Substitution of Donated Foods in Advance of Purchase and Negative Inventories
|DATE:||May 30, 2012|
|MEMO POLICY:||FD- 122: Processing|
|SUBJECT:||Substitution of Donated Foods in Advance of Purchase and Negative Inventories|
FD-122: Substitution of Donated Foods in Advance of Purchase and Negative Inventories
In accordance with 7 CFR 250.30(1), a processor may. in most cases, substitute Department of Agriculture (USDA) donated foods with commercially purchased foods of U.S. origin, and of equal or better quality in all USDA purchase specifications than the donated food. The substitution option permits processors to conduct their business efficiently and provide finished end products to school food authorities (SFAs) and other recipient agencies in a timely manner. Substitution of donated foods usually occurs after USDA purchase and delivery of the donated food to the processor, or after USDA purchase but before actual receipt of the donated food shipment In either case, the processor may sell commercial products or finished end products to any of its customers, while passing through the value of the donated food to SFAs.
However, in some cases, a processor will "substitute" for the donated food in advance of USDA purchase, and provide commercial food products to SF As with value pass-through for the donated food. · Although not specifically prohibited in 7 CFR Part 250, such substitution in advance of purchase (also referred (0 as "front loading") is not recommended, as USDA cannot guarantee the purchase and provision of donated foods for processing. In such case, the processor makes a business decision, and assumes the risk and attendant financial liability if USDA is unable to make the purchase.
The State Distributing Agency (SDA) must take special note of any negative inventories reported on a processor's monthly performance reports. I r negative inventories are reported, the SDA must check to sec if donated food orders arc in place for shipment to the processor, or if SFAs are to place such orders later in the school year. The SDA must inform the processor and the SFA if, for any reason, donated foods cannot be shipped to the processor in the school year.
Food Distribution Division
The contents of this guidance document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide clarity to the public regarding existing requirements under the law or agency policies.