United States Department of Agriculture
Food and Nutrition Service's
Financial Statements for
Fiscal Years 2018 and 2017
Audit Report 27401-0003-11
OFFICE OF INSPECTOR GENERAL
November 2018
Food and Nutrition Service’s Financial
Statements for Fiscal Years 2018 and 2017
Audit Report 27401-0003-11
OIG audited the consolidated financial statements of FNS for fiscal years 2018 and
2017.
OBJECTIVE WHAT OIG FOUND
Our audit objectives were The Food and Nutrition Service (FNS) received an
to determine whether: (1) unmodified opinion from the Office of Inspector General’s
the consolidated financial audit of FNS’ consolidated financial statements. We
statements present information
determined that the agency’s financial statements
fairly, in all material respects,
and in accordance with generally
present FNS’ financial position as of September 30, 2018
accepted accounting principles; and 2017, fairly, in all material respects, and prepared
(2) the internal control objectives in accordance with accounting principles generally
over financial reporting were accepted in the United States of America. This includes
met; (3) FNS complied with the agency’s net costs, changes in net position, and
applicable laws and regulations; statements of budgetary resources and related notes to
and (4) information was the financial statements.
materially consistent with other
sources. Our review of FNS’ internal control over financial
reporting identified no material weaknesses. However,
our review of compliance with laws and regulations
REVIEWED identified that FNS’ high-risk programs were not
We conducted our audits at FNS’ compliant with the requirements of the Improper
Headquarters in Alexandria, Payments Information Act, as amended by the Improper
Virginia, and the FNS Regional Payments Elimination and Recovery Act of 2010, and
Office in San Francisco, the Improper Payments Elimination and Recovery
California. Improvement Act of 2012.
RECOMMENDS
This report does not include any
recommendations.
United States Department of Agriculture
Office of Inspector General
Washington, D.C. 20250
DATE: November 8, 2018
AUDIT
NUMBER: 27401-0003-11
TO: Brandon Lipps
Administrator
Food and Nutrition Service
ATTN: David Burr
Chief Financial Officer and Deputy Administrator for
Financial Management
FROM: Gil H. Harden
Assistant Inspector General for Audit
SUBJECT: Food and Nutrition Service’s Financial Statements for Fiscal Years 2018
and 2017
This report presents the results of our audits of the Food and Nutrition Service’s financial
statements for the fiscal years ending September 30, 2018, and 2017. This report
contains an unmodified opinion on the financial statements, as well as the results of our
assessments of the Food and Nutrition Service’s internal control over financial reporting
and compliance with laws and regulations.
We appreciate the courtesies and cooperation extended to us by members of your staff
during our audit fieldwork and subsequent discussions. This report contains publicly
available information and will be posted in its entirety to our website
(http://www.usda.gov/oig) in the near future.
Table of Contents
Independent Auditor’s Report............................................................................... 1
Report on the Financial Statements .............................................................1
Opinion on the Financial Statements ...........................................................2
Other Matters.................................................................................................2
Report on Internal Control Over Financial Reporting .............................3
Report on Compliance with Laws, Regulations, Contracts, and Grant
Agreements .....................................................................................................3
Purpose of the Report on Internal Control Over Financial Reporting
and the Report on Compliance with Laws, Regulations, Contracts, and
Grant Agreements .........................................................................................5
Abbreviations .......................................................................................................... 6
Exhibit A: Status of Prior Year Noncompliance Finding .................................. 7
Exhibit B: Agency’s Financial Report ................................................................. 9
Independent Auditor’s Report
Brandon Lipps
Administrator
Food and Nutrition Service
The Department of Agriculture’s Office of Inspector General (OIG) audited the consolidated
financial statements of the Food and Nutrition Service (FNS) for fiscal years 2018 and 2017. We
also considered FNS’ internal control over financial reporting and tested FNS’ compliance with
certain provisions of applicable laws, regulations, contracts, and grant agreements that could
have a direct and material effect on the determination of material financial statement amounts
and disclosures on these consolidated financial statements.
Exhibit A of this report provides the status of the prior noncompliance with laws and regulations.
Report on the Financial Statements
We have audited the accompanying consolidated financial statements of FNS, which comprise
the consolidated balance sheets as of September 30, 2018 and 2017, and the related consolidated
statements of net cost and changes in net position; and the combined statements of budgetary
resources for the fiscal years then ended and the related notes to the financial statements
(hereinafter referred to as the “financial statements”). The objective of our audits was to express
an opinion on the fair presentation of these financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America
(U.S.); and the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the U.S.; the
standards applicable to financial audits contained in government auditing standards, issued by
the Comptroller General of the U.S.; and the Office of Management and Budget (OMB) Bulletin
19-01, Audit Requirements for Federal Financial Statements. Those standards and OMB
Bulletin 19-01 require that we plan and perform audits to obtain reasonable assurance about
whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
AUDIT REPORT 27401-0003-11 1
considers internal control relevant to the entity’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the financial statements. Our
audits also included performing such other procedures as we considered necessary in the
circumstances.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion on the Financial Statements
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of FNS, as of September 30, 2018 and 2017, and its net costs, changes in
net position, and budgetary resources for the years then ended, in accordance with accounting
principles generally accepted in the U.S.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the U.S. issued by the Federal Accounting Standards
Advisory Board (FASAB) require that the Required Supplementary Information (RSI)1 be
presented to supplement the financial statements. Although the RSI is not a part of the financial
statements, FASAB considers this information to be an essential part of financial reporting for
placing the financial statements in an appropriate operational, economic, or historical context.
We have applied certain limited procedures to the RSI in accordance with auditing standards
generally accepted in the U.S., which consisted of inquiries of management about the methods of
preparing the RSI information and comparing the information for consistency with
management’s responses to our inquiries, the financial statements, and other knowledge we
obtained during our audits of the financial statements. We do not express an opinion or provide
any assurance on the information because the limited procedures do not provide us with
sufficient evidence to express an opinion or provide any assurance.
1
The RSI presented within consists of Management’s Discussion and Analysis, and required supplementary
stewardship information.
2 AUDIT REPORT 27401-0003-11
Other Reporting Required by Government Auditing Standards
Report on Internal Control Over Financial Reporting
In planning and performing our audits of the financial statements, we considered FNS’ internal
control over financial reporting (internal control) to determine the audit procedures that are
appropriate in the circumstances for the purpose of expressing our opinion on the financial
statements, but not for the purpose of expressing an opinion on the effectiveness of FNS’ internal
control. Accordingly, we do not express an opinion on the effectiveness of FNS’ internal
control. We did not test all internal controls relevant to operating objectives as broadly defined
by the Federal Managers’ Financial Integrity Act of 1982 (FMFIA).
Our consideration of internal control was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control over financial
reporting that might be significant deficiencies or material weaknesses, and therefore, material
weaknesses or significant deficiencies may exist that were not identified.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent, or detect and correct, misstatements on a timely basis. A material weakness is a
deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable
possibility that a material misstatement of FNS’ financial statements will not be prevented, or
detected and corrected on a timely basis.
A significant deficiency is a deficiency, or combination of deficiencies, in internal control that is
less severe than a material weakness, yet important enough to merit attention by those charged
with governance.
OMB Bulletin 19-01 requires us to describe significant deficiencies and material weaknesses
identified during our audits, and in the event that no material weaknesses were identified, to so
report. We did not identify any deficiencies in internal control that were considered to be
material weaknesses during our audits.
Report on Compliance with Laws, Regulations, Contracts, and Grant Agreements
As part of obtaining reasonable assurance about whether FNS’ financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, grant agreements, and Governmentwide policy requirements,
noncompliance with which could have a direct effect on the determination of material amounts
and disclosures in the financial statements. However, providing an opinion on compliance with
those provisions was not an objective of our audits, and accordingly, we do not express such an
opinion.
We also performed tests of FNS’ compliance with certain provisions referred to in
Section 803(a) of the Federal Financial Management Improvement Act of 1996 (FFMIA).
Providing an opinion on compliance with FFMIA was not an objective of our engagement, and
AUDIT REPORT 27401-0003-11 3
accordingly, we do not express such an opinion. The results of our tests of FFMIA disclosed no
instances in which FNS’ financial management systems did not substantially comply with
FFMIA.
In Audit Report 50024-0013-11, USDA’s Fiscal Year 2017 Compliance with Improper Payment
Requirements, issued May 2018, OIG identified that FNS’ high-risk programs were not
compliant with the requirements of the Improper Payments Information Act of 2002, as amended
by the Improper Payments Elimination and Recovery Act of 2010 (IPERA). Specifically, OIG
reported FNS’ non-compliances with IPERA because the Supplemental Nutrition Assistance
Program and the Child and Adult Care Food Program did not publish a comprehensive improper
payment gross estimate; National School Lunch Program (NSLP), School Breakfast Program
(SBP), and Special Supplemental Nutrition Program for Women, Infants, and Children did not
meet annual reduction targets; and SBP and NSLP did not report a gross improper payment rate
of less than 10 percent.
Management’s Responsibility for Internal Control and Compliance
FNS’ management is responsible for (1) evaluating the effectiveness of internal control over
financial reporting based on criteria established under FMFIA, (2) providing a statement of
assurance on the overall effectiveness of internal control over financial reporting, (3) ensuring
FNS’ financial management systems are in substantial compliance with FFMIA requirements,
and (4) ensuring compliance with other applicable laws, regulations, contracts, and grant
agreements.
Auditor’s Responsibilities
We are responsible for (1) obtaining a sufficient understanding of internal control over financial
reporting and compliance to plan the audit, (2) testing whether FNS’ financial management
systems substantially comply with FFMIA requirements referred to above, and (3) testing
compliance with certain provisions of laws, regulations, contracts, and grant agreements that
have a direct effect on the determination of material amounts and disclosures in the financial
statements.
We did not evaluate all internal controls relevant to operating objectives as broadly established
by FMFIA, such as those controls relevant to preparing statistical reports and ensuring efficient
operations. We limited our internal control testing to controls over financial reporting and
compliance. Because of inherent limitations internal control over financial reporting may not
prevent, or detect and correct, misstatements due to fraud or error.
We did not test compliance with all laws, regulations, contracts, and grant agreements applicable
to FNS. We limited our tests of compliance to certain provisions of laws, regulations, contracts,
and grant agreements that have a direct effect on the determination of material amounts and
disclosures in the financial statements that we deemed applicable to FNS’ financial statements
for the fiscal year ended September 30, 2018. We caution that noncompliance may occur and
not be detected by these tests.
4 AUDIT REPORT 27401-0003-11
Management’s Response
FNS’ Chief Financial Officer and Accounting Division management reviewed a draft of this
report and, in commenting on such, stated they were in concurrence.
Status of Prior Year Noncompliance Finding
We reviewed the status of FNS’ corrective actions with respect to the prior year’s Independent
Auditor’s Report, dated November 6, 2017. The status is presented in Exhibit A.
Purpose of the Report on Internal Control Over Financial Reporting and the Report on
Compliance with Laws, Regulations, Contracts, and Grant Agreements
The purpose of the “Report on Internal Control Over Financial Reporting” and the “Report on
Compliance with Laws, Regulations, Contracts, and Grant Agreements” sections of this report is
solely to describe the scope of our testing of internal control and compliance and the results of
that testing, and not to provide an opinion on the effectiveness of FNS’ internal control or
compliance. These reports are an integral part of an audit performed in accordance with
government auditing standards in considering FNS’ internal control and compliance.
Accordingly, these reports are not suitable for any other purpose.
Gil H. Harden
Assistant Inspector General for Audit
Washington, D.C.
November 7, 2018
AUDIT REPORT 27401-0003-11 5
Abbreviations
FASAB........................ Federal Accounting Standards Advisory Board
FFMIA ........................ Federal Financial Management Improvement Act of 1996
FMFIA ........................ Federal Managers’ Financial Integrity Act of 1982
FNS ............................. Food and Nutrition Service
IPERA ......................... Improper Payments Elimination and Recovery Act of 2010
NSLP ........................... National School Lunch Program
OIG ............................. Office of Inspector General
OMB ........................... Office of Management and Budget
RSI .............................. Required Supplementary Information
SBP ............................. School Breakfast Program
U.S. ............................. United States of America
USDA.......................... United States Department of Agriculture
6 AUDIT REPORT 27401-0003-11
Exhibit A: Status of Prior Year Noncompliance Finding
Report 27401-0002-11, Food and Nutrition Service’s Financial Statements for Fiscal Years
2017 and 2016.
Reported Nonompliance
In Audit Report 50024-0011-11, USDA’s Fiscal Year 2016 Compliance with Improper Payment
Requirements, issued May 2017, OIG identified that FNS’ high-risk programs were not
compliant with the requirement of the Improper Payments Information Act of 2002, as amended
by the Improper Payment Elimination and Recovery Act of 2010 (IPERA). Specifically, OIG
reported FNS’ non-compliances with IPERA because Supplemental Nutrition Assistance
Program and Child and Adult Care Food Program did not publish a comprehensive improper
payment gross estimate; National School Lunch Program (NSLP), School Breakfast Program
(SBP), and Special Supplemental Nutrition Program for Women, Infants, and Children did not
meet annual reduction targets; and SBP and NSLP did not report a gross improper payment rate
of less than 10 percent.
Status
Closed. Final action on Recommendation 2 to FNS from Audit Report 50024-0011-11, USDA’s
Fiscal Year 2016 Compliance with Improper Payment Requirements, was closed during fiscal
year 2018.
AUDIT REPORT 27401-0003-11 7
8 AUDIT REPORT 27401-0003-11
Exhibit B: Agency’s Financial Report
Food and Nutrition Service’s
Fiscal Years 2018 and 2017 Financial Statements
Prepared by Food and Nutrition Service
AUDIT REPORT 27401-0003-11 9
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
MANAGEMENT DISCUSSION AND ANALYSIS
SECTION 1: MISSION, ORGANIZATIONAL STRUCTURE AND PROGRAMS
The Food and Nutrition Service (FNS) is an agency within the U.S. Department of Agriculture (USDA).
FNS was established August 8, 1969, by Secretary's Memorandum No. 1659 and Supplement 1 pursuant
to the authority contained in 5 U.S.C. 301 and Reorganization Plan No. 2 of 1953.
FNS is the Federal agency responsible for managing the 15 domestic nutrition assistance programs. Its
mission is to increase food security and reduce hunger in partnership with cooperating organizations by
providing children and other low-income Americans access to food, a healthful diet, and nutrition
education.
The FNS annual appropriation for administrative funds includes a very small percentage of funds for the
administration of the Center for Nutrition Policy and Promotion (CNPP). CNPP’s mission is to improve
the health of Americans by developing and promoting dietary guidance that links scientific research to the
nutrition needs of consumers.
FNS FY 2018 Organization Chart
Food and Nutrition Service
Administrator
Community Food Senior Policy Office of Strategic Administrator
Office of the Chief Communications Officer Civil Rights Division
Systems Advisor Initiatives Support Unit
Associate Administrator
Chief Operating Officer Associate Administrator Associate Administrator Deputy Administrator Deputy Administrator Deputy Administrator
Regional Operations and Supplemental Nutrition Special Nutrition & Safety Child Nutrition Programs Office of Policy Support
Support (ROS) Assistance Program (SNAP) Programs (SNAS) (CN) (OPS)
Deputy Chief Operating Retailer Operations Division Retailer Policy & Food Distribution Policy and Program SNAP Research and
Officer/ Office of Management Division Division Development Division Analysis Division
Management
Emergency Management
Program Accountability & Supplemental Food Program Monitoring Special Nutrition Research
Administration Division Program and Operational and Analysis Division
Office of Information State Systems Office
Support Division
Technology
Program Development Planning and
Mid-Atlantic Regional Office
Division Food Safety Nutrition Promotion Regulatory Affairs
and Technical
Office of Financial
Midwest Regional Office Assistance Division
Management
Mountain Plains Regional Office of Program
Office. Integrity
Northeast Regional Office)
Southeast Regional Office
Southwest Regional Office
Western Regional Office
Page 1 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Descriptions of FNS Programs:
Over the past half-century – beginning with the National School Lunch Program in 1946 – the Nation has
gradually built an array of nutrition assistance programs designed to help the most vulnerable populations
meet their food needs. Taken together, these programs form a nationwide safety net supporting low-
income families and individuals in their efforts to escape food insecurity and hunger and achieve healthy,
nutritious diets. Currently, the programs administered by FNS touch the lives of one in four Americans
over the course of a year.
