Meal Charging and Bad Debt Policies

CPAs & Advisors

Jennifer Watkins
Jennifer Watkins CPA Principal CPAs & Advisors

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Several months ago, the Michigan Department of Education (MDE) issued guidance in an administrative policy that requires districts to put a written Meal Charging Policy in place. With that, a Bad Debt Policy is also required. The guidance was the topic of many discussions, and parts of the guidance did not seem practical. Although it is still a bit confusing, MDE has now clarified many of the issues and made it more feasible.

Here are the highlights that are most helpful:

  • A written Meal Charging Policy is required to be in place at all districts effective 7/1/17.
  • The policy should include a Bad Debt Policy (unless done separately).
  • Bad Debt is an unallowable cost in the Food Service Fund (this has always been the case).
  • MDE clarified what “bad debt” is — bad debt is an uncollectible balance for inactive students only. Therefore, if the student still attends the district, they are active and would not have to be written off.
  • Any “bad debt” must be written off both on the Food Service Fund and the District’s POS system.
  • The Food Service Fund must be made whole for any bad debt. For example, the General Fund (or possibly an activity fund) would have to make a transfer to cover the bad debt.
  • Once an account has been determined to be bad debt, the district’s business office is responsible for trying to collect those balances, not the Food Service Department.
  • The uncollectible balances must be tracked and collected by the business office by December 31 (not June 30).

Here is a link to several pieces of guidance on the Michigan Department of Education’s website: MDE School Nutrition Program. Also, the USDA website has some helpful guidance as well, specifically in the area of unpaid meal charges: USDA – Schools Nutrition.

If you have questions, contact your Yeo & Yeo professional.

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