BILL ANALYSIS �
AB 1917
Page 1
ASSEMBLY THIRD READING
AB 1917 (Dickinson)
As Amended May 25, 2012
Majority vote
EDUCATION 7-3 HIGHER EDUCATION 6-3
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|Ayes:|Brownley, Ammiano, |Ayes:|Block, Brownley, Fong, |
| |Buchanan, Butler, Carter, | |Galgiani, Lara, |
| |Eng, Williams | |Portantino |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Norby, Grove, Halderman |Nays:|Olsen, Achadjian, Miller |
| | | | |
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APPROPRIATIONS 12-0
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|Ayes:|Fuentes, Blumenfield, | | |
| |Bradford, Charles | | |
| |Calderon, Campos, Davis, | | |
| |Gatto, Ammiano, Hill, | | |
| |Lara, Mitchell, Solorio | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
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SUMMARY : Requires that, if the governing board of a school
district enters into a contract for the acquisition of food
services, then the governing board shall adopt policies and
procedures, as specified, to ensure that food service
contractors disclose all discounts, allowances, and incentives
the contractor receives and pay them to the school.
EXISTING LAW authorizes school district governing boards to
establish cafeterias, which are defined as synonymous with food
service. When school districts enter into agreements with food
service contractors for food services, federal regulations
require that the contractor credit them for any rebates and
other cost reductions the contractor receives from its
suppliers.
AB 1917
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FISCAL EFFECT : According to the Assembly Appropriations
Committee, potential General Fund (Proposition 98) cost pressure
to school districts, likely between $150,000 and $250,000, to
develop policy and procedures regarding food service contracts.
There are approximately 1,040 school districts in the state.
According to the California Department of Education (CDE), there
were 1,483 local education agencies (LEAs, including charter
schools) participating in the school nutrition program.
Likewise, the CDE states that 298 (20.1%) of the LEAs have some
sort of vendor contract.
COMMENTS : Elementary and secondary schools 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
Accountability and Administrative Review (AAR) Committee 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.
AB 1917
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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.
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.
Analysis Prepared by : Rick Pratt / ED. / (916) 319-2087
FN:
0003894