The nutrition assistance programs described below work both individually and in concert with one
another to improve the nutrition and health of the Nation’s children and other low-income Americans.
• Supplemental Nutrition Assistance Program (SNAP): Authorized by the Food and Nutrition Act of
2008, SNAP is the cornerstone of the Nation’s nutrition assistance safety net, touching the lives of
more than 42 million Americans. It provides nutrition assistance to participants, the majority of
whom are children, the elderly, or people with disabilities, helping them put food on the table using
benefits that can be redeemed at authorized food retailers across the country. State agencies are
responsible for the administration of the program according to national eligibility and benefit
standards set by Federal law and regulations. The Food and Nutrition Service is responsible for
authorizing and monitoring participating retailers. Benefits are 100 percent Federally-financed, while
administrative costs are shared between the Federal and State Governments.
SNAP provides the basic nutrition assistance benefit for low-income people in the United States;
other FNS programs supplement this program with benefits targeted to special populations, dietary
needs and delivery settings. (Puerto Rico, American Samoa, and the Commonwealth of the Northern
Mariana Islands receive grant funds to provide food and nutrition assistance in lieu of SNAP.)
• Food Distribution Program on Indian Reservations (FDPIR): FDPIR provides USDA foods to
income-eligible households living on Indian reservations, and to American Indian households
residing in approved areas near reservations or in Oklahoma. Many households participate in FDPIR
as an alternative to SNAP, because they do not have easy access to SNAP offices or authorized food
stores. State agencies and Indian Tribal Organizations (ITOs) that operate the program are responsible
for eligibility certification, nutrition education, local warehousing and transportation of food,
distribution of food to recipient households, and program integrity. The Federal Government pays
100 percent of the cost of USDA foods distributed through the program and provides cash payments
for administrative expenses.
• Child Nutrition Programs (CNP): The Child Nutrition Programs - National School Lunch (NSLP),
School Breakfast (SBP), Special Milk (SMP), Child and Adult Care Food (CACFP), and Summer
Food Service (SFSP) - provide reimbursement to State and local governments for nutritious meals
and snacks served to about 35 million children in schools, child care institutions, summer sites and
after school care programs. CACFP also supports meal service in adult day care centers. FNS
provides cash and USDA-purchased food on a per-meal basis to offset the cost of food service at the
local level and a significant portion of State and local administrative expenses, and provides training,
technical assistance, and nutrition education. Payments are substantially higher for meals served free
or at a reduced price to children from low-income families.
Page 2 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
• Special Supplemental Nutrition Program for Women, Infants and Children (WIC): WIC addresses the
supplemental nutritional needs of at-risk, low-income pregnant, breastfeeding and postpartum
women, infants and children up to five years of age. It provides participants monthly supplemental
food packages targeted to their dietary needs, breastfeeding support to nursing mothers, nutrition
education, and referrals to a range of health and social services – benefits that promote a healthy
pregnancy for mothers and a healthy start for their children. Appropriated funds are provided to
States agencies for food packages and nutrition services and administration for the program; State
agencies operate the program pursuant to plans approved by FNS.
• The Emergency Food Assistance Program (TEFAP): This program supports the emergency food
organization network by distributing USDA-purchased, 100 percent domestically grown foods for use
by emergency feeding organizations including soup kitchens, food recovery organizations, and food
banks. The foods are also provided to other types of local organizations, such as community action
agencies, which distribute the foods directly to low-income households. TEFAP also provides
administrative funds to defray State and local costs associated with transportation, processing storage,
and distribution of USDA Foods or those provided through private donations. The allocation of both
Federal food and administrative grants to States is based on a formula that considers the States’
unemployment levels and the number of persons with income below the poverty level.
• The Commodity Supplemental Food Program (CSFP): CSFP works to improve the health of low-
income elderly persons at least 60 years of age by supplementing their diets with nutritious USDA
Foods. Women, infants, and children who were certified and receiving CSFP benefits as of February
6, 2014, can continue to receive assistance until they are no longer eligible under the program rules
in effect on February 6, 2014. As required by the Agricultural Act of 2014 (P.L. 113-79), women,
infants, and children who apply to participate in CSFP on February 7, 2014, or later cannot be
certified to participate in the program. Such individuals may be eligible for other nutrition assistance
programs such as the Special Supplemental Nutrition Program for Women, Infants, and Children
(WIC), the Supplemental Nutrition Assistance Program (SNAP), and other nutrition assistance
programs. In FY 2016, elderly participants comprised over 99.5 percent of total participation.
Participants receive a monthly food package of USDA Foods. State agencies are provided funding to
cover State and local administration costs such as nutrition education, warehousing, food delivery, and
participant certification. States work with local agencies to distribute the monthly food package to
participants.
• Senior Farmers’ Market Nutrition Program (SFMNP): This program provides coupons to low-
income seniors that can be exchanged for fresh, nutritious, unprepared, locally grown fruits,
vegetables and herbs and honey at farmers’ market, roadside stands, and community-supported
agriculture programs.
• Pacific Island and Disaster Assistance: Pacific Island Assistance includes assistance to the nuclear-
affected islands of the Republic of the Marshall Islands (RMI) in the form of cash-in-lieu of food and
administrative funds through the Special Food Assistance Program and is authorized under the
Compact of Free Association Amendments Act of 2003 (P.L. 108-188). Disaster relief in the form of
USDA Foods can be provided to the RMI and Federated States of Micronesia for use in Presidentially
declared disasters.
Federal nutrition assistance programs operate as partnerships between FNS and the State and local
organizations that interact directly with program participants. States voluntarily enter into agreements
with the Federal Government to operate programs according to Federal standards in exchange for
program funds that cover all benefit costs, and a significant portion, if not all, of administrative expenses.
Page 3 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Under these agreements, FNS is responsible for implementing statutory requirements that set national
program standards for eligibility and benefits, providing Federal funding to State and local partners, and
for conducting monitoring and evaluation activities to make sure that program structures and policies are
properly implemented and effective in meeting program missions. State and local organizations are
responsible for delivering benefits efficiently, effectively, and in a manner consistent with federal
regulations.
FNS Staff:
The public servants of FNS are an important resource for advancing the key outcomes sought through the
nutrition assistance programs. The agency staff serves to ensure and leverage the effective use of the
other program appropriations.
FNS staff is funded primarily out of the Nutrition Programs Administration account, which represents
approximately one-tenth of one percent of the total FNS budget. The agency employment level
represents less than two percent of the total employment within USDA and is similarly small in
proportion to the total State-level staff needed to operate the programs. The agency employs people from
a variety of disciplines, including policy and management analysts, nutritionists, computer and
communication experts, accountants, investigators, and program evaluators. Because of the small size of
the agency’s staff relative to the resources it manages, FNS has created clear and specific performance
measures and must focus its management efforts in a limited number of high-priority areas.
Program operations are managed through FNS’ seven regional offices and 19 field offices/satellite
locations. A regional administrator directs each regional office. These offices maintain direct contact
with State agencies that administer the FNS programs and conduct on-site management reviews of State
operations. The Retailer Operations Division monitors the 260,624 stores and other outlets as of June 30,
2018 authorized to redeem SNAP benefits.
As of September 30, 2018, there were approximately 1,451 full-time permanent employees in the agency.
There were 544 employees in the Washington headquarters office and 907 in the field. The chart below
displays staff year utilization.
STAFF YEAR DISTRIBUTION
(From All Sources of Funds)
2017 2018 2019 2020
FNS Projects and CNPP Actual Enacted Estimate Change Estimate
Supplemental Nutrition Assistance Program 370 376 377 -1 376
Child Nutrition Programs 290 293 290 +3 293
Commodity Assistance Program 3 3 2 +1 3
Special Supplemental Nutrition Program for
44 44 44 0 44
Women, Infants and Children
Nutrition Programs Administration 839 815 818 -3 815
Center for Nutrition Policy and Promotion* 28 26 26 0 26
Total Available 1,574 1,557 1,557 0 1,557
*CNPP Staff Year Distribution includes NPA and four program funding in the Child Nutrition Programs
Page 4 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
SECTION 2. PERFORMANCE GOALS, OBJECTIVES and
RESULTS
The FNS agency goals and objectives are fully integrated into USDA’s Strategic Goal 7 with two related
Department Strategic objectives. Each Department Strategic Objective has a key outcome and indicator,
as discussed below.
USDA Strategic USDA Strategic Programs that
Key Outcomes Key Indicators
Goal Objective Contribute 1
USDA Strategic
Objective 7.2: Program Participation
Key Outcome 1:
Provide access to Rates as well as
Nutrition assistance
safe and nutritious annual measure of the
SNAP, CN, WIC, programs positively
food for low-income proportion of
CAP, FDPIR, TEFAP impact the
people while households with ready
USDA Goal 7: communities they
supporting a and reliable access to
Provide All serve.
pathway to self- the food they need.
Americans
sufficiency
Access to A
USDA Strategic
Safe, Nutritious,
Objective 7.3:
And Secure Key Outcome 2: Give
Support and
Food Supply consumers the tools,
encourage healthy
skills, and motivation Program Participation
dietary choices CN,SNAP,WIC
they need to choose a Rates.
through data driven,
diet that supports a
flexible, and
healthy future.
customer-focused
approaches
STRATEGIC GOAL 7: PROVIDE ALL AMERICANS ACCESS TO A SAFE, NUTRITIOUS,
AND SECURE FOOD SUPPLY
Nutrition is the link between agriculture and the Nation’s health, and the Department made strong
progress in advancing our nutrition and health goal in 2018. USDA’s leadership of the Federal nutrition
assistance programs made a healthier diet available for millions of children and low-income families.
And the cutting-edge nutrition promotion efforts of the Center for Nutrition Policy and Promotion
harnessed interactive technologies to motivate all Americans to make positive dietary behavioral changes
consistent with the Dietary Guidelines for Americans and the Healthier US initiative.
In FY 2018, USDA continued to improve the quality of Americans’ diets through research-based nutrition
enhancements to the Nation’s food supply and better knowledge and education to promote healthier food
choices. In FY 2018, USDA pursued national policies and programs to ensure that everyone has access to
a healthy diet regardless of income, and that the information is available to support and encourage good
nutrition choices.
USDA’s success in promoting public health through good nutrition and the effectiveness of its nutrition
assistance education programs relies heavily on research. The research provides critical knowledge of
what we need to eat to stay healthy and how that knowledge can be conveyed to the public in a manner
1
SNAP = Supplemental Nutrition Assistance Program (formerly the Food Stamp Program), CN=Child Nutrition (includes the
National School Lunch Program, the School Breakfast Program, and the Special Milk Program), WIC = Special Supplemental
Nutrition Program for Women, Infants & Children, CAP = Commodity Assistance Programs, FDPIR = Food Distribution
Program on Indian Reservations, TEFAP = The Emergency Food Assistance Program
Page 5 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
that leads to true changes in our diets. Research also supports development of new healthy and tasty food
products providing another avenue for helping consumers eat well.
Participation in SNAP Employment and Training (E&T) Programs: In partnership with State and local
agencies and Federal, public, and private partners, E&T programs are designed to help able-bodied SNAP
recipients find work or gain the skills, training, and experience that lead to employment. USDA will
continue to work with State agencies to incorporate robust E&T components into SNAP State plans. In
addition, USDA will disseminate best practices regarding skills-based training components to State
agencies.
STRATEGIC GOAL 7: PROVIDE ALL AMERICANS ACCESS TO A SAFE, NUTRITIOUS,
AND SECURE FOOD SUPPLY
OBJECTIVE 7.2: PROVIDE ACCESS TO SAFE AND NUTRITIOUS FOOD FOR LOW-
INCOME PEOPLE WHILE SUPPORTING A PATHWAY TO SELF-SUFFICIENCY
7.2.1 Percentage of American households with Consistent, dependable access to food
Overview
The Supplemental Nutrition Assistance Program (SNAP) is the foundation of America’s nutrition
assistance program system. SNAP provides benefits that can be used to purchase food at authorized
retailers for preparation and consumption at home. It makes resources that can be used for food available
to most households with little income. Benefit levels are based on the Thrifty Food Plan, a representative
healthful and minimal cost meal plan that shows how a nutritious diet may be achieved with limited
resources. The amount received by a household depends on its income, expenses, and household size.
Analysis of Results
Most U.S. households have access at all times to enough food for an active and healthy life and are food
secure. The estimated percentage of households that were food secure in 2017 (88.2 percent) increased
significantly from 2016 (87.7 percent), and continued an upward trend from a low in 2011 when only 85.1
percent of households were food secure.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Annual Performance Goals, 2013 2014 2015 2016 2017 Fiscal Year 2018
Indicators Target Actual Result
and Trends
7.2.1 Percentage of American households 85.7% 86.0% 87.3% 87.7% 88.2% 87.9% Not Deferred
with consistent dependable access to Available
food
FY 2018 data will be available in September 2019
Rationale for Met Range: The standard error around the measure (88.2 percent) is + 0.1914.
Data Assessment of Performance Measure 7.2.1
The data comes from the annual survey conducted by the U.S. Census Bureau as a supplement to the nationally representative Current
Population Survey (CPS). The data are collected annually in December.
Completeness of Data—The CPS currently includes about 37,389 households and is representative at the State and national level of the
civilian non-institutionalized U.S. population. In December 2017, 41,186 households completed the food security supplement, and data
are weighed by the U.S. Census Bureau to provide the national prevalence. The most current data is Calendar Year 2017.
Reliability of Data— The US Census Bureau conducted cognitive and field tests of the food security questionnaire before it was finalized
and included as a supplement to the CPS in April 1995. Minor modifications were made to the format and screening procedures during the first
years of administration. In 1998 the screener and format were substantially revised to reduce respondent burden and improve the quality of the data.
However, the content of the 18 food security questions has remained constant. In 2003-2006 an expert panel convened by the Committee on
National Statistics (CNSTAT) of the National Academy of Sciences reviewed the food security measurement methodology. This expert panel
concluded that the general methodology for measuring food insecurity was appropriate.
Quality of Data— The food security statistics are based on a nationally representative food security survey conducted as an annual
supplement to the monthly CPS by the U.S. Census Bureau for the Bureau of Labor Statistics. The CPS provides data for the monthly U.S.
unemployment statistics and annual income and poverty statistics.
Challenges for the Future
Although the prevalence of households that are food secure has continued to increase after reaching its
lowest level in 2011, it is still not at the pre-recessionary level of 89 percent (2005-2007). About 58
percent of the food insecure households reported that they participated in SNAP, Special Supplemental
Nutrition Program for Women, Infants, and Children (WIC) or the National School Lunch Program in the
month prior to the survey. Therefore, the need for developing and implementing evidence-based
strategies that can further increase the percentage of low-income households with consistent and
dependable access to food continues. The evaluation of the Food Insecurity Nutrition Incentives (FINI)
grants program is examining the effect on food security of providing incentives to increase fruit and
vegetable purchases by SNAP households. The evaluation of the ten 2014 Farm Bill Employment and
Training (E&T) Pilots is also examining the impact of pilot participation on food security, as well as
employment and earnings. Interim findings from FINI and E&T pilots’ evaluations are expected in FY
2019.
The alignment of the timeline for the annual performance measure with the availability of the annual food
security statistics continues to be a challenge. In addition, the annual food security statistics are for a
calendar year. The actual outcome measure for 2018 will be released in September 2019.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
7.2.2 Percentage of SNAP Education and Training Participants Engaged in
Education and Skills-Based Training
Overview
FNS supports helping SNAP recipients become self-sufficient. FNS allocates $90 million to state SNAP
agencies to operate employment and training (E&T) programs designed to help SNAP recipients gain
skills, education, and work experience that lead to good jobs. In addition, FNS reimburses states 50
percent for costs they incur above that amount. States have discretion regarding whom to serve and
where to provide services. They may provide a variety of components such as job search, job search
training, workfare, career and technical education, on-the-job training, or apprenticeships. Previously the
majority of SNAP participants received light touch services such as job search. The FNS November 2016
SNAP E&T Best Practices Report Study found that stand alone basic skills or job search assistance
programs fall short of helping participants achieve lasting self-sufficiency. Whereas, combining these
components with more intensive services, or offering programs leading to academic credentials or
community college certificates are more often associated with improved outcomes.
