sione!thompson,!executive!director! hawaii!state!public...

P.O. Box 115, Kealakekua, HI 96750 • (808) 322-4900 • 322-4906 fax • [email protected]

February 26, 2019 VIA EMAIL ([email protected]) Sione Thompson, Executive Director Hawaii State Public Charter School Commission SPCSC Commissioners 1111 Bishop Street, Suite 516 Honolulu, HI 96813 RE: Governing Board Information for Hawaii State Public Charter School Commission Dear Mr. Thompson and Commissioners, On February 20, 2019, the governing board of Kona Pacific Public Charter School received email notification from the State Public Charter School Commission of a special meeting to be held on February 28, 2019, in Kailua Kona. The notification included a list of discussion items for the meeting. In order to provide the commissioners with written information to be considered prior to the meeting, we have compiled some information that will be helpful for our February 28 discussion. The discussion items, and some information bullet points pertaining to these items, are provided below. I. What steps and actions the Governing Board has taken since July 20, 2018 to address the school’s financial situation.

• Currently, the school budget shows a projected $125,972 year-‐end cash balance, as compared to the 2017–18 cash balance of $65,521 and the 2016–17 year-‐end cash balance of $56,966. Through increased oversight of the school’s finances, the governing board, director and finance staff have worked together to double the amount of year-‐end cash compared to the previous two years.

• The Kona Pacific governing board has demonstrated fiscal responsibility by approving only essential expenses.

• The board has been working with the school’s finance team to improve the accuracy of financial reports and to ensure that these are submitted to the board regularly and on time.

• The school’s finance team and administration have put many new systems in place in order to address the audit findings in our most recent audit. Specific actions include:

2 KPPCS Governing Board Information for the SPCSC Staff and Commissioners 2-‐26-‐19

1. A new filing system that includes banking, vendors, customers, students and payroll (December 2017);

2. A new billing system for nutrition program vended meals that includes a new tracking spreadsheet and management updating information (December 2017);

3. A new comprehensive billing system for student income and collection (April 2018);

4. A new system for properly entering invoices into accounts payable, ensuring correct liability amounts on the balance sheet (December 2017);

5. Establishment of new review and approval process for all expenses (December 2017);

6. Created a new budget format that is now included in QuickBooks for oversight and monitoring (May 2018);

7. Established new banking procedures that include director review of statements along with copies of all deposits and proper reconciliation (February 2018);

8. Established new petty cash procedures (December 2017); 9. Payroll process streamlined using new timecards for hourly and project-‐based

employees, a new journal entry spreadsheet to ensure proper classification and a new file system for payroll and payroll tax reports (January 2018);

10. Created new internal controls for receiving funds (mailed and onsite payments) and discontinued accepting cash payments (January 2018)

11. Establishment of new credit card reconciliation processes, with proper documentation from cardholders including a disbursement sheet overview and receipts (December 2017)

12. Established a journal entry form requiring backup documentation for the audit trail (March 2018);

13. Creation of an outgoing ledger system to control checks held for pickup (March 2018);

14. A comprehensive new accounting setup with a new QuickBooks company setup, new chart of accounts, a new item listing process for Commission reporting, and new classifications for grant and finding tracking (July 2018);

15. Creation of a new financial format for finance committee and board review (July 2018);

16. In addition, there are several ongoing improvements to internal controls, with an anticipated completion date of 5/31/19, that includes development of an accounting manual and procedures; improvement of payroll procedures; human resources system & procedures; grant tracking, classification and reconciliation, month-‐end, quarter-‐end and year-‐end check-‐off lists; and clear delineations between the accounting for the school and the aligned non-‐profit organization.


II. Financial transactions between the school and the non-‐profit; Friends of Kona Pacific Public Charter School (KPPCS). • The financial transactional relationship between the two entities has always been

managed by the school; the financial record keeping for the school and for Friends have been done by a shared bookkeeper for the past ten years.

• The validity of this shared approach was confirmed with Rozanne Connell of Carbonaro CPAs, who completed the KPPCS audit. The practice is not unique to KPPCS and Rozanne agreed that this approach is utilized in many other charter schools.

• The school pays quarterly lease rent to Friends in the amount of $47,895 as agreed upon in the annually renegotiated lease.

• The MOA between Friends and KPPCS allows the school to utilize Friends’ 501c3 status to apply for grants that require a 501c3 applicant; the grant funds are then transferred to KPPCS. The school’s needs and mission drive all grant requests; Friends does not pursue any grants for its own operations.

