BILL ANALYSIS �
AB 1917
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Date of Hearing: March 28, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 1917 (Dickinson) - As Introduced: February 22, 2012
�Note: This bill is double-referred to the Assembly Higher
Education Committee and will be heard as it relates to issues
under its jurisdiction.]
SUBJECT : Education finance: acquisition of food services
SUMMARY : Requires public schools, colleges, and universities
to adopt policies to ensure that food service contractors
disclose all discounts, allowances, and incentives the
contractor receives and pay them to the school, college, or
university. Specifically, this bill :
1)Requires school district governing boards, the Board of
Governors of the California Community Colleges, the Trustees
of the California State University, and requests the Regents
of the University of California to develop and adopt policies
and procedures for the acquisition of food services to ensure
a service contractor fully discloses to the school, campus
auxiliary organization, or other unit of the public
postsecondary segment all discounts, rebates, allowances and
incentives received by the service contractor from its
suppliers.
2)Requires the contractor to pay to the above entities the full
amount of the discount, rebate or credit.
3)Requires that a record of such transactions be available for
public review as part of any statutorily-required audit.
4)Requires any necessary changes to contractual agreements be
implemented upon the renewal, extension, or amendment of an
existing service agreement.
EXISTING LAW authorizes school district governing boards to
establish cafeterias, which are defined as synonymous with food
service. Existing law also authorizes public postsecondary
institutions to enter into agreements for the purchase of goods
and services, including food services. When education
institutions enter into agreements with food service contractors
AB 1917
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for food services, federal regulations require that the
contractor credit them for any rebates and other cost reductions
the contractor receives from its suppliers.
FISCAL EFFECT : Unknown
COMMENTS : Elementary and secondary schools, colleges, and
universities that provide food services are referred to
collectively as school food authorities (SFAs). SFAs typically
contract with food service contractors for food services.
Contractors then can use their purchasing power to negotiate
rebates and other cost reductions from suppliers. Federal
regulations require that such cost reductions be credited back
to the SFA. SFAs are responsible for ensuring that invoices
from contractors are net of all applicable discounts, rebates,
and credits.
Oversight hearing. On March 7, 2012 the Assembly Committee on
Accountability and Administrative Review (AAR) held an oversight
hearing on "Rebates and Transparency in K-12 and Higher
Education Food Service Contracts." The hearing was prompted by
a $20 million settlement in 2010 in New York State that resolved
allegations that Sodexo, a food service contractor, had
overcharged New York public schools and universities by not
remitting rebates collected from its suppliers. Background
information prepared by AAR Committee staff indicates (among
other things):
1)Several contracts reviewed were silent on off-invoice rebates,
raising questions in some cases about whether the rebates
should have been remitted and may still be owed to the schools
involved.
2)As many as 52 of some 170 food contracts in California may be
in violation of rules that prohibit requiring school districts
to purchase all food supplies through a contractor's vendors.
3)California Department of Education (CDE) officials believe
food service contractors continue to collect questionable
rebates under fixed-price contracts.
4)The CDE is investigating a complaint from one school district
that its food service contractor is collecting and refusing to
disclose or remit off-invoice rebates.
AB 1917
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This bill addresses these issues by codifying the federal
regulations requiring the crediting of cost reductions to the
SFA and requiring SFAs to develop policies and procedures to
ensure compliance.
Required State Oversight. Since 2009, federal regulations have
required state education agencies to review and approve Food
Service Management Company (FSMC) and Food Service Consulting
Company (FSCC) contracts prior to execution. Contracts,
including all supporting documentation, must be reviewed
annually, and on-site reviews must be conducted at least once
every five years. A federal audit found the California
Department of Education (CDE) to be out of compliance with these
requirements. The CDE agrees with the audit and says the lack
of compliance is due to lack of positions. The CDE submitted a
request for 6.5 positions beginning in 2012-13. The positions
would be funded with $556,000 from federal funds already
available for this purpose. The Governor did not approve this
request in his 2012-13 budget proposal. The CDE indicates that,
with adequate staffing, it could effectively monitor FSMC and
FSCC contracts to ensure compliance with federal regulations and
ensure that school districts receive the full credits they are
owed.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Rick Pratt / ED. / (916) 319-2087