Since 2014, FNS has invested significant resources to help states create more evidenced-based, skills-
based programs that meet the needs of employers and lead to jobs in the local economy. Given that the
100 percent federal funds and state resources are limited, FNS determined that the best way for states to
grow and improve their programs was to leverage the 50 percent reimbursement funds and build third-
party partnerships. FNS increased its capacity at the national and regional levels to work directly with all
states, and through its SNAP to Skills (S2S) Project provided more targeted technical assistance to 15
States. Through S2S, FNS also created tools and resources that are available to all states and other
stakeholders. FNS has disseminated policy briefs on best practices such as Integrating SNAP E&T into
Career Pathway Systems to Boost Outcomes, and SNAP E&T and WIOA: Partnering to Raise Skills and
Employment. It has published the SNAP E&T Operations Handbook: A Step-by-Step Guide to
Developing, Implementing, and Growing a SNAP E&T Program, a “soup to nuts” guide on how to build a
SNAP E&T program using third-party partners to deliver services. Other materials include The
Employment and Training Review, a monthly newsletter that is disseminated to over 6,000 people, a
series of webinars on best practices, and four promotional videos featuring State agencies, E&T providers
and SNAP participants.
Analysis of Results
Every year states report data on the FNS 583 that includes the number of SNAP participants served in
each component. Overtime this data should show an increase in the number of participants in more
education and skills-based activities. However, there are inherent limitations of this data, including that it
is state reported and not verified by FNS. The FY 2017 data showed an extreme deviation from previous
years in many of the data fields, including the number of participants in skills-based education and
training activities. FNS is working with states to identify the reasons behind these reporting anomalies
and to correct the problems. FNS is committed to improving the quality of the state reported data.
Moving forward FNS will take action to clarify instructions through webinars and technical assistance
packages. In addition, an FY 2019 national target area for management evaluation includes states that
have reported significant fluctuations in their FNS 583 data over a three-year period.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Annual Performance Goals, 2013 2014 2015 2016 2017 Fiscal Year 2018
Indicators Target Actual Result
and Trends
7.2.2 Percentage of SNAP Education & Not Not 33% 33% Not 35% Not Deferred
Training participants engaged in Available Available Available Available
education and skills-based training
Rationale for Met Range: FY 2018 data will be available in FY 2019.
Data Assessment of Performance Measure 7.2.2
Data is pulled from the FNS-583 SNAP Employment and Training (E&T) Program Activity Report fourth quarter report. The percentage
of participants engaged in education and skill-based training is calculated by adding up the total number of participants in education and
training activities (job search, job search training, job retention, workfare, and WIOA activities are excluded) and dividing that by the total
number of participants.
Completeness of Data— The data is submitted 45 days after the end of the previous fiscal year and is considered “complete” after it is reviewed
and approved by FNS regional offices. However, data may be subject to change up to a year after posting if the State or Federal agency identifies an
error. The most current data is FY 2016.
Reliability of Data— The data is compiled and submitted by State agencies. While it is reviewed and approved by Federal staff, it is not
independently verified. FNS does review data collection methods and samples during Management Evaluations. However, these reviews do not take
place in every State each year. FY 2017 data showed wide deviations from previous years. FNS is working with States to identify issues and
correct deficiencies in data collection and reporting.
Quality of Data— The data is compiled and submitted by State agencies. While it is reviewed and approved by Federal staff, it is not
independently verified. FNS does review data collection methods and samples during Management Evaluations. However, these reviews do not take
place in every State each year. FNS is implementing strategies to improve the quality of the data.
Challenges for the Future
FNS will continue to provide technical assistance and oversight to ensure States address deficiencies in
collecting and reporting data on the FNS 583 reports in order to improve the reliability and quality of the
data, including the number of SNAP participants enrolled in education and skills-based training.
OBJECTIVE 7.3: SUPPORT AND ENCOURAGE HEALTHY DIETARY CHOICES
THROUGH DATA DRIVEN, FLEXIBLE, AND CUSTOMER-FOCUSED APPROACHES
7.3.1 Annual Percentage of Eligible Children Participating in the National School
Lunch Program (NSLP)
Overview
The National School Lunch Program (NSLP) is a federally assisted meal program operating in over
99,000 public and non-profit private schools and residential child care institutions. Schools and districts
that choose to participate in the NSLP receive cash subsidies and USDA Foods from the U.S. Department
of Agriculture (USDA) for each meal they serve that meets the Federal requirements. Generally, children
from families with income at or below 130 percent of the Federal poverty level are eligible for free meals,
while children from families with incomes between 130 percent and 185 percent are eligible for reduced
price meals. Schools can charge no more than 40 cents per reduced price lunch and no more than
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
30 cents per reduced price breakfast. Children who do not qualify for free or reduced price meals may
purchase a lunch at the “paid” rate. Local school districts have discretion in setting the price of a paid
lunch, provided they meet minimum Federal requirements.
Analysis of Results
USDA is working to provide flexibility so that program operators can serve healthy meals that students
enjoy. These changes are truly successful only when all of America’s school children eat and enjoy the
school meals. While some Program operators have had great success in implementing the updated
nutrition standards in a way that encourages healthy eating and participation, some school meal programs
require additional flexibility and support from USDA to meet this goal.
In 2017, Secretary Perdue issued a Proclamation directing FNS to begin drafting regulations allowing:
• State agencies to continue to offer exemptions from the whole grain-rich requirement
where schools can demonstrate hardship in procuring, preparing, or serving compliant
products that are acceptable to students;
• Schools to continue to plan menus that meet Sodium Target 1; and
• Schools to serve 1 percent flavored milk in the school meal programs without requiring
State agency approval or documentation of hardship.
FNS published an interim final rule in response to the Secretary’s Proclamation on November 30, 2017.
The interim final rule granted the following flexibilities for SY 2018-2019:
• Allowed State agencies discretion to grant whole grain-rich exemptions to school food
authorities that can demonstrate hardship(s) in procuring, preparing, or serving specific
products that are acceptable to students and compliant with the whole grain-rich criteria;
• Provided operators the option to offer flavored, low-fat (1 percent fat) milk in the Child
Nutrition Programs, without having to document hardship; and
• Retained Sodium Target 1 as the regulatory limit in the school meal programs.
Over 51 million children attend schools that operate the NSLP. More than 30 million children participate
in the NSLP each school day, with over 20 million receiving their lunch at no cost or at a reduced price.
Provisions designed to improve access, streamline administration, and eliminate barriers to participation
have helped USDA reach more of the nation’s children in recent years. In fact, participation among
children eligible for free meals has increased by over 34 percent in the last decade. USDA continues to
work to connect our nation’s most vulnerable children with the wholesome foods they need to stay
healthy and focused during the school day.
• Section 9(b)(4)(F) of the Richard B. Russell National School Lunch Act sets benchmark rates for
States to meet in directly certifying children in families receiving SNAP benefits - 80 percent in
School Year (SY) 2011-2012, 90 percent in SY 2012-2013, and 95 percent in SY 2013-2014 and
future years. In SY 2016-2017 there were 28 States that met or exceeded the 95 percent
requirement, which reflects an additional 16 states meeting the benchmark since SY 2013-2014,
and marks the first time that the majority of States met the direct certification performance target.
Each State that does not meet the benchmark for a particular school year is required to develop
and implement a Continuous Improvement Plan (CIP) to improve its direct certification
procedures and fully meet the statutory benchmarks in subsequent school years. To assist in the
development and execution of these Plans, as well as direct certification efforts nationally, the
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Food and Nutrition Service (FNS) continues to provide guidance and process improvement
assistance to State agencies. Technical assistance efforts include on-site visits, conference calls,
and written guidance. Due in part to this assistance, it is anticipated that several States will
achieve the mandated benchmark rate in subsequent years.
Annual Performance Goals, 2013 2014 2015 2016 2017 Fiscal Year 2018*
Indicators Target Actual Result
and Trends
7.3.1 Annual percentage of eligible children 55.7% 54.8% 55.4% 55.5% 54.5% 59% 57.8% Met
participating in the NSLP
Rationale for Met Range: Thresholds for 7.3.1 reflect the margin of error in forecasts of future participation, estimated at 5
percent for school meals programs. This reflects the pattern of variance between actual and target performance for both
programs during the past 5 years. For FY 2018, this percentage range allows for actual performance did meet the target in the
range of 56.0 - 61.6 percent.
Data Assessment of Performance Measure 7.3.1
*Starting with FY 2018 there is a change in the methodology to calculate this figure. The figure is now derived from FNS
administrative data on participation and enrollment in schools participating in the NSLP. Previously the metric used the
Department of Education National Center for Education Statistics (NCES) public and private school enrollment data from
the NCES’s Projections of Education Statistics report series for the denominator. The old method did not adjust for whether
or not the schools in which the children were enrolled participated in the NSLP. The new method uses enrollment data from
FNS administrative data on the number of students enrolled in schools that participate in the NSLP. This method measures
the actual percent of students that participate in the NSLP that are enrolled in schools operating the NSLP. This is the same
metric used in the USDA Strategic Plan.
The indicator is a ratio of school meals participation and enrollment data, drawn from USDA administrative records. This ratio
shows the proportion of children enrolled in schools with the NSLP participating in the program.
NSLP administrative data is drawn from State agency reports that are certified as accurate and submitted to FNS Regional
Offices. There, the reports are reviewed for completeness and consistency. If the data are acceptable, the FNS Regional Office
analyst posts the reports to the National Data Bank (NDB) Preload System. NDB is a holding area for data review prior to release.
Otherwise, FNS Regional Office personnel reject the report and the State agency is contacted. Data posted by FNS Regional Office
personnel into NDB are reviewed at USDA. If data are reasonable and consistent with previous reports, they will be downloaded to
NDB for public release. If not, USDA works with FNS Regional Offices and States to resolve problems and inconsistencies. This
process of review and revision ensures that the data are as accurate and reliable as possible.
Completeness of Data— Figures for NSLP participation are based on 9-month (school year) averages. Participation data are
collected and validated monthly before being declared annual data. Reported estimates are based on data through May 30, 2018,
as available August 2018. Figures for enrollment in NSLP participating schools are reported in October of each year.
Reliability of Data— Participation and enrollment data reporting are used to support program financial operations. All of the
data are used in published analyses, studies and reports. The data also are used to support dialogue with and information requests
from the Government Accountability Office, the Office of Inspector General, and the Office of Management and Budget.
Quality of Data— As described above, the data used to develop this measure are used widely for multiple purposes, both within
and outside USDA. The measure itself is reported in stand-alone publications as an important, high-quality indicator of program
performance.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Challenges for the Future
FNS is in the process of drafting a final regulation that will address the whole grain-rich, flavored milk,
and sodium flexibilities in the long term. This final regulation is expected to take effect in SY 2019-
2020.
In addition to the meal pattern flexibilities, USDA is committed to finding other ways to simplify menu
planning and expand menu choices. In December 2017, FNS issued a Request for Information to gather
feedback about current food crediting guidelines from a wide variety of stakeholders. FNS will use this
public input to develop new guidance and resources in FY 2019 to enhance flexibility and expand the
food options available to menu planners working hard to prepare meals that children enjoy.
FNS also provides operators with extensive support through grants, training, a searchable collection of
recipes, and technical assistance and educational resources. Schools that face operational challenges
receive targeted technical assistance, training, and peer mentoring to support strong student participation.
School food authorities are required to increase the prices charged for paid lunches to ensure adequate
revenue is generated to cover the costs of producing these meals. The intent of this requirement is to
ensure Federal reimbursements for free and reduced price meals are not used to cover the costs of paid
lunches. In some cases, increasing the paid lunch price may impact participation among children
participating at the paid rate. FNS has recognized that not all school food authorities need the additional
revenue from increasing the paid lunch price, and has provided an exemption from this requirement for
school food authorities in good financial standing. School food authorities may also contribute non-
Federal funds to meet this requirement in lieu of raising prices.
Further, consistent with Section 776 of the 2018 Consolidated Appropriations Act, FNS issued guidance
in April 2018 exempting any school food authority with a positive or zero balance in its school food
service account as of January 31, 2018 from paid lunch equity requirements for SY 2018-2019. School
food authorities maintain the discretion to determine their target paid lunch price and may adjust their
paid lunch price for SY 2018-2019 accordingly. To demonstrate State oversight of this provision, FNS
recommended that State agencies maintain documentation for any school food authorities using this
exemption.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
SECTION 3. ANALYSIS OF SYSTEMS, CONTROLS, AND
LEGAL COMPLIANCE
The information in this section is consistent with the findings of the USDA OIG’s FY 2018 financial
statements audit report.
Federal Managers’ Financial Integrity Act (FMFIA Section 2)
Assurance
FNS management is responsible for developing and maintaining internal control to ensure the
effectiveness of operations, reliability of reporting, compliance with applicable laws and regulations and
the safeguarding of assets. Internal control encompasses accounting and administrative controls. Such
controls include program, operational and administrative areas.
FNS management has conducted its annual evaluations of internal control pursuant to Sections 2, for the
period ending June 30, 2018. Based on the results of the evaluations, FNS provides an unmodified
statement of assurance that internal controls are operating effectively over operations. No new material
weaknesses, significant deficiencies, or control deficiencies were identified for FY 2018.
Assurance for Internal Control over External Financial Reporting (FMFIA
Section 2)
FNS conducted its assessment of the effectiveness of internal control over external financial reporting as
of June 30, 2018. The assessment followed USDA guidance, Office of Management and Budget (OMB)
Circular A-123, Appendix A (revised) and best practices established by the department.
This assessment included risk assessments, process descriptions, documentation of key controls,
assessments of the design of key controls, tests of operating effectiveness of properly designed controls,
summary of deficiencies, and the development of corrective action plans for control deficiencies. Key
controls in the following processes were tested:
Processes
a. Charge Card Management: Purchase Cards
b. Charge Card Management: Travel Cards
c. Conference Planning and Reporting
d. Financial Reporting: Period-End Reporting
e. Financial Reporting: Significant Management Estimates
f. Financial Reporting: Unliquidated Obligations Review
g. Financial Reporting: User Access
h. Funds Management: Fund Balance with Treasury Reconciliation
i. Grants Management: Awards and Modification (Discretionary and Entitlement Grants)
j. Grants Management: Closeout (Discretionary and Entitlement Grants)
k. Grants Management: Draws and Expenditures (Discretionary and Entitlement Grants)
l. Grants Management: Monitoring (Discretionary and Entitlement Grants)
m. Reimbursable Agreements: Authorizations and Modifications
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
n. Reimbursable Agreements: Receivables and Payment Management
o. Revenue and Receivables: Collections
FNS management recognizes its responsibility for monitoring and correcting control deficiencies assessed
as outside of its risk tolerance. With regard to these processes and the internal controls within these
processes, management certifies that there have been no changes in the operation of controls tested from
the sample selection date through June 30, 2018. FNS provides an unmodified statement of assurance that
the internal controls over external financial reporting for FY 2018 are operating effectively.
In addition, there were no new material weaknesses or significant deficiencies identified in FNS’
Business Process Controls (BPC). There were six BPC control deficiencies that remained and five control
deficiencies that were corrected. Corrective action plans for the six BPC control deficiencies have been
developed and submitted in the A-123 Compliance Reporting Tool (ACRT). The approved risk-based
decisions have been documented and reported including a listing of deficiencies.
Compliance with Laws and Regulations (FFMIA-Section 2)
Anti-Deficiency Act
1. FNS management has not entered into contracts that exceeded the enacted appropriations for the
year or purchased services and merchandise before appropriations are enacted.
