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Oklahoma Department of Human Services
Sequoyah Memorial Office Building, 2400 N. Lincoln Blvd. • Oklahoma City, OK 73105
(405) 521-3646 • Fax (405) 521-6684 • Internet: www.okdhs.org
Commodity Distribution Procedures Handbook

Publication Number: 98-0002
Revision / Issue Date:   11-2005
8. Losses

Table of Contents:

Summary

  1. Introduction
  2. Legal Basis
  3. Definitions
  4. Eligibility Requirements
  5. Allocation and Ordering
  6. Storage
  7. Delivery
  8. Losses
  9. Transfers
  10. Use and Sale of Commodity Foods
  11. Food Safety and Recalls
  12. Disaster Feeding
  13. Processing
  14. Civil Rights Guidelines
  15. Commodity Compliance Reviews
  16. School Nutrition Program

The recipient agency (RA) is responsible to safeguard USDA commodity foods from losses. If a recipient agency stores donated foods under less than favorable conditions, it does so at its own risk and is in violation of its contract with the Commodity Distribution Unit (CDU).

A commodity loss can be an inventory adjustment due to theft or an unexplained loss of inventory during physical count reconciliation. A commodity loss can also be any commodity product that is no longer edible due to age, damage, infestation or spoilage. This includes processed foods.

Immediately notify the Commodity Distribution Unit (CDU) in the event of a loss, regardless of its size. Foods that are no longer edible must be disposed of properly. You may be directed by the Commodity Distribution Unit (CDU) to contact the local health department sanitarian for assistance in disposing of the products. Once the health department  sanitarian  completes the Disposition Form, the RAs provide the form to the Commodity Distribution Unit (CDU) as soon as possible. In the case of foods that may be edible but the age and general condition compromise the quality of the food, the Commodity Distribution Unit (CDU) and USDA may authorize the transfer to an unlike category. This has to be approved  PRIOR to the transfer. The food has to be  determined “fit for human consumption” by the health department sanitarian, or the Commodity Distribution Unit (CDU) reviewer.

Foods that are beyond their best if used by date and no longer safe for human consumption will be destroyed and a claim filed with repayment required. This is cited as “excessive inventory” since the food was not utilized before it was no longer edible. The current value of the food will be billed to the recipient agency (RA) for repayment.

When authorized by the Commodity Distribution Unit (CDU) or the health department, please use the following guidelines when disposing of food.

  • Destroy carton labels and remove product from USDA packaging
  • Destroy food and ensure that it cannot be eaten. For example, remove it from the USDA container and pour bleach or other substance on it
  • Some products may have to be taken to a landfill for proper disposal

 

Note: If health department officials are not available, contact the Commodity Distribution Unit (CDU). Those who destroy before authorized could be billed for the loss. Repeat offenders will risk termination of their agreement and receipt of USDA commodities. There are instances that health department officials will not recommend disposal based on the fact a product has been stored properly and there are no “visible” signs of deterioration. the Commodity Distribution Unit (CDU) can condemn these items. Example: If a product is two years beyond the best if used by date, has been frozen solid the entire time and has no obvious freezer burn, it still must be destroyed. The recipient agency (RA) will be billed due to age and safety concerns. The health department does not have the final determination. The Commodity Distribution Unit (CDU) and USDA make the final determination.

Use the Loss Report Form in the forms section of this handbook to report losses of USDA donated foods to the Commodity Distribution Unit (CDU) within five working days of a loss. Give all information requested on the Loss Report Form, including an explanation of how and why the loss happened and all supporting information. Some examples are:

  •  Freezer losses: Send temperature logs for the 30 days before the loss, health department disposition sheet, freezer repair bills, and loss report form
  • Theft: Send police report, updated perpetual inventory and proof of any repairs to the facility
  • Old product/spoilage: Send health department disposition sheet and updated perpetual inventory. (The Commodity Distribution Unit (CDU) may also review your menus for the past months.)

 

There has been a common practice to transfer items that are still fit for human consumption, but past the "best if used by" dates to the charitable institutions. This can only be done with the prior approval of the the Commodity Distribution Unit (CDU) program administrator.

Recipient agencies (RAs) are accountable for losses of all donated foods, including those diverted for further processing, that occur due to improper storage or handling. The Commodity Distribution Unit (CDU) reviews the loss report form and other documentation sent by an RA reporting a loss of commodities. If the loss happened because of negligence, USDA may require repayment.

In all instances when the items lost are considered to be excessive inventory, that is old items that have been in inventory longer than they are considered fit for human consumption, repayment will be required.

Manage your inventory levels to have no more than you can use at the current rate before the expected shelf life/"best if used by" date is exceeded.

If  you have items that you do not feel you can menu and use before they are too old, contact the Commodity Distribution Unit (CDU) for permission to transfer items to another agency. These items must be used before you are required to pay for them.  In some  instances the Commodity Distribution Unit (CDU) and USDA allow replacement-in-kind. If this is permitted, Type  “A” and “B”  non-bonus commodities may be replaced with the same amount of  an equal or better quality food purchased by the recipient agency (RA) from the time of the loss. Receipts are required to document these purchases. The replacement in kind must  be satisfied within 120 days of the loss. Additional time may be granted by the Commodity Distribution Unit (CDU) programs administrator with a  written request specifying an acceptable reason more time is needed.

USDA requires that all bonus commodities lost, regardless of the reason for the   loss, be paid for at the current price.

A Commodity Distribution Unit (CDU) social services inspector (reviewer) will make an on-site visit to complete a loss investigation and report of all losses over $100. This does not mean you will not be billed for less than that amount. In  the instance of foods destroyed due to age,  a claim will be filed and you could be billed for that amount even if  less than $100.

Report all losses, even small losses or  shortages discovered in inventory reconciliation,  to the Commodity Distribution Unit (CDU). The Commodity Distribution Unit (CDU) keeps an accumulative loss log each school/fiscal year. Once the accumulative total exceeds $100, a social services inspector will make an on-site visit to complete a loss investigation and report. The normal procedure is to allow  replacement in kind in equal values to the items lost.

There are times that you will have losses that include new products and old products. In those losses, you are usually allowed replacement in kind for the products that are  not old. These will not be considered excessive inventory. Repayment will be required for the older products.

There are instances when losses result in a no claim determination against the recipient agency (RA). The Commodity Distribution Unit (CDU)programs administrator or USDA authorizes these, and they are usually losses that occur as a result of a  Federal Disaster Declaration. Some examples would be floods, ice storms or tornadoes.

Contact Mattie Williams, (405) 521-4991 or 1-800-848-4019, Mattie.Williams@OKDHS.org to report losses and for information.

Social Services Inspectors conduct on-site reviews and loss determination reports. They are also responsible for the commodity compliance reviews, complaint investigations and initial eligibility determinations for charitable institutions. They provide technical assistance visits to RAs and upon request conduct training sessions.

Contact the social services inspectors, Pamela Dean at Pamela.Dean@OKDHS.org; Donna Chasenah at DonnaG.Chasenah@OKDHS.org and Christopher Pyle at Christopher.Pyle@OKDHS.org.