors. USDA enters into the NPA with the processor, approves the End Product Data Schedules (EPDS) and holds the bond. The State must sign a state participation agreement with the processor before national processing can be implemented. The State also orders the commodity foods, and monitors Monthly Performance reports for each processor. Sponsors are responsible for the competitive purchase of commodity processed products and must follow Federal, State and local procurement regulations when obtaining processed products or processing services. Direct Shipment - Commodities ordered by a State Agency to be shipped directly from the USDA vendor to the processor, rather than shipped to a distributing agency s or recipient agency s storage facility. Since the normal shipping practice is to ship foods to the distributing agency, this is sometimes called a diverted shipment, direct diversion or direct delivery." Backhaul - The pick up of commodities from the State Agency or sponsor for processing and return. Sponsors may have commodities in their inventory backhauled to a processor. Due to the implementation of Single Inventory, once a sponsor receives commodities they become part of their regular inventory and are no longer tracked by USDA or the State. Also, the State is no longer responsible for the oversight of these commodities. Therefore, backhauled commodities aren t covered by Master Processing Agreements or National Processing Agreements. When commodities are backhauled from a sponsor s storage facility to a processor, the sponsor is responsible for: Competitive procurement of the processing service Maintaining a contract with the processor to protect the value of the commodities while they are in the processor s possession. Sale - A sale represents the total number of units of a specific end product sold to a sponsor. The documentation of a sale typically consists of a delivery ticket (showing the sponsor signed for the particular product) and a billing invoice issued by the processor/distributor that delivered the product. Performance reports are compiled by summarizing the information contained in the sales documents for a specific reporting month. A processor may bill and report a sale each time a delivery takes place or he may choose to bill for product delivered over a specific period of time (i.e., on a monthly basis). Fee-For-Service - The price charged by pound or by case representing a processor s costs of ingredients (other than donated foods), labor, packaging, overhead, and other costs incurred in the conversion of the donated food into the specified end product. Fee-for-service is an alternative to using a value pass-through system. It primarily applies to meat and poultry products or other non-substitutable donated foods. Value Pass-Through System A system used to ensure that the full value of the USDA food contained in an end product is passed on to the sponsor. The Value Pass-Through System types are: Refund/Rebate A sponsor purchases a Processor s end product and submits a refund request. The processor pays the sponsor for the USDA value of the commodity food contained in the end product. 7/06) Page 5 of 6

6 Discount System A sponsor purchases end product from a processor at an established price minus the USDA value of the commodity food contained in the end product. Net Off Invoice (NOI) A Distributor sells commercial product to a sponsor at net price (gross price minus the USDA value of the commodity food contained in the product). The distributor uses the velocity report to deduct the USDA value of the commodity food contained in the product sold from the gross price shown on the processor s invoice and remits the balance to the processor. Substitutable Food - A USDA commodity that may be replaced by a commercially purchased food of domestic origin, of the same generic identity, and of equal or better quality to the commodity provided by USDA. Inventory - The accounting of commodities for which State Agency, sponsor or processor is liable or responsible. In processing, the inventory can include food in physical inventory (on hand), in finished foods, or in book inventory. Monthly Performance Reports (MPR) - Reports submitted monthly by processors to the State Agency detailing sales of finished end products to recipient agencies, receipts of donated food, and information on the donated food inventory. Fees Processing Fees The price per case a processor charges to convert a commodity into a specified end product. This charge may include ingredients, labor, packaging, overhead and other costs incurred in the conversion. State processed commodities are listed on the Forecast as P code, such as P004 mayonnaise. Processing fees for state processed commodities are charged on your invoice. Diversion Fee The price per pound the State Agency charges sponsors for commodities diverted to a processor. Delivery Fees The price per case the State Agency charges sponsors for the distribution of commodities. Years School Year (SY) The period of 12 months beginning July 1 of any calendar year and ending June 30 of the following year. Processing Agreements are set up on a school year basis. Federal Fiscal Year - The period of 12 months beginning October 1 of any calendar year and ending September 30 of the following year. Program Year - The period of 12 months beginning October 1 of any calendar year and ending September 30 of the following year. Note: Updated terminology will be posted to the CFDP web site at: 7/06) Page 6 of 6

Basic Commodity Processing. Mary Beth Flowers FDD Program Support Branch

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