2. FNS has maintained compliance with all provisions of law that are associated with the Anti-
Deficiency Act.
Federal Civil Penalties Inflation Adjustment Act Improvements Act
1. FNS provides reasonable assurance that controls are in place that align with the requirements set
forth in the Act.
Supplemental Appropriations for Disaster Relief Requirements, 2017/Additional Supplemental
Appropriations for Disaster Relief Act of 2017
1. FNS has established appropriate policies and controls, and corrective actions have been taken to
mitigate the risk of fraud and inappropriate spending practices regarding activities and expenses
related to disaster-related activities for the Commodity Assistance Program, Puerto Rico Nutrition
Assistance Program Block Grants, and Special Supplemental Nutrition Program for Women,
Infants and Children.
2. FNS management has not identified additional significant deficiencies associated with
management for disaster relief and other emergencies.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Data Act Reporting for USAspending.gov
1. FNS provides reasonable assurance that data integrity processes and controls align with OMB
Circular A-123 and are in place for all reported data. This includes agency financial systems,
award management systems, and procurement data reported to the Federal Procurement Data
System – Next Generation (FPDS-NG).
Government Charge Card Abuse Prevention Act
1. FNS has established appropriate policies and controls and corrective actions have been taken to
mitigate the risk of fraud and inappropriate charge card practices.
2. FNS management has not identified additional significant deficiencies associated with internal
controls for purchase cards, debit cards and travel cards (i.e., centrally billed accounts,
individually billed accounts, and declining balance cards).
Fraud Reduction and Data Analytics Act
1. FNS has established financial and administrative controls to identify and assess fraud risks and
has designed and implemented control activities to prevent, detect and respond to fraud, including
improper payments.
2. FNS management has implemented the fraud risk principle in the Standards for Internal Control
for Federal Government and OMB Circular A-123 with respect to the leading practices for
managing fraud risk.
3. FNS management has not identified risks and vulnerabilities to fraud, including with payroll,
beneficiary payments, grants, large contracts, and purchase and travel cards, as applicable.
4. FNS management has established strategies, procedures, and other steps to curb fraud.
Conformance with Federal Financial Management Systems Requirements (FMFIA – Section 4 and
FFMIA)
1. The FNS Information and Security Office (ISO) management evaluated its financial management
systems under FMFIA (section 4) for the period ended June 30, 2018.
2. The FNS ISO information systems conform to financial management system requirements.
3. No new significant or material non-conformance(s) or consolidated non-conformance(s) were
identified.
4. A Plan of Action and Milestone was developed and entered into the Cyber Security Assessment
and Management (CSAM) system for one control deficiency which has been corrected.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Compliance with Section 803 (a) of the Federal Financial Management Improvement Act (FFMIA)
1. Financial systems used by FNS are owned, managed, and evaluated by the Associate Chief
Financial Officer – Financial Management Services (ACFO -- FMS).
In conclusion, FNS continues to struggle with diminishing staff resources. Any future reductions in
FNS resources, any increases in responsibilities or change in program design without compensating
Administrative resources increases may compromise the gains we have achieved in the areas of
Program integrity and FNS’ ability to adequately execute internal controls already put in place or to
develop any additional controls that may be needed in the future.
OIG Audit Handling Process and Performance
USDA’s Office of the Inspector General (OIG) performs audits of FNS programs, systems and
operations. The results of this work are reports detailing, at a minimum, what was examined, findings that
should be addressed and recommendations for changes/improvements. Upon release of each final report,
FNS submits to OIG a written corrective action plan listing actions planned and dates by which these
actions will occur. Management decision is reached when OIG accepts FNS’s proposed corrective
actions.
Upon reaching management decision, FNS’s Financial Management organization oversees follow-up
activities to assure that planned actions for each recommendation are implemented and completed. As this
occurs, FNS notifies the Department’s Office of the Chief Financial Officer (OCFO) and requests
concurrence that all actions described in the management decision agreement have occurred. Final action
is achieved for each finding/recommendation when all actions necessary to fulfill the management
decision agreement have been performed.
Delays in reaching Final Action status most often occur for two categories of reasons:
o The amount of time needed to complete certain activities cannot be accurately estimated.
Examples of these are:
• Specific legislation, policy or guidance needs to be developed;
• An investigation, negotiation, or administrative appeal action must be completed;
• An automated system needs to be developed, implemented, or enhanced;
• The results of additional monitoring or program review activity must be completed;
• Disallowed costs must be collected;
• Legal advice or opinion from the Office of General Counsel is needed; or
• Certain external (state) or administrative actions must occur.
o Changes that could not be anticipated at the time management decision was reached:
• A change must be made to the management decision agreement. For example, the agreed
upon management decision calls on the Agency to publish a regulation, but Congress initiates
a moratorium on regulations.
• Additional information, explanation, advice or action from OIG is needed.
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
USDA agencies submit quarterly progress reports to OCFO for all audits that remain open more than one
year past the management decision date. These interim reports show incremental progress toward
completion of planned actions, changes in planned actions, actual or revised completion dates, and
explanations for revised dates.
Audits Without Final Action More Than One Year Past the Management Decision Date
Audit Number Date Issued Audit Title Completion Date Reason for Lack of Final Action
For Actions (Est.)
27099-49-TE 9-4-07 Food and Nutrition Service 9-30-18 Change in management decision
Disaster Food Stamp (MD) was approved by OIG on
Program for Hurricanes 8-22-18. FNS has since completed
Katrina and Rita a reminder memo to all State
agencies regarding their D-SNAP
responsibilities. Memo is going
through the final stages of FNS
Senior Management clearance in
preparation for release.
27004-0001-22 9-25-14 State Agencies’ Food 11-30-18 In May 2018, Economic Research
Costs for the Food and Service (ERS) advised FNS
Nutrition Service’s Special officials that the study needed to
Supplemental Nutrition satisfy this recommendation was
Program for Women, being rolled into a larger project
Infant, and Children that would significantly extend
the completion date. Therefore, a
decision was made that, separate
from that larger analysis. ERS
would draft a memo specifically
to address the open rec. That
memo will update the findings
from the original report done in
2005 on Interstate Variation in
WIC Food Package Costs, which
meets the intent of the OIG rec.
ERS shared a draft of the memo
with FNS around the end of July
2018, and the estimated time for
making edits and finalizing is
three months from that point.
27601-0001-31 7-31-13 Controls for Authorizing TBD Recs. 9, 10, 11: Resolution of
SNAP Retailers these three recs. hinges on
rulemaking that would remove all
stores under the same ownership
when one store is determined to
have trafficked SNAP benefits
unless the owner(s) meet the
criteria for a trafficking civil
money penalty.
27601-0001-22 9-23-15 SNAP Error Rates 8-30-19 Rec. 1: Resolution depends on the
results of a feasibility study on
creating a Federal one-tier Quality
Control (QC) system. The study
is underway and expected to be
complete by Summer 2019. Rec.
Page 17 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
11: On June 1, 2018, FNS
published a Request for
Information (RFI) titled “SNAP
Quality Control Integrity and
Modernization.” FNS is
considering proposals for a
regulatory reform of our QC
system in order to better align
regulations with new policy and
procedural requirements. FNS
has three objectives for reforming
the QC system: (1) Strengthen the
integrity and accountability of the
system, (2) increase transparency
in the process, and (3) use
technology to improve improper
payment estimates. The intent of
the RFI is to obtain the
perspectives of State governments
and other stakeholders to inform
the Agency as it considers how
best to proceed with reforming the
QC system. Included in the RFI,
FNS seeks input from
stakeholders on how best to revise
the Comparison I and Comparison
II process to address this specific
OIG rec. FNS filed a work plan
for the Fall regulatory agenda and
intends to proceed with
rulemaking later this year.
27601-0003-10 9-27-16 New Mexico’s Compliance 10-31-18 FNS and OIG met in April 2018
with SNAP Certification of to discuss some of the challenges
Eligible Households associated with closing these recs.
Requirements given the extensive work FNS has
done with the State as well as
significant staff changes at the
State agency level. FNS and OIG
agreed on an action plan for how
to best move forward with the
recs., and the final collection of
supporting documentation from
the State agency is underway.
27601-0003-22 9-29-16 SNAP Administrative 10-15-18 Rec. 2: FNS has completed its
Costs first annual analysis of existing
State-level administrative expense
data to monitor State cost-per-
case variances and identify trends.
However, because the State data
could not be easily validated, next
steps to complete this rec. took
longer than originally anticipated.
Documentation demonstrating
completion and results of analysis
Page 18 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
is being finalized.
27601-0004-10 10-25-16 Michigan's Compliance 10-31-18 As part of the formal final action
with SNAP Certification of process, FNS received a request
Eligible Households from OCFO for additional
Requirements documentation on two of the recs.
Via the FNS Midwest Regional
Office (MRWO) this additional
documentation is the process of
being collected from the Michigan
State agency.
27901-0002-13 1-9-17 Detecting Potential SNAP 10-31-18 As part of the formal final action
Trafficking Using Data process, FNS received a request
Analysis from OCFO for more detailed
information on two of the recs.
rather than the summary level
information originally provided.
Given the volume of the records
involved, additional time is
needed by FNS to pull this
information and present in a clear,
concise manner.
27601-0008-10 6-14-17 Georgia's Compliance with 11-15-18 One rec. required the Georgia
SNAP Requirements for State agency to develop training
Participating State materials to address a SNAP data
Agencies matching issue. A system change
needed to be implemented first.
That system change is scheduled
for completion in September
2018, and then the State can
proceed with finalizing the
associated training materials.
Page 19 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
The Inspector General Act Amendments of 1988 requires an annual report on the status of audits. In
compliance with this Act the below table reflects FNS audits that were closed during FY 2018.
Auditor Agency Audit Number Audit Name Status
1 OIG FNS 27004-0001-41(1) California's Controls Over the CLOSED – October
Summer Food Service Program - 2017
Interim Report
2 OIG FNS 27401-0002-11 FNS Financial Statements for FY CLOSED – November
2017 2017
3 OIG FNS 27601-0001-10 New Hampshire's Compliance CLOSED – February
with SNAP Certification of 2018
Eligible Households
Requirements
4 OIG FNS 27601-0007-10 Compilation Report of State's CLOSED – February
Compliance with SNAP 2018
Certification of Eligible
Households Requirements (7
CFR Part 273)
5 OIG FNS 27601-0001-23 National School Lunch Program - CLOSED – April 2018
Food Service Management
Company Contracts
6 OIG FNS 27002-0011-13 Analysis of FNS’ Supplemental CLOSED – April 2018
Nutrition Assistance Program
(SNAP) Fraud Prevention and
Detection Efforts
7 OIG FNS 27601-0018-10 Massachusetts's Compliance with CLOSED – May 2018
Requirements for the Issuance
and Use of SNAP Benefits (7
CFR 274)
8 OIG FNS 50601-14-AT Effectiveness and Enforcement of CLOSED – July 2018
Suspension and Debarment
Regulations in the U.S.
Department of Agriculture
9 OIG FNS 27601-0002-31 FNS Controls Over SNAP CLOSED – July 2018
Benefits for Able-Bodied Adults
Without Dependents
10 OIG FNS 27601-0006-10 Missouri's Compliance with CLOSED – July 2018
SNAP Certification of Eligible
Households Requirements
11 OIG FNS 27601-0009-10 Nebraska's Compliance with CLOSED – July 2018
SNAP Requirements for
Participating State Agencies
12 OIG FNS 50024-0011-11 USDA's Fiscal Year 2016 CLOSED – August
Compliance with Improper 2018
Payment Requirements
13 OIG FNS 50024-0013-11 USDA's Fiscal Year 2017 CLOSED – August
Compliance with Improper 2018
Payment Requirements
Page 20 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
14 OIG FNS 27601-0005-10 Kentucky's Compliance with CLOSED – September
SNAP Certification of Eligible 2018
Households Requirements
15 OIG FNS 27601-0016-10 Louisiana's Compliance with CLOSED – September
Requirements for the Issuance 2018
and Use of SNAP Benefits (7
CFR 274)
16 GAO FNS-Lead GAO-18-41SP Child Well-Being: Key CLOSED – November
Considerations for Policymakers, 2017
Including the Need for a Federal
Cross-Agency Priority Goal
17 GAO OBPA- GAO-18-22 Federal Regulations: Key CLOSED – November
Lead * Considerations for Agency 2017
Design and Enforcement
Decisions
18 GAO FNS GAO-18-125R WIC: USDA’s Review of CLOSED – December
Vegetables Available under the 2017
Program Followed Leading
Research Practices
19 GAO FNS-Lead GAO-18-377 Improper Payments: Actions and CLOSED – June 2018
Guidance Could Help Address
Issues and Inconsistencies in
Estimation Processes
20 GAO FNS GAO-14-641 SNAP: Enhanced Detection CLOSED – August
Tools and Reporting Could 2018
Improve Efforts to Combat
Recipient Fraud
21 GAO OCFO- GAO-17-484 Improper Payments: Additional CLOSED – August
Lead * Guidance Could Provide More 2018
Consistent Compliance
Determinations and Reporting by
Inspectors General
22 GAO OCIO- GAO-18-381 Paperwork Reduction Act: CLOSED – August
Lead * Agencies Could Better Leverage 2018
Review Processes and Public
Outreach to Improve Burden
Estimates
23 GAO OHRM- GAO-18-491 Grants Workforce: Actions CLOSED – September
Lead * Needed to Ensure Staff Have 2018
Skills to Administer and Oversee
Federal Grants
* Indicates FNS had an active role in the audit, but did not serve as lead agency for USDA.
Page 21 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Assurance for Legal Compliance
The Office of the Inspector General (OIG), in their most recent compliance audit (USDA’s Fiscal Year
2017 Compliance with Improper Payment Requirements – Audit Report 50024-0013-11), found that FNS
did not fully comply with two of six Improper Payment Elimination and Recovery Act of 2010 (IPERA)
requirements. FNS did not always meet annual reduction targets and report error rates below specific
thresholds. Below is a summary of the noncompliance and FNS’ accomplishments with planned actions
for becoming compliant with IPERA.
Outstanding Initiatives to Achieve Compliance
Target
Initiative Non-compliance Agency Completion Date
Improper Payments Elimination and Recovery Act Has not met annual reduction FNS CACFP-11/2020
of 2010 (IPERA) targets for each program (e.g., Child
and Adult Care Program (CACFP), NSLP - 11/2018
National School Lunch Program
(NSLP), School Breakfast Program
SBP - 11/2018
(SBP), assessed to be at risk and
measured for improper payments.
Reported a gross improper payment FNS 12/2020
error rate of greater than 10 percent
for NSLP and SBP.
.
Page 22 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
SECTION 4. IMPROPER PAYMENTS INFORMATION ACT
(IPIA)
The Improper Payments Information Act (IPIA) requires all agencies to 1) review all programs and
activities, 2) identify those that may be susceptible to significant improper payments, 3) estimate the
annual amount of improper payments for each program and activity and 4) report results.
Appendix C of OMB Circular A-123 defines significant improper payments as an annual amount that
exceeds both 1.5% of program payments and $10,000,000. For programs/payments that fit this
description, agencies must:
• Measure and reduce the improper payments,
• Identify the causes and take action to correct them,
• Implement necessary infrastructure to support activities,
• Develop proposals to obtain necessary infrastructure, and
• Hold managers accountable for results.
FNS assessed all food assistance programs as well as its Nutrition Programs Administration (NPA)
funding, which support FNS’s Federal administrative operations. Assessments were conducted in
conjunction with USDA-coordinated procedures. FNS, with OMB concurrence, has designated five
programs as susceptible to significant improper payments: the Supplemental Nutrition Assistance
Program (SNAP), the Special Supplemental Nutrition Program for Women, Infants and Children (WIC),
the Child and Adult Care Food Program (CACFP), the National School Lunch Program (NSLP) and the
School Breakfast Program (SBP). Improper payment measurement activities for each are described
briefly below.