• Based upon the strategic plan for KPPCS and Friends, Friends meets with the school board at regular intervals in order to stay informed about the needs of the school and to receive requests from the school for possible grant funding for school needs.

• The intent of the supporting non-‐profit has always been to the keep the lease rent as absolutely low as possible to support the school; as a result, Friends does not maintain any cash reserves.

• In the past the lack of cash reserves occasionally created a cash flow challenge for Friends and its ability to meet financial obligations of providing school facilities while awaiting grant reimbursement payments from the state or other entities. While raising the school’s lease rent could establish such a reserve, the two entities have embraced the nature of their interdependent relationship and shared vision. Occasionally, achieving the shared vision has required the school to submit a portion of the rent payment in advance of the due date. However, this practice only occurs if the school’s director and finance team determine that an early payment will not negatively impact the school.

• The two entities share bank VISA and Lowe's credit cards for the purchase of maintenance supplies such as a water pump, building materials, and kitchen equipment for the school, which requires regular monitoring and reimbursement because there have been some "to and from" transactions that have needed to be rectified due to errors by past school administration and finance staff.

• Friends currently owes funds to the school due to bookkeeping errors made by the school’s previous finance staff. Friends is aware of the amounts owed and will be reimbursing the school.

III. Lease agreements with KPPCS over the past years.

• The current lease is budgeted at $191,580 annually. • Rent payments are paid to Friends quarterly, at the request of KPPCS. This system was

revisited again in September 2018, and the school’s finance team and director recommended that the quarterly lease payments continue rather than transitioning to monthly payments.


• Annual lease amounts are re-‐negotiated by the boards of both organizations every spring; lease amounts are not determined by unilateral demand by Friends.

• In the lease negotiations, the following factors are considered: the financial condition of the school and any increase in the costs of Friends operations (Friends is a break-‐even organization with only one part-‐time property manager. Increased costs include things like taxes, insurance, audit requirements, equipment and maintenance).

• The lease rent is currently 8.5% of the school’s budget, which is below the average of 10% for charter schools in Hawaii.

• Innovations Public Charter School with 239 students, and West Hawaii Explorations Academy with 260 students (compared to KPPCS’ 227 students as of the enrollment count date), are also located in West Hawaii with similar real estate values. Those charter schools each pay an annual lease rent of $350,000, which is 55% higher than KPPCS’s annual lease rent, for serving a student body that is only 6-‐14% larger than that of Kona Pacific.

IV. The Food Nutrition program and the financial impact to the school's operating budget.

• The commission staff and commissioners have been provided, prior to this meeting, with a detailed report regarding the school’s nutrition program.

• Kona Pacific’s nutrition program operates at a total annual net expense that is very

comparable with the total annual net expense figures of the 13 other public charter schools that operate nutrition programs. The nutrition program report provides details about the total net expense figures for the ten schools we spoke with. Additionally, using these charter schools’ estimates of their net nutrition program expense, divided by the number of students enrolled, the amount of annual net expense per pupil per year ranges from a low of $248 to a high of $1200, with an average of $550. Kona Pacific’s net expense per pupil falls below that average, at $434.

• The disparity between nutrition program funding for charter schools as compared with

that for DOE schools has been noted by Hawaii legislators. In the current Hawaii state legislative session, there are two companion bills to provide funding for charter school nutrition programs. This is one of the areas of inequity between charter schools and DOE schools; the latter receives a pool of $20 million annually to offset school nutrition program net expenses, while charter schools receive no funds for this purpose. The Senate bill, SB937, reads, in part: “The legislature finds that there are nearly twelve thousand students enrolled in the thirty-‐seven public charter schools operating under the governance of the state public charter school commission and the board of education. The majority of charter school funding is provided on a non-‐facility general fund per-‐pupil basis, calculated from the sum of certain general fund non-‐facility operating appropriations to the department of education and each charter school's pro rata enrollment compared to the total public education enrollment. Charter school non-‐facility general fund per-‐pupil funding has been $6,846, $7,089 and $7,323 in school years 2015-‐2016, 2016-‐2017, and 2017-‐2018, respectively. Charter schools use this funding to pay for a wide range of school-‐related expenses, such as for teachers and administrative staff, school facilities, meal service, and student transportation. Notably, a significant amount of charter schools' expenses may not be borne by schools operated under the department of education. Accordingly, while the


