Background

The Healthy, Hunger-Free Kids Act (HHFKA) 

directed USDA to study the extent to which school 

food authorities (SFAs) participating in the 

National School Lunch Program (NSLP) and 

School Breakfast Program (SBP) pay indirect costs

to local education agencies (LEAs). It specifically 

requested an assessment of the methodologies used 

to establish indirect costs, the types and amounts 

of indirect costs that are charged and not charged 

to the school foodservice account, and the types 

and amounts of indirect costs recovered by LEAs.

The principal research questions for the study are:

• What percent of LEAs have an indirect cost 

rate?

• Do LEAs determine indirect costs specifically 

attributable to school foodservice and, if so, do 

they charge these costs to the program?

• Do LEAs that charge any or all of the indirect 

costs to the school foodservice account 

actually recover these charges?

Methods

To address the research questions, information 

was collected from four perspectives: (1) the 

State education agency finance officer, (2) the 

State child nutrition director, (3) the LEA 

business manager, and (4) the SFA director. 

State-level data were collected through telephone 

surveys conducted from August to November 

2012. Two Web surveys collected data from a 

nationally representative sample of SFAs and their 

LEAs conducted from November 2012 to 

February 2013. A total of 1,640 LEA business 

managers (73 percent) and 1,227 SFA directors 

(66 percent) completed the surveys. Data 

collection focused on school year 2011-12.

The results from the study are based on selfreported information from survey respondents and 

are not associated with an audit of State, LEA, or 

SFA operations.

Findings

• Just over half (55.3 percent) of all LEAs 

had a method for calculating an indirect 

cost rate. The vast majority of these LEAs 

used a rate calculated directly by their State 

education agency (SEA) or another method of 

allocating indirect costs provided by their 

SEA. The mean restricted indirect cost rate 

for foodservice in SY 2011-12 was 6.2 

percent, while the mean unrestricted indirect 

cost rate was 13.7 percent. 1

Figure 1: Charging of Indirect Costs to School Foodservice: 

Percentages of All LEAs; SY 2011-2012

 1 "Restricted Indirect Cost Rates" are used with grant 

programs that limit expenditures to those that supplement but 

do not supplant State or local effort. For example, all No 

Child Left Behind and Individuals with Disabilities Education 

Act Federal programs use the restricted rate. 

"Non-Restricted (or Unrestricted) Indirect Cost Rates" apply 

to Federal programs that allow Federal funds to supplement 

and/or supplant local funds. The legislation authorizing the 

School Meal Programs does not require use of a restricted 

rate; therefore, the general fund may bill the school 

foodservice at the unrestricted rate. 

44.7%

21.1%

34.2%

Do not have an 

approved method for 

charging indirect cost

Charged indirect costs 

to school foodservice

Did not charge indirect 

costs to school 

foodservice

SCHOOL FOODSERVICE INDIRECT COST STUDY (SUMMARY)

Food and Nutrition Service, Office of Policy Support March 2014
• Just 21.1 percent of all LEAs calculated and 

charged indirect costs specifically to school 

foodservice.

Figure 2: Foodservice Programs

• Nearly twice as many LEAs calculated 

indirect costs for grants and programs 

other than school foodservice. For other 

programs receiving Federal funds, 43.2 

percent of all LEAs calculated indirect costs 

attributable to the other programs.

• Larger LEAs are more likely than others to 

charge and recover some indirect costs. Of 

the large LEAs (5,000 or more students), 45 

percent calculated indirect costs for 

foodservice. One-fourth of medium LEAs 

(1,000-4,999 students) and 12 percent of small 

LEAs (fewer than 1,000 students) calculated 

indirect costs for foodservice.

• Most charges of indirect costs to the school 

foodservice do not result in actual recovery 

of funds. Only about 13 percent of all LEAs 

had any funds transferred to the LEA’s general 

fund to pay indirect costs charged to the 

school foodservice account.

o Almost three times as many LEAs (36.4 

percent) recovered indirect costs from 

other grants and programs than from 

school foodservice. 

o The primary reasons that LEAs did not 

recover all of the indirect costs charged to 

the foodservice were that LEAs made the 

decisions to bear these costs and/or the 

SFAs did not have the funds with which to 

pay these costs. 

Figure 3: Reasons LEAs Did Not Charge Any Indirect Costs to School 

Foodservice SY 2011-2012

Note: LEAs could indicate multiple reasons for not changing any indirect costs attributable to school 

foodservice

The study also provided important findings on a 

number of other issues regarding the charging and 

recovery of indirect costs, as summarized below.

• The SEA’s financial management division 

computed or approved a restricted indirect 

cost rate in all 49 States where it had some 

involvement in the process of setting or 

approving LEA indirect cost rates. In 38 

States, the SEA also computed or approved 

unrestricted LEA indirect cost rates.

• The indirect cost pools for both restricted and 

unrestricted indirect cost rates typically 

included salaries and benefits, workers’ 

compensation, and supplies and expendable 

equipment. Audit fees, travel, and other 

miscellaneous costs were rarely reported as 

included in the rates. The indirect cost pool 

generally covered support functions such as 

accounting, information technology, budget, 

finance and payroll, personnel administration, 

and purchasing and contracting.

• In all but three States, SEAs provided some 

form of notification or guidance to SFAs 

regarding the computed or approved indirect 

rates for their LEAs. 

For More Information

Frederic B. Glantz et al. (2014). School 

Foodservice Indirect Cost Study Final Report. 

Prepared by Abt Associates, Inc. Alexandria, VA:

U.S. Department of Agriculture, Food and

Nutrition Service. Project Officer: John Endahl.

Available online at:

www.fns.usda.gov/research-and-analysis.

USDA is an equal opportunity provider and employer.