• The Supplemental Nutrition Assistance Program (SNAP), sampling and erroneous payment
measurement process has been a legislative mandate for more than 30 years. This process
compares the certification criteria upon which a household’s benefit issuance is determined with
the household’s circumstances at the time the case is sampled. States pull an initial sample of
cases following a standardized methodology required by regulation. State reviewers then follow
national guidance in order to complete their case review to determine whether an improper
payment occurred. All case results are accumulated by State. FNS then sub samples State review
findings and conducts an independent assessment in order to substantiate State reported results.
FNS uses a regression analysis to extrapolate the impact of cases where FNS disagrees with State
findings to ensure the results are representative of a State’s caseload. The validated results are
combined into a national cumulative (overpayments plus underpayments) error rate.
While SNAP’s improper payment measurement activities predate the passage of IPIA, SNAP routinely
assesses its policies to ensure compliance with the most recent improper payment guidance. SNAP
updates its guidance prior to the start of each fiscal year. On September 30, 2016, SNAP released
guidance that included substantial new policy revisions, that ensure payment error determinations align
with IPIA and OMB circulars, and is issuing further, more modest, updates in the annual release of
updated guidance for FY 2019.
Page 23 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
FNS has also undertaken a number of initiatives to improve the measurement of payment errors and
explore ways to make the measures into more actionable intelligence for program administrators. Some
activities to assess and improve our measurement of payment errors include:
• In FY 2017 FNS awarded a contract to conduct a feasibility assessment of moving the current
two tiered measurement system to a one tier system and expects the study to be released
publicly by the summer of 2019. In FY 2015, FNS and OIG found a number of States that
were improperly conducting payment error reviews, due to both intentional and unintentional
actions, and undertook a number of activities to correct the issues found. One OIG
recommendation, to address State introduced bias in the measurement of improper payments,
was to determine whether eliminating the States, who OIG and FNS are concerned may have
motivations beyond ensuring accurate measurements, from the measurement process to
ensure accurate measurements that are free of bias.
• Since FY 2015, FNS has increased the frequency of management evaluations of payment
error rate measurement operations and has revised guidance related to these important audits.
These audits produce corrective action plans, when deficiencies are found, to help ensure the
integrity of the payment error measurement system and rectify ongoing problems. This tool
also allows FNS to escalate problems to higher authorities should solutions be problematic
and/or when the problem persists despite intervention.
• In FY 2018, FNS released a Request for Information to explore ways to improve FNS
regulations pertaining to payment error rate measurement and related oversight activities and
to make the data derived from these measurements more actionable for program
administrators. Currently, FNS is in the process of analyzing comments and preparing draft
revisions of pertinent regulations to leadership and internal stakeholders. FNS expects to
release proposed regulations in FY 2019 and final regulations thereafter.
SNAP takes seriously its responsibility to reduce improper payments and engages in a number of
initiatives to help State agencies. These include:
• Requiring corrective action plans from States with high error rates.
• FNS providing technical assistance to help States conduct a root cause analysis of what
contributes to payment errors to aid in corrective action planning.
• As 60 percent of SNAP’s payment errors are caused by State agencies, FNS works with
States to strengthen the upfront eligibility determination process through system
improvements, policy training, improved data matching and verification.
• The remaining 40 percent of payment errors are client caused. FNS works with States to
improve client education efforts and the clarity of notices to ensure application and reporting
instructions are clearly conveyed.
• FNS providing technology improvement grants to States to help update and strengthen
systems. As an example, States are moving towards guided navigation to prompt accurate
data entry or verification checks, as well as adding business rules based on policy, to reduce
payment errors.
Page 24 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
• FNS helping States with business process re-engineering efforts to streamline and add
effective controls in their case management processes to help prevent improper payments
before they occur.
In addition to FNS’s efforts to prevent improper payments, SNAP works closely with State agencies to
ensure claims are established and collected from over issuances in order to recoup misspent funds for the
federal government. State agencies are required to establish and collect SNAP claims in accordance with
the requirements found in the Program regulations. Debts that become delinquent are subsequently
submitted by the State agencies for collection through the Treasury Offset Program. In past years, FNS
has used target measures to gauge the success of recipient claims activity. Claims collection by States is
ongoing, however, success in this area can be challenging, since collections are to a large extent tied to
the ability of each individual State to pursue and collect erroneous payments.
• In the Special Supplemental Nutrition Program for Women, Infants and Children (WIC),
work is underway to report improper payment error rates on two segments of the program:
certification error and vendor error.
o Vendor rate: FNS first reported a vendor improper payment error rate in FY 2006. Over
and under payment rates for FY 2005 were developed through a nationally representative
study of a probability sample of WIC vendors. Data from this study along with
information on vendor investigations by State WIC Agencies was used to prepare a
statistically estimated improper payment amount for each subsequent year until the next
vendor study. The WIC Vendor Management Study was replicated in FY 2012 with
results available in late 2013. Beginning in FY 2013, FNS estimated the rates of
overpayment and underpayment by applying the average annual percent changed in the
rates from 2005 and 2012 to the estimated rates obtained in 2012 and subsequent years.
o Certification rate: The National Survey of WIC Participants-II (NSWP-II) included a
measurement of the amount of erroneous payments associated with certification error in
FY 2009. WIC participants were interviewed and the household income at the time of
benefit issuance was verified through the review of household income documents to
determine the case error. Case error was then translated into dollar error by examining
actual WIC redemption data. The NSWP-II that contains a final estimate of erroneous
payments due to certification error in FY 2009 was published in April 2012.
Because erroneous payment estimates need to be produced annually, and given that surveys such as the
NSWP-II are extremely expensive to mount, FNS required a methodology to “age” the estimates
produced in that study. The generation of improper payments associated with erroneous WIC eligibility
in the years beyond FY 2009, is based on a three-stage model. In the first stage, equations were
developed from the NSWP-II survey data to predict the probability that a WIC participant was certified
erroneously (i.e., deemed eligible when the participant’s actual income was not within eligibility
guidelines) and to predict the average annual cost of an erroneous determination for those in error. The
second stage of the process focuses on predicting the size and changes in the composition of the WIC
population. The files used for estimating the composition of the WIC population are from the WIC
Participant and Program Characteristics data a biennial census of all WIC participants enrolled within a
particular target month (April of every even year). The WIC administrative data obtained from the
National Data Bank provide monthly information on the number of WIC participants within WIC
certification categories and region. The third stage of the process is to apply the predictions generated
Page 25 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
from the first stage to the second stage population. This approach results in population-adjusted estimates
of the annual incidence of eligibility errors and dollar impact.
• The Child and Adult Care Food Program (CACFP) include separate requirements for Child
Care Centers, Adult Day Care Centers, and Day Care Homes (DCHs). Overall program funding is
provided to State agencies which, in turn, provide funds to institutions to pay for claims for
reimbursable meals served at participating facilities. Institutions can be independent child or adult
care centers, or sponsoring organizations of facilities, which include DCHs or child or adult care
centers. Institutions and facilities range in size and can be as small as a household (DCHs). Each
part of CACFP has its own reimbursement structure.
Payments and claim information are transferred among FNS, State agencies, program sponsor
institutions, and program facilities; each such transaction represents a risk for improper payment.
However, because requirements vary significantly for each type of program operator (institutions
and facilities), a comprehensive assessment of improper payments is extremely complex.
Recognizing that the agency was limited in resources needed to develop a measurement approach
for program-wide erroneous payments in CACFP, FNS submitted a request for resources in the
fiscal year (FY) 2006 budget process. The goal of the funding request was to conduct a nationally
representative, program-wide CACFP erroneous payments study which would examine
reimbursements for meals served and to develop program error measurements that complied with
the requirements of the 2002 IPIA. Due to the complexities of the program, FNS estimated that it
would cost $20 million to measure improper payments at the precision required by IPIA.
Although the FY 2006 Budget request included funds designated for the nationally representative
CACFP erroneous payments study, funds were not provided by Congress.
FNS has identified the DCH component of CACFP as potentially high risk, and measures error in
this part of the program in lieu of the unfunded comprehensive measure. DCHs participate in
CACFP through public or private nonprofit sponsoring organizations. DCH improper payments
are most likely caused by sponsor error in determining a participating home’s reimbursement tier
(a tiering error) or by DCH error in reporting the number of meals which are eligible for
reimbursement (a claiming error).
The following activities have informed FNS on improper payments in the DCH component of
CACFP.
o In July 2009, FNS issued the final report of the Child Care Assessment Project
(CCAP). This project was designed to measure whether the two interim management
improvement rules issued by FNS in 2002 and 2004 had been properly implemented,
and whether the rules had effectively addressed the serious program management and
integrity problems that had been uncovered in the 1990s. Data were collected by FNS
in cooperation with State agencies and sponsors administering the CACFP, during the
period 2004-2007, from a broadly representative national sample of sponsors and
providers. While the CCAP report identified areas of potential weakness in the local-
level management of the CACFP in DCHs, it also raised questions about State and
Federal oversight of CACFP—specifically, why existing review mechanisms do not
identify some of the serious Program management weaknesses.
o Sponsor error measurement – Beginning in 2005 and annually through 2015, FNS
measured the level of erroneous payments due to sponsor error for the two types of
Page 26 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
program reimbursement (Tier I and Tier II). Annual reports are available at
http://www.fns.usda.gov/report-finder.
o To strengthen the financial integrity process and work towards improving the
balance of erroneous payments, FNS has conducted 11 assessments of CACFP,
since 2005. CACFP Assessment of Sponsors Tiering Determinations is an
evaluation that provides a national estimate of the share of CACFP participating
DCHs approved for an incorrect level of per meal reimbursement based on
sponsor tiering determinations (“Tiering studies”). This study assessed sponsor
tiering determinations for DCHs participating in the CACFP. The assessment
evaluated DCHs that were misclassified by sponsoring agencies into the wrong
tier, and the resulting erroneous payments for meals and snacks reimbursed at the
wrong rate. The most recent study, which provides estimates for 2015, was
completed in the fall of 2016. The 2015 assessment produced results comparable
to those of previous assessments. The estimates of misclassification rates, the cost
of misclassification, and the meals reimbursed in error for the 2015 assessment
are the lowest in 11 years. The final report is at https://fns-
prod.azureedge.net/sites/default/files/ops/CACFPTiering2015.pdf.
o Given the low error rates identified by the Tiering studies, the stability of the
estimates over time, and the high annual cost of data collection, the FY 2015
report will be the last annual report in the series. FNS will replace the annual
series with periodic studies. FNS awarded a contract in FY 2017 to examine the
feasibility of developing a statistical model to project annual error estimates in
between study years. Conditional on the results of that effort, FNS will report
model-based error estimates in future Financial Reports. For the FY 2018 report
FNS has applied our most recent study-based error rate to current year program
outlays to estimate the dollar value of tiering error.
o FNS released the report for FY 2015 in June 2017.
• Claiming error measurement – In addition to the annual sponsor error assessments,
FNS has continued to use its limited available resources to explore potential
methodologies to develop other measures of high-risk program components – in
particular, the accuracy of meal claims in DCHs participating in CACFP.
FNS contracted with Mathematica Policy Research, Inc. (MPR) to
evaluate the feasibility of the three different data collection methods
for validating FDCHs’ meal reimbursement claims. The pilot-tested
methods were based on observations of meal services, analysis of
sign-in/sign-out (SISO) logs, and parent interviews. SISO logs were
found ineffective for creating a valid indicator of the risk of erroneous
payments. The 2009 report is at http://www.fns.usda.gov/child-and-
adult-care-food-program-cacfp-improper-payments-data-collection-
pilot-project.
An expanded feasibility study was conducted in FY 2013 and FY
2014 to assess the validity of using parent-recall telephone
interviews to develop estimates of the meals served to the children
Page 27 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
of the parents against meal claims reimbursed to DCH providers.
This assessment found that parental recall of meals served to their
children while in attendance at the DCH was unreliable due to a low
match rate between parent-recalled meals and actual meals served.
The study concluded that it was not feasible to use the parent recall
data on specific meals (breakfast, morning snack, lunch, afternoon
snack, supper, and evening snack) to estimate erroneous meal
claims.
• Two additional CACFP studies related to improper payments were initiated in
FY 2014:
o CACFP Erroneous Payments in Child Care Centers Study (EPICCS). This
study will provide a comprehensive measure of the level of erroneous payments
(dollars and rates) to child care centers and center sponsors participating in
CACFP. It builds on the methods developed for school meals in the Access,
Participation, Eligibility and Certification (APEC) study series. Estimates will be
designed to meet the measurement requirements of the Improper Payments
Elimination and Recovery Act of 2010 (IPERA). The findings from this study
will complement the annual measure of reimbursement “tiering” errors in DCHs
for IPERA reporting on CACFP. Data collection was completed in March 2018
and the final report is due to FNS in Spring 2019.
o CACFP Day Care Homes Meal Claims Feasibility Study. This study will
examine ways to provide a measure of erroneous payments for meals claimed for
reimbursement by DCHs participating in CACFP. Different methods of
estimating improper payments and their rates will be developed and a feasibility
study will be conducted in an effort to determine the best means to meet
requirements under the IPERA. Data collection was completed in February
2018. The study results are expected to be released in late 2019.
Improper payments identified through the course of a review, audit, or through other operational oversight
activities can be recovered either through direct billing or through an offset of future program payments
earned. Current statutes only provide authority to recover improper payments identified through reviews,
audits or other operational oversight activity. Program regulations allow States to waive claims against a
single institution for improper payments of up to $600 in a single fiscal year. CACFP does not have
authority to pursue collection of improper payments identified on the basis of a statistical sample or
estimation procedure.
The National School Lunch Program and School Breakfast Program do not have a sampling and
erroneous payment measurement process comparable to SNAP. Instead, FNS developed the Access,
Participation, Eligibility and Certification (APEC) study series, which collects and analyzes data from a
nationally representative sample of schools and school food authorities (SFAs) about every 5 years. The
APEC-I study, which collected data in School Year 2005-2006, found significant levels of program
errors. APEC-II, which collected data in School Year 2012-2013, identified significant improvement in
certain types of error, but overall program error remains high. APEC-III started data collection in School
Year 2017-2018. APEC allows FNS to develop a national estimate of erroneous payment rates and
amounts in three key areas:
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FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Certification errors occur when a child is placed in the wrong meal reimbursement category, such as
when a child who should receive reduced-price meals is certified for free meals;
Meal claiming errors occur when meals are incorrectly categorized as reimbursable or non- reimbursable
at the point of sale in the cafeteria, as when a required meal component, such as a carton of milk or a
piece of fruit, is missing. Note the meal claiming errors are not included in FNS’s FY 2018 calculation
of improper payments, as these errors do not result in a monetary loss; and
Aggregation errors occur when a school or SFA tallies the number of reimbursable meals incorrectly and
thus makes an error in the number of meals claimed for reimbursement.
The APEC-II study used a multistage-clustered sample design that first sampled SFAs, then schools
served by the SFAs, and finally students who attend the sampled schools. The APEC-II researchers
selected two independent samples: (1) a base sample to estimate improper payments in schools and
districts that did not participate in the Community Eligibility Provision (CEP), and (2) a sample of SFAs
and schools that participated in the CEP.
Base sample SFAs were stratified by State, prevalence of participation in the NSLP, the proportion of
schools using Provision 2 or Provision 3, and the proportion of directly certified students. SFAs were
selected using a probability proportional to size method. Data were collected from 130 SFAs, 387 public
schools, and 5 private schools.
SFAs were selected from 5 States for the CEP sample. CEP SFAs were selected using probability
proportional to size. The selection of schools for the CEP sample was done similarly to the selection of
schools for the base sample. Data were collected from 45 CEP-participating SFAs and 135 CEP schools.
Students were selected for the base sample from separate frames of those approved for free or reduced-
price meals and those who were denied certification. The study collected data from about 3,800 free and
reduced-price certified students, and 600 students who were denied benefits.
Students were selected for the CEP sample from three frames: directly certified (“identified”) students,
students certified by application, non-applicants and denied applicants. The CEP sample consisted of
3,200 students.
APEC data are collected through multiple means:
A SFA director survey,
1. A household survey completed through field interviews with the parent or guardian of students
sampled,
2. In-school review of applications and direct certification documents,
3. Collection of student participation data from SFA records, and
4. Meal counting and claiming data during weeklong visits at SFAs through on-site observations.
The three types of error identified in the APEC studies differ significantly in their program impact.