non-‐facility general fund per-‐pupil funding provided to charter schools has increased each year, charter school operational costs continue to rise, and gaps continue to remain between public charter schools and schools under the operation of the department of education. As the state public charter school commission's 2019-‐2023 Strategic Vision and Plan explains, "[f]unding gaps continue in per pupil allocation, facilities, payroll, transportation and food services, causing charter schools to use already meager per pupil allocation to provide basic services that are provided through centralized services by the Departments of Education (DOE), Accounting and General Services (DAGS) and Department of Transportation (DOT) for other public schools.” The legislature further finds that the potential disparity in per-‐pupil funding for food services is particularly concerning.”

• The State Public Charter School Commission submitted testimony in favor of SB 937.

• Most Hawaii charter schools that operate nutrition programs, including KPPCS, see these programs as an essential student service, providing the resources that students need for optimal learning.

• The governing board confirmed with commission staff in November 2018 that it is at the

discretion of the governing board to determine how per-‐pupil funds are allocated, and that nutrition programs are a completely allowable use of per-‐pupil funds.

V. The corrective actions taken by the Governing Board in addressing the enrollment discrepancies identified in past Commission investigations and reviews.

• From December 2017 through December 2018, the governing board actions regarding this important task included oversight of the process of shoring up the student records system, creating new policies and procedures (all of which have already been approved by the commission), creating a student records manual, and ensuring that we are in compliance with all DOE requirements.

• The internal audit of student records, which is one of the defined corrective actions,

began in January 2019 and is proceeding well, and we expect that this task will be complete by the end of April 2019, as indicated on our corrective action plan.

• We are inspecting and auditing the files for the years that we have already identified as

including enrollment mistakes made by previous school staff. We are finding additional evidence that the issues we knew existed did indeed exist; we have found more examples of the kinds of errors that were made and that we already taken steps to address, starting in the 2017-‐18 school year, by making improvement across the board of all student enrollment and records processes.

VI. Open investigations with school personnel Clearly, personnel matters cannot be discussed in an open public meeting.


VII. The current organizational structure of the school. We are happy to provide some background information about the school’s organizational structure for the commission staff and commissioners. Kona Pacific’s first organizational structure working group was formed in early 2015 to plan for the major school transition after Usha Kilpatrick’s departure as school director. This was the school’s first major leadership transition. After one year, the new director, Shaheer Faltas, returned to California to accept a position closer to his family, and facilitated the hiring of Shanna Mall to replace him. After Ms. Mall’s employment with the school was terminated midway through the 2016-‐17 school year, the organizational structure working group was reconvened in order to delve deeper into the task of developing a new organizational structure that best reflected the mission, vision and culture of KPPCS. The reconvened working group built on the previous work that had been done, and also conducted a substantial body of new research into the organizational models of other Hawaii charter schools and other public Waldorf schools. Their findings were presented twice to the school staff members, who provided feedback as the model was developed and fine-‐tuned. The working group presented a first report in March 2017 to the school governing board with some initial findings, which were approved by the governing board. The board then also tasked the working group with some additional work, including creating a decision-‐making flow chart and other supporting documents. A report update was submitted to the governing board and approved in June 2017. At the heart of the new approved organizational structure is the concept of a shared leadership/distributed leadership/management team approach, rather than a top-‐down hierarchical model with one “director” at the top. Both Innovations Public Charter School and West Hawaii Explorations Academy use this type of organizational structure, and both are high-‐performing charter schools; WHEA is also accredited, and Innovations has earned the title of a “Hawaii Distinguished School.” The Innovations team was very generous with their time, guidance and materials, and several of the flow charts and decision-‐making diagrams developed by the working group are based on Innovations’ documents as well as those of other high-‐performing charter schools. The newly adopted model was in place for the first part of the 2017-‐18 school year, with Kim Le Bas as the new pedagogical director and Deann Canuteson as the new operations director, along with a school leadership council to support and guide the work of both directors. However, Ms. Canuteson resigned mid-‐way through the year. Her duties were distributed among various staff members for the balance of that year, and for the 2018-‐19 school year Mr. Le Bas was named as school director. One of the purposes for a shared leadership model in both the West Hawaii schools with which we consulted is to mitigate any trauma for the school due to the departure of one individual; the boards of those schools were focused on ensuring that the loss of any one leader would result in minimal upheaval at the school. In the current school year, the abrupt 9/18/18 resignation of the KPPCS director, followed by a period of staff chaos, drama, trauma and uncertainty, then