Certification errors result in families receiving benefits they are not entitled to or being denied benefits
they should receive. In contrast, meal claiming errors occur when a meal is missing a required
component. Finally, aggregation errors result in schools being reimbursed for too many or too few meals
due to incorrect aggregation of the numbers of meals served.
Page 29 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
FNS uses the findings from the APEC studies supplemented with administrative and other data to
estimate erroneous payments due to certification error and meal counting error on an annual basis.
Current statutory authority allows USDA to recover improper payments from State agencies when
identified through review, audits or other operational oversight activities. Current statutory authority does
not support recovery of improper payments identified on the basis of a statistical sample or estimation
procedure of the type used to develop the periodic APEC estimates and the annual updates to those
estimates reported here.
Certification Error
As reported in USDA’s FY 2018 Agency Financial Report (AFR), NSLP improper payments arising from
misclassification of student eligibility for program benefits (free, reduced-price, or paid) totaled
$1.052 billion. Close to two-thirds of this “certification error” results from the misreporting of income by
households on program applications. The balance is due to administrative error at the school or school
district. The estimated certification error reported in the FY 2018 AFR for SBP is $420 million.
• Misreporting Error – Household misreporting on school meal applications includes understating
or overstating household income or household size.
• Administrative Error – Administrative errors are mistakes made by school personnel in
processing applications, such as misreading the attested income information, or applying the
eligibility standards incorrectly. Traditionally, school districts have had significant discretion
regarding their internal procedures for application review.
Non-Certification Error:
In FY 2018, NSLP improper payments of approximately $104 million were due to the submission of
claims for payments reflecting inaccurate counts of reimbursable meals. Most of these non-certification
errors result from meals being claimed for reimbursement which do not meet Federal standards for
reimbursable meals. The remaining non-certification errors arise from errors in the aggregation and
submission of meal service data to school districts and State agencies. The estimate for non-certification
error in the SBP is $50 million.
USDA is pursuing the following in this area:
Repeat and/or Enhance National Study: As part of its multifaceted program integrity initiatives, FNS
awarded a contract in FY 2016 to conduct the third study in the APEC series, providing national data on
rates and dollar amounts of NSLP and SBP underpayments, overpayments, and gross and net erroneous
payments in School Year 2017-2018, using a methodology that will allow longitudinal comparisons
among the three studies. APEC-III will replicate APEC-II and provide updated national estimates of
erroneous payments in the NSLP and SBP; moreover, APEC-III will include the following additional
study components:
1. Robust, statistically reliable national estimates of the annual amount of erroneous payments in
NSLP and SBP among FNS-specified sub-groups;
2. A sub-study on the differences in error rates among SFAs using different implementation
strategies in their school meals programs.
3. Qualitative data on the causes of erroneous payments.
Page 30 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Additions to the Annual Estimation Model: FNS uses an econometric model to “age” the data from the
nationally-representative APEC studies to reflect changes in program size, as well as changes in
certification accuracy, based on State-reported administrative data. One of the major sources of non-
certification error, the process of identifying reimbursable meals and collecting and reporting meal counts
for reimbursement claims, was not built into the initial APEC study model because of data limitations.
The agency has placed a major focus on administrative efforts to improve counting and claiming, but has
been unable to model the impact of these efforts over time. To the extent that improvements in counting
and claiming may have occurred, the annual estimates may overstate the actual level of payment errors.
As part of the APEC-II study, the contractor developed statistical models designed to estimate national
improper payments due to meal claiming error on an annual basis using district-level data. This will
enable the FNS to update its estimates of national improper payment rates for the NSLP and SBP in
future years without having to conduct full rounds of primary data collection. As part of the APEC-III
study, the contractor will develop statistical models informed by prior APEC studies to estimate
certification and meal claiming error rates on an annual basis using district-level data. This will
enable the FNS to update its estimates of national improper payment rates for the NSLP and SBP
in future years without having to conduct full rounds of primary data collection.
Additional information on FNS’s IPIA activities can be found in the FY 2018 USDA Agency Financial
Report.
The preceding tables summarize the results of measurement activities for FNS programs identified as
subject to a significant risk of improper payments.
Page 31 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Preliminary Data as of 7/31/18 – FNS Measures for IPIA Reporting
2018 Agency Financial Report
(SBP) Total Program
FNS School Breakfast Program
Error
FNS NSLP Counting/Claiming
FNS NSLP Certification Error
Program (NSLP) Total Program
FNS National School Lunch
Assistance Program (SNAP)
FNS Supplemental Nutrition
Program
4,252 N/A 63,593 Current Year (CY)
N/A 12,250
Outlays $
89% N/A 93.70% CY Properly Paid %
N/A 90.57%
11% 0.85% 8.59% 9.43% 6.30%
CY IP %
CY Properly Paid $
3,783 N/A N/A 11,094 59,585
469 104 1,052 1,155 4,008
CY IP $
299 750 3,301 CY
49 799
Overpayments $
171 302 707 CY
54 356
Underpayment $
4,379 N/A 63,593 CY +1 Est.
N/A 12,495
Outlays $
10.8% N/A N/A 9.14% 6.30% CY + 1 Est. IP %
472 N/A N/A 1,142 4,007 CY + 1 Est. IP $
Page 32 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Preliminary Data as of 7/31/18 – FNS Measures for IPIA Reporting
2018 Agency Financial Report
FNS WIC Vendor Error
FNS WIC Certification Error
Children (WIC)
Nutrition Program for
FNS Special Supplemental
Error
Counting/Claiming
FNS SBP
FNS SBP Certification Error
Women, Infants, and
Program
3,605 4,252 Current Year (CY)
3,605 3,605 4,252
Outlays $
N/A N/A CY Properly Paid %
N/A 94.61% N/A
2.84% 2.55% 5.39% 1.17% 9.87% CY IP %
N/A 3,411 N/A CY Properly Paid $
N/A N/A
102 92 194 50 420 CY IP $
16 92 108 11.4 287 CY Overpayment $
0 38.4 CY Underpayments $
86 86 132
N/A N/A CY +1 Est.
N/A 3,605 N/A
Outlays $
N/A N/A 3.88% N/A N/A CY + 1 Est. IP %
N/A N/A 140 N/A N/A CY + 1 Est. IP $
Page 33 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Preliminary Data as of 7/31/18 – FNS Measures for IPIA Reporting
2017 Agency Financial Report
FNS CACFP FDCH – Meal Claims
Decisions
FNS CACFP FDCH – Tiering
Program
Program (CACFP) Total
FNS Child and Adult Care Food
Program
N/A Current Year
N/A 721
(CY) Outlays $
N/A CY Properly Paid
N/A 99.46%
%
N/A .N/A 0.54% CY IP %
N/A N/A 717 CY Properly Paid $
CY IP $
N/A N/A 4
N/A CY
N/A 3
Overpayment
$
N/A CY
N/A 1
Underpayment
$
N/A CY +1 Est.
N/A 717
Outlays $
N/A N/A 0.54% CY + 1 Est. IP %
N/A N/A 4 CY + 1 Est. IP $
Page 34 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
SECTION 5. LIMITATIONS OF FINANCIAL STATEMENTS
The principal financial statements have been prepared to report the financial position and results of
operations of the Food and Nutrition Services (FNS), an agency of the United States Department of
Agriculture, pursuant to the requirements of 31 U.S.C. 3515 (b). While the statements have been prepared
from the books and records of FNS in accordance with GAAP for Federal entities and the formats
prescribed by OMB, the statements are in addition to the financial reports used to monitor and control
budgetary resources which are prepared from the same books and records.
The statements should be read with the realization that they are for a component of the U.S. Government,
a Sovereign entity.
SECTION 6. FINANCIAL STATEMENTS HIGHLIGHTS AND
ANALYSIS
FNS’ FY 2018 financial statements reflect the nutrition assistance programs’ responsiveness to the
Nation’s economic performance. By design, the level of activity within the nutrition assistance programs
varies with the level of need experience by the populations we serve.
Balance Sheet
2018 2017
Dollars (mil) Percent Dollars(mil) Percent
Fund Balance With Treasury 54,009 99.40% 49,011 99.31%
Accounts Receivable 326 0.60% 336 0.68%
General PP& E - 0.00% - 0.00%
Other - 0.00% 3 0.01%
Total Assets 54,335 100.00% 49,350 100.00%
Accounts Payable 8 0.01% 7 0.01%
Federal Employee and
Veterans Benefits 9 0.02% 9 0.02%
Benefits Due and Payable 5,074 9.34% 4,564 9.25%
Other Liabilities 2,494 4.59% 2,275 4.61%
Total Liabilities 7,644 13.96% 6,905 13.99%
Unexpended Appropriations 46,391 85.38% 42,329 85.77%
Cumulative Results of
Operations 300 0.55% 116 0.24%
Total Net Position 46,691 85.93% 42,445 86.01%
Total Liabilities & Net
Position 54,335 100% 49,350 100%
Page 35 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
The Balance Sheet composition (comparative composition of account balances to the totals) remained
substantially the same in FY 2018 as the prior year. The vast majority of FNS assets are held in Fund
Balance with Treasury (FBWT) - 99% in FY 2018 and 99% in FY 2017. This cash-like account largely
represents the aggregate amount of funds in the FNS accounts with the U.S. Treasury from which the
agency is authorized to make expenditures and pay liabilities. As financial statement Note 3 presents, a
substantial portion of the fund balance is unavailable as they are associated with either expired years or
are contingency funds which were not made available.
“Other assets” amount decreased by $3 million, commodity advances are being processed through direct
fund cite. Accounts receivable levels remained relatively unchanged from the prior year.
Benefits Due and Payable represents the largest liability of the agency, typically representing amounts
that are currently payable to grantees on Entitlement Benefits Programs. The FY 2018 and FY 2017 Net
Position of the agency is concentrated in Unexpended Appropriations.
Statement of Net Cost
2018 2017
Dollars(mil) Percent Dollars(mil) Percent
Gross Cost 98,792 100.06% 99,853 100.06%
Less: Earned Revenue (57) -0.06% (58) -0.06%
Net Cost of Operations 98,735 100.00% 99,795 100.00%
The FNS mission addresses USDA Strategic Goal 7 “Provide All Americans Access to A Safe, Nutritious,
and Secure Food Supply”. All program costs are reported under that strategic goal. Gross Costs
decreased from $99,853 million in FY 2017 to $98,792 million in FY 2018, reflecting the overall
decrease in programs participation levels.
As the chart above displays, Earned Revenue represents an extremely small offset to Gross Costs (less
than one percent), in both fiscal years. Earned revenue largely represents funds from the State Option
Supplemental Nutrition Assistance Program authorized under P.L. 105-18. One State participating in this
program (California) reimburses FNS for benefits paid to legal immigrants who do not qualify for the
Federal Supplemental Nutrition Assistance Program to whom the States have “opted” to provide benefits.
The Net Cost of Operations decreased from $99,795 million in FY 2017 to $98,735 million in FY 2018.
Page 36 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Statement of Changes in Net Position
2018 2017
Dollars(mil) Percent Dollars(mil) Percent
Unexpended Appropriations
Beginning Balance 42,329 41,817
Budgetary Financing Sources:
Appropriations Received 96,102 98,637
Appropriations Transferred
in/out (1) 0
Other Adjustments (3,063) (8,871)
Appropriations Used (88,976) (89,254)
Total Budgetary Financing
Sources 4,062 512
Total Unexpended
Appropriations 46,391 42,329
Cumulative Results from
Operations:
Beginning Balance 116 123
Budgetary Financing Sources:
Other Adjustments (1) 0.00% (1) 0.00%
Appropriations Used 88,976 89.95% 89,254 89.44%
Transfers In (Out) without
Reimbursements 9,193 9.29% 9,695 9.72%
Other Financing Sources(Non
Exchange):
Imputed Financing 751 0.76% 840 0.84%
Total Financing Sources 98,919 100.00% 99,787 100.00%
Net Cost of Operations (98,735) (99,795)
Net Change 184 (8)
Cumulative Results of
Operations 300 116
Net Position 46,691 42,445
The Statement of Changes in Net Position explains the changes in the two components of Net Position of
the Balance Sheet from year to year, the Unexpended Appropriations and the Cumulative Results of
Operations.
The FY 2018 appropriations used was $88,976 million, which decreased $278 million from FY 2017,
based on actual participation levels and food costs.
Unexpended Appropriations increased from $42,329 million in FY 2017 to $46,391 million in FY 2018
as less carryover appropriation balances were expended in the current year. Adjustments which decreased
from $8,871 million in FY 2017 to $3,063 million in FY 2018 are due to permanent reductions and
cancellations of expired accounts.
Page 37 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Cumulative Results of Operations increased $184 million, from $116 million in FY 2017 to $300 million
in FY 2018, as the net cost of operations is less than the total financing sources. The proportional
distribution of financing sources among appropriations, transfers, and imputed financing remained
relatively unchanged from FY 2017 to FY 2018. Transfers are largely made up a single large transfer
made in the annual appropriations act from funds available to the Secretary under Section 32 of the Act of
1935 for support of Child Nutrition programs. Additionally, FNS received transfers from the Commodity
Credit Corporation for the Senior Farmers Market Program. Transfers represented nine percent of total
financing sources in FY 2018 and ten percent in FY 2017.
Statement of Budgetary Resources
2018 2017
Dollars(mil) Percent Dollars(mil) Percent
Budgetary Resources
Unobligated Balance from
prior year budget authority, net
(discretionary and mandatory) 39,173 27.26% 39,105 27.86%
Appropriations (discretionary
and mandatory) 104,479 72.70% 107,466 76.55%
Spending Authority from
Offsetting Collections
(discretionary and mandatory) 59 0.04% 59 0.04%
Total Budgetary Resources 143,711 100.00% 140,384 100.00%
Status of Budgetary
Resources
New Obligations and Upward
Adjustments 99,734 69.40% 100,988 71.94%
Apportioned, Unexpired
Accounts 8,012 5.58% 6,851 4.90%
Unapportioned, Unexpired
Accounts 6,179 4.30% 8,889 6.33%
Expired, Unobligated Balance
End of Year 29,786 20.72% 23,656 16.85%
Total Budgetary Resources 143,711 100% 140,384 100%
Agency Outlays, Net
(discretionary and mandatory) 97,229 67.66% 98,762 70.35%
Appropriations were decreased from $107,466 million in FY 2017 to $104,479 million in FY 2018. Total
budgetary resources were greater than in the prior year due primarily to a change in unobligated balances
from the prior year. FNS had $143,711 million in total budgetary resources during FY 2018, largely from
appropriations received, but also from recoveries and available unobligated balances from prior periods.
At fiscal yearend 2018, most $99,734 million or 69% of those resources were obligated, though $8,012
million or 6% remained unobligated and available, and another $35,965 million was unobligated and not
available (including apportioned unavailable Contingency Reserve funds for WIC and SNAP). In FY
2018, Net Outlays represented 68% of Total Budgetary Resources, compared to 70% in FY 2017.
Page 38 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Food and Nutrition Service
CONSOLIDATED BALANCE SHEET
As of September 30, 2018 (CY) and 2017 (PY)
(Dollars in Millions)
FY 2018 FY 2017
(CY) (PY)
Assets (Note 2):
Intragovernmental:
Fund Balance with
Treasury (Note 3) $ 54,009 $ 49,011
Other - 3
Total Intragovernmental 54,009 49,014
Accounts Receivable, net (Note 4) 326 336
General Plant, Property, and
Equipment, net - -
Other - -
Total Assets $ 54,335 $ 49,350
Liabilities (Note 5):
Intragovernmental:
Accounts Payable $ - $ -
Other (Note 6) 59 50
Total Intragovernmental 59 50
Accounts Payable 8 7
Federal Employee and Veterans
Benefits 9 9
Benefits Due and Payable 5,074 4,564
Other (Note 6) 2,494 2,275
Total Liabilities 7,644 6,905
Net Position:
Unexpended Appropriations -
Other Funds 46,391 42,329
Cumulative Results of Operations -
Other Funds 300 116
Total Net Position $ 46,691 $ 42,445
Total Liabilities and Net Position $ 54,335 $ 49,350
The accompanying notes are an integral part of these statements.
Note: CY denotes Current Year; PY
denotes Prior Year.
Page 39 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Food and Nutrition Service
CONSOLIDATED STATEMENTS OF NET COST
For the Years Ended September 30, 2018 (CY) and 2017 (PY)
(Dollars in Millions)
FY 2018 FY 2017
(CY) (PY)
Program Costs:
Strategic Goal:
Improve the Nation's Nutrition
and Health:
Gross Costs
(Note 7) $ 98,792 $ 99,853
Less: Earned
Revenue 57 58
Net Program
Costs 98,735 99,795
Net Cost of Operations $ 98,735 $ 99,795
The accompanying notes are an integral part of these statements.
Page 40 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Food and Nutrition Service
CONSOLIDATED STATEMENTS OF CHANGES IN NET POSITION
As of September 30, 2018 (CY) and 2017 (PY)
(Dollars in Millions)
FY 2018 FY 2017
(CY) (PY)
Unexpended Appropriations:
Beginning Balance $42,329 $41,817
Adjustments:
Changes in Accounting Principles - -
Corrections of Errors - -
Beginning Balance, as Adjusted 42,329 41,817
Budgetary Financing Sources:
Appropriations Received 96,102 98,637
Appropriations Transferred in/out (1) -
Other Adjustments (3,063) (8,871)
Appropriations Used (88,976) (89,254)
Total Budgetary Financing Sources 4,062 512
Total Unexpended Appropriations 46,391 42,329
Cumulative Results from
Operations:
Beginning Balances 116 123
Adjustments:
Changes in Accounting Principles - -
Corrections of Errors - -
Beginning Balance, as Adjusted 116 123
Budgetary Financing Sources:
Other Adjustments (1) (1)
Page 41 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Appropriations Used 88,976 89,254
Nonexchange Revenue - -
Donations and Forfeitures of Cash - -
and cash Equivalents
Transfers-In/Out Without 9,193 9,695
Reimbursement (+/-)
Other (+/-) - -
Other Financing Sources
(NonExchange):
Donations and Forfeitures of Property - -
Transfers-In/Out Without - -
Reimbursement
Imputed Financing 751 840
Other - -
Total Financing Sources 98,919 99,787
Net Cost of Operations (+/-) (98,735) (99,795)
Net Change 184 (8)
Cumulative Results of Operations 300 116
Net Position 46,691 42,445
The accompanying notes are an integral part of these statements
Page 42 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Food and Nutrition Service
CONSOLIDATED STATEMENTS OF BUDGETARY RESOURCES
For the years ended September 30, 2018 (CY) and 2017 (PY)
(Dollars in Millions)
FY 2018 FY 2017
(CY) (PY)
Budgetary Resources:
Unobligated balance from prior year budget authority, net
(discretionary and mandatory) $ 39,173 $ 39,105
Appropriations (discretionary and mandatory) 104,479 107,466
Borrowing authority (discretionary and mandatory) - -
Contract authority (discretionary and mandatory) - -
Spending authority from offsetting collections (discretionary
and mandatory) 59 59
Total Budgetary Resources 143,711 140,384
Status of Budgetary
Resources:
New Obligations and
upward adjustments
(total) (Note 9) 99,734 100,988
Unobligated Balance,
end of year:
Apportioned, unexpired
accounts 8,012 6,851
Exempt from
apportionment, unexpired
accounts - -
Unapportioned, unexpired
accounts 6,179 8,889
Unexpired, unobligated
balance, end of year 14,191 15,740
Expired, unobligated
balance, end of year 29,786 23,656
Unobligated balance, end of year (total) 43,977 39,396
Total budgetary
resources 143,711 140,384
Outlays, Net:
Outlays, net (total)
(discretionary and 97,235 98,757
Page 43 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
mandatory)
Distributed offsetting
receipts (-) (6) 5
Agency outlays, net
(discretionary and
mandatory) 97,229 98,762
The accompanying notes are an integral part of these statements
Page 44 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
FOOD and NUTRITION SERVICE
Note 1. Summary of Significant Accounting Policies
A. Basis of Presentation
These financial statements have been prepared to report significant assets, liabilities, net cost of
operations, changes in net position, and budgetary resources for FNS, as required by the Chief
Financial Officers Act of 1990 as amended and OMB Circular A-136 dated July 30, 2018. They
have been prepared from the books and records of FNS in accordance with the Generally
Accepted Accounting Principles (GAAP) as applied to the Federal Government. GAAP for
Federal financial reporting entities recognizes the Federal Accounting Standards Advisory Board
(FASAB) as the standard setting body.
In accordance with revised OMB Circular A-136, FNS has changed its presentation of the
Statement of Changes in Net Position and Statement of Budgetary Resources for FY 2018.
B. Reporting Entity
FNS, including the Center for Nutrition Policy and Promotion (CNPP), is under the jurisdiction
of the Under Secretary for Food and Nutrition Consumer Service of the United States
Department of Agriculture. FNS is headed by an administrator with overall policy formulated in
the FNS headquarters in Alexandria, Virginia. State departments of education have responsibility
for food programs serving children in schools, child care centers, and summer recreation centers.
State departments of health, welfare, and agriculture usually have responsibility for programs
providing SNAP benefits or supplemental foods. For the FY 2018 financial statement
presentation, data classified as “Other” is primarily comprised of Nutrition Program
Administration (NPA) appropriations. A detailed description of the FNS programs is contained
in the Management Discussion & Analysis (MD&A).
C. Basis of Accounting
FNS records transactions on an accrual accounting and a budgetary basis. Under the accrual
method, revenues are recognized when earned and expenses are recognized when a liability is
incurred, without regard to receipt or payment of cash. Budgetary accounting facilitates
compliance with legal constraints and controls over the use of Federal funds. These financial
statements include all funds for which the FNS is responsible and were prepared in accordance
with the GAAP hierarchy of accounting principles for the Federal Government.
D. Accounts Receivable
The $326 million recognized as non-federal accounts receivable includes debts owed to FNS by
individuals, businesses, States and local governments. The largest single component of this item
consists of SNAP recipient claims. States establish claims against households to recover over
issued food stamp benefits. States are responsible for pursuing collection of such claims.
Collections, less an authorized State retention amount, are remitted to FNS. The portion of total
net realizable receivables consisting of SNAP recipient claims is the expected amount of such
remittance from States. The data generated by the State systems of gross account receivables has
Page 45 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
been determined to be unreliable. Accordingly, FNS does not know what the State gross account
receivable is. FNS has an alternative method for acquiring reliable State receivable information.
FNS estimates net realizable SNAP accounts receivable through a regression-based statistical model.
This model estimates future collections by the States, which the States will remit to the Federal
Government as of the end of the accounting period based on the actual SNAP issuance and net claims
collections for prior years. The forecasting model draws its predictive power from the strong historical
relationship between the level of SNAP benefit issuance and the level of recipient claims collections by
States. Applying the model to actual data covering the periods FY 1984 through FY 2018, the model
explains 96 percent of the variation in claims collections. Historically, collections projected by the model
have proved to be accurate within approximately 4 percent of actual net collections. Because the
expected cash flow from collections of such claims beyond one year is not expected to be material, FNS
does not estimate collections after the initial year or discount the estimate produced by the statistical
model to its present value.
The Supplemental Nutrition Assistance Program (SNAP) is using data from the Quality Control (QC)
system to report SNAP improper payments and to support SNAP administration. The data is based upon
a statistically valid methodology and the sampling plan has been approved by the Office of Management
and Budget (OMB). The QC system uses a systematic random sampling of SNAP participants to
determine a combined payment error rate for each State. The combined error rate consists of over-
issuances and under-issuances of SNAP benefits. A regression formula is applied to the results of the
reviews to calculate official error rates. State agencies review selected cases monthly to determine the
accuracy of the eligibility and benefit-level determination. The process included a client interview and
verification of all elements of eligibility and the basis of issuance. Federal reviewers validate a sample of
the State’s reviews by conducting a re-review.
FNS continues to provide on-going reviews of all State agency QC systems and offers technical
assistance as necessary. If FNS identifies procedures that do not meet Federal requirements, States are
required to undertake specific corrective action and FNS monitors their progress. If a State does not meet
these corrective actions to FNS’ satisfaction, it may result in possible suspension or disallowance of
Federal cost share funding for State administrative expenses.
Because reliable data is not available addressing gross FNS accounts receivable, the SNAP QC
estimate of SNAP benefits over issued nationwide provided the best statistically valid estimate of
invalid program payments. Statement of Federal Financial Accounting Standards (SFFAS) #1
permits Federal entities to estimate its accounts receivable. The QC error rate over issuance
estimate is considered the best estimate available. However, since this is an estimate of all SNAP
overpayments, the actual State gross account receivable amount would be lower but the variance
cannot be quantified. The amount of over issued benefits is included in the total program cost of
the SNAP as reflected in the Statement of Net Cost.
E. Grants and Program Benefits
The Fund Balance with Treasury represents the aggregate amount of funds in the FNS accounts with
Treasury for which the agency is authorized to make expenditures and pay liabilities. The FNS Fund
Balance with Treasury is primarily appropriated funds. FNS records grant obligations based on the grant
awards and SNAP benefits based on the issuance of benefits to Account Management Agent (AMA).
Funds for FNS grant programs and SNAP electronic benefits transfer (EBT) benefits are provided to
States through a Letter of Credit process. This process allows the grantees or the EBT processor to draw
Page 46 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
on established credit balances, as needed, to pay expenses associated with their grants or SNAP EBT
transactions at retailers. This allows the U. S. Treasury to hold funds until the grantees need the funds to
pay program expenses or until the SNAP EBT benefits are actually used. Expenses are recognized and
obligations liquidated as grantees or EBT processors drawdown on the Letter of Credit.
F. Annual, Sick, and Other Leave
Annual leave is accrued as it is earned and the accrual is reduced as leave is taken. Each year, the
balance in the accrued annual leave account is adjusted to reflect current pay rates. To the extent
that current or prior year appropriations are not available to fund annual leave earned but not
taken, funding will be obtained from current or future financing sources. Sick leave and other
types of non-vested leave are expensed as taken.
G. Retirement Plan
FNS employees participate in both the Civil Service Retirement System (CSRS) and the Federal
Employees Retirement System (FERS). FNS makes matching contributions to both CSRS and
FERS total plans. For most employees hired since December 31, 1983, FNS also contributes the
employer's matching share for Social Security. FERS went into effect pursuant to Public Law 99-
335 on January 1, 1987. Most employees hired after December 31, 1983, are automatically
covered by FERS and Social Security. A primary feature of FERS is that it offers a savings plan
to which FNS automatically contributes 1 percent of pay and matches any employee contribution
up to an additional 4 percent of pay. FNS makes these and other contributions to employee
retirement plans as shown in the following table:
FNS Retirement Contributions (In Millions)
Amount
Type of Contribution 2018 2017
CSRS/Transitional retirement contributions - Civil Service $1.0 $1.0
FERS regular contributions $19.0 $19.0
Thrift Savings Plan contributions $6.0 $6.0
TOTAL $26.0 $26.0
These contributions are reported as expenses in the Statement of Net Cost. FNS does not report
CSRS and FERS assets, accumulated plan benefits, or unfunded liabilities, if any, applicable to its
employees. Reporting such amounts is the responsibility of the Office of Personnel Management's
Federal Retirement System.
Statement of Federal Financial Accounting Standards No. 5, Accounting for Liabilities of the Federal
Government, requires Federal entities to recognize an expense for pensions and other retirement benefits
at the time the employee’s services are rendered. The purpose of recognizing this expense is to record and
report the full cost of each entity’s operation. Corresponding revenue, Imputed Financing Sources, is
recognized to the extent pension and other retirement benefit expenses exceed the amount paid to the
Office of Personnel Management (OPM).
Page 47 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
H. Recognition of Financing Sources and Appropriations Used
FNS receives the majority of the funding it needs to support its programs through annual and
multi-year appropriations. FNS recognizes appropriations as used at the time that program or
administrative expenses are delivered and recognized. FNS recognizes appropriations expended
for capitalized property or equipment as expenses when the assets are consumed in operations.
Appropriations used are the amount of appropriations expended during the current period to fund
FNS’ nutrition programs. This includes the NPA appropriation, which provides funds for salaries
and administrative expenses.
At the time grant awards are made, FNS records obligations for the full amount of expected
expenses as unexpended obligations-unpaid (undelivered orders). Reductions in unexpended
obligations occur as expenses are incurred by grantees. At year-end, grant obligations are accrued
and reflected on the financial statements as accounts payable. At grant closeout, the unused
portions of grant awards are deobligated; increasing the unobligated balances and is shown on the
balance sheet as part of unexpended appropriations. Unobligated balances available for future
periods are also shown as unexpended appropriations.
I. Fund Balance with Treasury Accounts
The Fund Balance with Treasury represents the aggregate amount of funds in the FNS accounts with
Treasury for which the agency is authorized to make expenditures and pay liabilities. The FNS Fund
Balance with Treasury is primarily appropriated funds.
J. Direct versus Reimbursable Obligations Incurred
FNS’ direct and reimbursable obligations incurred are represented as amounts apportioned under
category A and B. The amounts apportioned by Fiscal Quarter consist of FNS’ category A obligations
and the amounts apportioned for Special Activities consist of category B obligations as reported on the
agency’s year-end SF133s, Report on Budget Execution and Budgetary Resources.
K. Allocation Transfers
FNS is a party to allocation transfers with other federal agencies as a receiving (child) entity. Allocation
transfers are legal delegations by one agency of its authority to obligate budget authority and outlay
funds to another agency. A separate fund account (allocation account) is created in the U.S. Treasury as
a subset of the parent fund account for tracking and reporting purposes. All allocation transfers of
balances are credited to this account, and subsequent obligations and outlays incurred by the child entity
are charged to this allocation account as they execute the delegated activity on behalf of the parent
entity. Financial activity related to these allocation transfers is reported in the financial statements of
the parent entity, from which the underlying legislative authority, appropriations and budget
apportionments are derived. FNS has reported all activity relative to these allocation transfers in the FY
2018 financial statements. FNS receives allocation transfers, as the child, from the Agricultural
Marketing Service (AMS) and the Commodity Credit Corporation (CCC).
Page 48 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
L. Electronic Benefit Transfer (EBT) Fiscal Year Integrity Adjustment
Under the Integrated Program Accounting System (IPAS), FNS developed a methodology to estimate
the balance of SNAP benefit funds (undelivered orders) that remained from prior fiscal years due to
inactive participant balances. From this estimate, an adjustment, referred to as the EBT Fiscal Year
Integrity Adjustment, was made at year-end in IPAS to more accurately reflect the unredeemed EBT
benefit balances by fiscal year of issue. This adjustment was necessary to properly match undelivered
orders and payments, which may cause SNAP funds to be used differently than authorized by the
Appropriation Acts.
In May 2015, FNS switched accounting systems to the Financial Management Modernization Initiative
(FMMI) and is without an implemented methodology or procedure to complete this adjustment.
For FY 2018, FNS estimates that an adjustment of $556 is needed in total disbursements related to
SNAP benefit redemptions from the FY 2018 SNAP appropriation to the FY 2017 SNAP appropriation.
This would bring actual expenditures for those two years into line with anticipated expenditures as
authorized by the SNAP appropriations.
Note 2. Non-Entity Assets
FY 2018 FY 2017
Intragovernmental:
Fund balance with Treasury $0 $0
Investments - -
Accounts Receivable - -
Loans Receivable - -
Other - -
Total Intragovernmental - -
With The Public
Cash and other monetary assets - -
Accounts receivable 50 46
Taxes receivable - -
Loan receivable and related foreclosed property - -
Inventory and related property - -
Other - -
Total With the Public 50 46
Total non-entity assets 50 46
Total entity assets 54,285 49,304
Total assets $ 54,335 $ 49,350
FNS’ Non-Entity Assets related to Accounts Receivable consists of FNS’ Miscellaneous Receipts,
Interest, Fines & Penalties, and Miscellaneous Receipts for Cancelled Years.
Page 49 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 3. Fund Balance with Treasury
FY2018 FY 2017
Status of Fund Balance with Treasury:
Unobligated Balance:
Available 8,012 6,851
Unavailable 35,965 32,545
Obligated Balance not yet Disbursed 9,997 9,583
Non-Budgetary Fund Balance with Treasury: 35 32
- -
Total $ 54,009 $ 49,011
Note 4. Accounts Receivable, Net
Allowance for
Gross Accounts Uncollectible Accounts
FY 2018 Receivable Accounts Receivable, Net
Intragovernmental $ - $ - $ -
With the Public $ 344 $ 18 $ 326
Total $ 344 $ 18 $ 326
Allowance for
Gross Accounts Uncollectible Accounts
FY 2017 Receivable Accounts Receivable, Net
Intragovernmental $ - $ - $ -
With the Public $ 357 $ 21 $ 336
Total $ 357 $ 21 $ 336
FNS’s accounts receivable amounts related to criminal restitution orders is currently unavailable and the
agency is pursuing efforts in order to obtain the data. See Note 1.D. for further explanation of FNS’
accounts receivable activity with the public.
Page 50 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 5. Liabilities Not Covered by Budgetary Resources
Intragovernmental: FY 2018 FY 2017
Accounts payable $ - $ -
Debt - -
Other 1 2
Total Intragovernmental 1 2
With the Public: - -
Accounts Payable - -
Debt held by the public - -
Federal employee and veterans' benefits 9 9
Environmental and disposal liabilities - -
Benefits due and payable - -
Other 14 15
Total With the Public 23 24
Total liabilities not covered by budgetary resources 24 26
Total liabilities covered by budgetary resources 7,537 6,879
Total liabilities not requiring budgetary resources 83 -
Total liabilities $ 7,644 $ 6,905
FNS’ “Intragovernmental-Other Liabilities” consist of Unfunded FECA Liability and Other
Unfunded Employment Related Liability. FNS’ “With the Public-Other Liabilities” consist of
Unfunded Leave.
Page 51 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 6. Other Liabilities
FY 2018 Non-Current Current Total
Intragovernmental:
Contract Holdbacks $ - $ - $ -
Other Liabilities with Related Budgetary Obligations - 7 7
Employer Contributions and Payroll Taxes - 2 2
Other Post-Employment Benefits Due and Payable - - -
Unfunded FECA Liability - 1 1
Other Unfunded Employment Related Liability - - -
Liability for Advances and Prepayments - - -
Deferred Credits - - -
Liability for Clearing Accounts - (1) (1)
Contingent Liabilities - - -
Capital Lease Liability - - -
Liability for Subsidy Related to Undisbursed Loans - - -
Accounts Payable from Canceled Appropriations - - -
Resources Payable to Treasury - - -
Custodial Liability - 50 50
Other Liabilities without Related Budgetary Obligations - - -
Total Intragovernmental - 59 59
With the Public:
Contract Holdbacks - - -
Other Liabilities with Related Budgetary Obligations - 2,438 2,438
Accrued Funded Payroll and Leave - 9 9
Withholdings Payable - - -
Employer Contributions and Payroll Taxes Payable - - -
Other Post-Employment Benefits Due and Payable - - -
Pension Benefits Due and Payable to Beneficiaries - - -
Benefit Premiums Payable to Carriers - - -
Life Insurance Benefits Due and Payable - - -
Unfunded Leave - 14 14
Other Unfunded Employment Related Liability - - -
Liability for Advances and Prepayments - - -
Deferred Credits - - -
Liability for Clearing Accounts - (1) (1)
Liab. for nonfiduciary deposit funds & undeposited collections - 34 34
Contingent Liabilities - - -
Capital Lease Liability - - -
Accounts Payable from Canceled Appropriations - - -
Custodial Liability - - -
Other Liabilities without Related Budgetary Obligations - - -
Total With the Public - 2,494 2,494
Total Other Liabilities $ - $ 2,553 $ 2,553
Page 52 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
FY 2017 Non-Current Current Total
Intragovernmental:
Contract Holdbacks $ - $ - $ -
Other Liabilities with Related Budgetary Obligations - 3 3
Employer Contributions and Payroll Taxes - 2 2
Other Post-Employment Benefits Due and Payable - - -
Unfunded FECA Liability - 1 1
Other Unfunded Employment Related Liability - - -
Liability for Advances and Prepayments - - -
Deferred Credits - - -
Liability for Clearing Accounts - (2) (2)
Contingent Liabilities - - -
Capital Lease Liability - - -
Liability for Subsidy Related to Undisbursed Loans - - -
Accounts Payable from Canceled Appropriations - - -
Resources Payable to Treasury - - -
Custodial Liability - 46 46
Other Liabilities without Related Budgetary Obligations - - -
Total Intragovernmental - 50 50
With the Public:
Contract Holdbacks - - -
Other Liabilities with Related Budgetary Obligations - 2,218 2,218
Accrued Funded Payroll and Leave - 9 9
Withholdings Payable - - -
Employer Contributions and Payroll Taxes Payable - - -
Other Post-Employment Benefits Due and Payable - - -
Pension Benefits Due and Payable to Beneficiaries - - -
Benefit Premiums Payable to Carriers - - -
Life Insurance Benefits Due and Payable - - -
Unfunded Leave - 15 15
Other Unfunded Employment Related Liability - - -
Liability for Advances and Prepayments - - -
Deferred Credits - - -
Liability for Clearing Accounts - (3) (3)
Liab. for nonfiduciary deposit funds & undeposited collections - 36 36
Contingent Liabilities - - -
Capital Lease Liability - - -
Accounts Payable from Canceled Appropriations - - -
Custodial Liability - - -
Other Liabilities without Related Budgetary Obligations - - -
Total With the Public - 2,275 2,275
Total Other Liabilities $ - $ 2,325 $ 2,325
Page 53 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 7. Program Costs By Segment
For the year ended September 30, 2018
Consolidated
CHILD NUTRITION SNAP WIC CAP OTHER Total
Total Gross Costs 23,619 69,526 5,089 348 210 98,792
Less Earned Revenue: 0 57 0 0 0 57
Net Goal Costs: 23,619 69,469 5,089 348 210 98,735
Net Cost of Operations 98,735
For the year ended September 30,2017
Consolidated
CHILD NUTRITION SNAP WIC CAP OTHER Total
Total Gross Costs 23,017 70,369 5,942 303 222 99,853
Less Earned Revenue: 0 58 0 0 0 58
Net Goal Costs: 23,017 70,311 5,942 303 222 99,795
Net Cost of Operations 99,795
Page 54 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 8. Exchange Revenues
FNS’ earned revenue from nonfederal parties consists largely of the $57 from the state option
Supplemental Nutrition Assistance Program.
On June 12, 1997, the President signed into law the Supplemental Appropriations Act, Public Law 105-
18. This law authorized the state option Supplemental Nutrition Assistance Program. In this program,
States issue SNAP benefits through the Federal government for use in a State-funded food assistance
program for legal immigrants, and childless, able-bodied adults ineligible for the Supplemental Nutrition
Assistance Program.
States operating a state option Supplemental Nutrition Assistance Program utilize FNS’ SNAP
infrastructure. That is, they utilized electronic benefits transfer (EBT) issued benefits from FNS which
are transacted at FNS authorized SNAP retailers. These benefits are subsequently redeemed through the
Federal Reserve Banking (FRB) system.
Prior to issuance, States are required to remit payment to FNS for the amount of the benefits issued as
well as reimburse FNS for the costs of redeeming benefits. During fiscal year 2018, one State participated
in this program, which generated earned revenues of $57.
Note 9. Apportionment Categories of Obligations Incurred: Direct vs. Reimbursable Obligations
FY 2018 Direct Reimbursable Total
Apportionment by Fiscal Quarter $ 34,089 $ 1 $ 34,090
Apportionment for Special Activities 65,586 58 65,644
Exempt from Apportionment - - -
Total Obligations Incurred $ 99,675 $ 59 $ 99,734
FY 2017 Direct Reimbursable Total
Apportionment by Fiscal Quarter $ 33,877 $ - $ 33,877
Apportionment for Special Activities 67,053 58 67,111
Exempt from Apportionment - - -
Total Obligations Incurred $ 100,930 $ 58 $ 100,988
Note 10. Undelivered Orders at the end of the Period
Budgetary resources obligated for undelivered orders as of September 30, 2018 were as follows:
Federal Non Federal
Paid $ - $ -
Unpaid $ 35 $ 2,431
Total $ 35 $ 2,431
Budgetary resources obligated for undelivered orders as of September 30, 2017 was $2.8 billion.
Page 55 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 11. Explanation of Differences between the SBR and the Budget of the US Government
Differences exist between FNS’ FY 2017 Statement of Budgetary Resources (as provided to the
Department for consolidation purposes) and the FY 2017 actual numbers presented in the FY 2019
Budget of the United State Government (Budget). These differences are summarized below:
Description Budgetary Resources Outlays
2017 SBR $140,384 $98,762
Less: Expired Accounts not $23,879 $-
Included in Budget
Add: Parent Child $9 $-
Relationship (NIFA)
Add: Differences due to $1 $1
Rounding
Less: Permanent Reduction $- $-
Error
Budget of the U.S. $116,515 $98,763
Government
The actual numbers for the FY President’s Budget have not yet been published as of FNS’ FY 2018
financial statements, and it is expected that the actual numbers will be published in February of the
following fiscal year and will be available on the website at www.whitehouse.gov.
Page 56 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 12. Incidental Custodial Collections
Revenue Activity: FY 2018 FY 2017
Sources of Cash Collections:
Miscellaneous $ 18 $ 15
Total Cash Collections 18 15
Accrual Adjustments (+/-) 5 5
Total Custodial Revenue 23 20
Disposition of Collections:
Transferred to Others:
Treasury - -
States and Counties - -
( Increase )/Decrease in Amounts Yet to be Transferred (+/-) (23) (20)
Refunds and Other Payments - -
Retained by the Reporting Entity - -
Net Custodial Activity $ - $ -
FNS’ FY 2018 custodial activity represents all accounts receivable activity related to cancel year
appropriations for interest, fines & penalties assessed and collected. For example; civil money penalties,
interest, retailer and wholesaler fines and penalties. (See Note 1D., “Accounts Receivable”, for further
disclosures on FNS’ collection activities). FNS transfers these types of collections to the Department of
Treasury. FNS’ custodial collection activities are considered immaterial and incidental to the mission of
FNS.
Page 57 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
Note 13. Budget and Accrual Reconciliation
Food amd Nutrition Services
Budget and Accrual Reconciliation
Period Ending September 30, 2018
Intragovernmental with the public
Net Operating Cost (SNC) 1,135 97,600
Components of Net Operating Cost Not Part of the Budgetary
Outlays:
1. Property, plant, and equipment depreciation 0 1
2. Property, plant, and equipment disposal & revaluation 0 0
3. Unrealized valuation loss/(gain) on investments in GSE's 0 0
4. Yearend credit reform subsidy re-estimates 0 0
5. Other 0 0
Increase/(decrease) in assets:
6. Accounts Receivable 0 (13)
7. Loans receivable 0 0
8. Other assests (3) 0
9. Investments 0 0
(Increase)/decrease in liabilities not affecting Budget Outlays:
10. Accounts payable 0 (511)
11. Salaries and benefits 0 0
12. Insurance and guarantee program liabilities 0 0
13. Environmental and disposal liabilities 0 0
14. Other liabilities (Unfunded leave, Unfunded FECA, Actuarial (5) (221)
FECA)
Other financing sources:
15. Federal employee retirement benefit costs paid by OPM and (751) 0
imputed to the agency
16. Other imputed finance 0 0
17. Total Components of Net Cost That Are Not Part of the Budget (759) (744)
Outlays
Components of the Budget Outlays That Are Not Part of Net
Operating Cost:
18. Effect of prior year agencies credit reform subsidy re-estimates 0 0
19. Acquisition of capital assets 0 (1)
20. Acquisition of inventory 0 0
21. Acquisition of other assets 0 0
22. Debt and Equity Securities 0 0
23. Transfers out (in) without reeimbursement 0 0
24. Other 0 (2)
25. Total Components of Budgetary Outlays That Are Not Part of 0 (3)
Net Operating Cost
26. Other Temporary Timing Differences 0 0
28. NET OUTLAYS 376 96,853
29. Outlays,gross 0 97,294
30. Actual offsetting collections 0 (59)
31. Distributed offsetting receipts 0 (6)
32. Outlays, Net 0 97,229
Page 58 of 59
FINANCIAL REPORT – U. S. D. A. – F. N. S. – FY 2018
NOTES TO THE FINANCIAL STATEMENTS
(Amounts shown are in Millions except as noted)
FOOD AND NUTRITION SERVICE
REQUIRED SUPPLEMENTARY STEWARDHIP INFORMATION
STEWARDSHIP INVESTMENTS
Nonfederal Physical Property
1. A. Supplemental Nutrition Assistance Program (SNAP)
B. Program Expense 2018 2017
1. ADP Equipment & Systems $15 $21
FNS’ nonfederal physical property consists of computer systems and other equipment obtained by the State and
local governments for the purpose of administering the Supplemental Nutrition Assistance Program. The total SNAP
Expense for ADP Equipment & Systems has been reported as of the date of FNS’ financial statements.
2. A. Special Supplemental Nutrition Program for Women, Infants and Children (WIC)
B. Program Expense 2018 2017
1. ADP Equipment & Systems $6 $6
FNS’ nonfederal physical property also consists of computer systems and other equipment obtained by the State and
local governments for the purpose of administering the Special Supplemental Nutrition Program for Women, Infants
and Children.
Human Capital
1. A. Supplemental Nutrition Assistance Program
B. Program Expense 2018 2017
1. Employment and Training $85 $83
FNS’ human capital consists of employment and training (E&T) for the Supplemental Nutrition Assistance Program.
The E&T program requires recipients of SNAP benefits to participate in an employment and training program as a
condition to SNAP eligibility.
Outcome data for the E&T program is only available through the third quarter. As of this period, FNS’ E&T
program has placed 241,898 work registrants subject to the 3 - month SNAP participant limit and 906,410 work
registrants not subject to the limit in either job-search, job-training, job-workfare, education, or work experience.
Page 59 of 59
Learn more about USDA OIG
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How to Report Suspected Wrongdoing in USDA Programs
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File complaint online: www.usda.gov/oig/hotline.htm
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In accordance with Federal civil rights law and U.S. Department of Agriculture Relay Service at (800) 877-8339. Additionally, program information may be made
(USDA) civil rights regulations and policies, the USDA, its Agencies, offices, and available in languages other than English.
employees, and institutions participating in or administering USDA programs
are prohibited from discriminating based on race, color, national origin, religion, To file a program discrimination complaint, complete the USDA Program Discrimina-
sex, gender identity (including gender expression), sexual orientation, disability, tion Complaint Form, AD-3027, found online at How to File a Program
age, marital status, family/parental status, income derived from a public Discrimination Complaint and at any USDA office or write a letter addressed to
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rights activity, in any program or activity conducted or funded by USDA (not all request a copy of the complaint form, call (866) 632-9992. Submit your completed
bases apply to all programs). Remedies and complaint filing deadlines vary by form or letter to USDA by: (1) mail: U.S. Department of Agriculture, Office of the
program or incident. Assistant Secretary for Civil Rights, 1400 Independence Avenue, SW, Washington,
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Persons with disabilities who require alternative means of communication for
program information (e.g., Braille, large print, audiotape, American Sign USDA is an equal opportunity provider, employer, and lender.
Language, etc.) should contact the responsible Agency or USDA’s TARGET
Center at (202) 720-2600 (voice and TTY) or contact USDA through the Federal All photographs are from USDA's Flickr site and are in the public domain.
Food and Nutrition Service's Financial Statements for Fiscal Years 2018 and 2017
Published by the Department of Agriculture, Office of Inspector General on 2018-11-14.
Below is a raw (and likely hideous) rendition of the original report. (PDF)