followed by the director’s request that his resignation be rescinded, illustrated that the concerns expressed by our West Hawaii mentor schools were well founded. Another advantage of a shared leadership model is to allow the school leaders to focus on the areas in which they have substantial expertise. The board has noted that with the model currently in place at Kona Pacific, with one director overseeing both the pedagogical and operational activities of the school, several important tasks have fallen through the cracks this year. We would be happy to provide the commissioners and commission staff with specific examples, in a setting where confidentiality for our staff is assured. A return to a shared leadership model is under consideration in order to ensure that there is sufficient time and expertise at the leadership level in order to fulfill all of the complex obligations a school has to its students, parents and all of the agencies to whom the governing board must answer. In view of 1) the substantial amount of work that went into the development of the shared leadership model; 2) a letter signed by a number of parents indicating unhappiness that the shared leadership model had been abandoned, and 3) the fact that the model had a chance to operate for only a few months in 2017–18 before the operations director left, the governing board is considering a return to the shared leadership model for 2019-‐20. The 2019-‐20 shared leadership model would not, of course, need to be exactly the same in all aspects as the model put in place in 2017-‐18, as we have learned a few things in the interim, but if the decision is made to go in that direction, the organizational structure working group could then be reconvened once more to make some additional suggestions to fine-‐tune this model that is so highly effective at other Hawaii charter schools. Because Mr. Le Bas has notified the governing board of his intention not to return to Kona Pacific in the 2019-‐20 school year, the governing board feels that this is a very appropriate time to seriously reconsider a return to the meticulously developed “shared leadership” model, with additional adjustments and modifications based on what we have learned in the interim.

1 Governing Board Nutrition Program Report 2018–19

GB NUTRITION PROGRAM REPORT February 26, 2019

I. Introduction and Summary The governing board of Kona Pacific, at its 11/13/18 meeting, formed a subcommittee with a mandate to collect information about an administration proposal to suspend the school’s current foodservice/nutrition program and replace it with an alternate program involving purchasing non-reimbursable meals from other suppliers, with an intention to save money. Based on its research, the subcommittee found that there is no financial purpose to suspending the current nutrition/foodservice program and replacing it with the proposed temporary alternative program, as the costs of the alternative program will be more than, or about the same as, the current program. Therefore, any decision to suspend and replace the program would need to be based on factors other than the financial considerations. This report includes historical, financial and programmatic information and analysis. II. Background Kona Pacific Public Charter School opened its doors in 2008 as the first Title I Waldorf public school in the nation. Kona Pacific is the first and only public Waldorf school in Hawaii. The dream of a tuition-free Waldorf school for the Kona community started to take shape in the summer of 2006 when a group of parents, teachers and community leaders joined forces to create a non-traditional public charter school in West Hawaii. Motivated by a desire to provide an innovative, place-based Waldorf curriculum in this underserved community, these dedicated volunteers undertook a year-long planning process that culminated in the submission of a Detailed Implementation Plan for Kona Pacific Public Charter School to the state of Hawaii Charter Schools Review Panel in Spring 2007. In October of 2007 the panel, having given Kona Pacific’s charter application a record-setting 96% score, awarded Kona Pacific a charter authorizing the school to open in the 2008–2009 school year. The school’s founding principles included serving as a model for the practice of social, environmental and cultural sustainability, embracing our demographic of families for whom agriculture and Hawaiian culture are part of their daily life.


From the outset, the school’s founders and boards have embraced striving towards a greater vision of service for the children of West Hawaii and their families, reaching beyond the core educational mission to meet essential needs of our rural, underserved community. Community health fairs, literacy and parenting workshops and other community support programs have provided vital assistance to our community since the school’s opening. The most significant community outreach and support program operated by Kona Pacific is the nutrition/foodservice program. Kona Pacific’s W.H.O.L.E. Foodservice program launched in Fall 2012, when the previous nutrition program vendor, HCEOC, ceased operations with just 30 days notice. At that time, this was the only federally approved food service vendor for nutrition programs in West Hawaii, and their closure endangered the health and well-being of hundreds of needy citizens, mostly children and elders, including the children of KPPCS. Kona Pacific immediately responded to this emergency need by developing a new foodservice program in time to ensure that none of these at-risk residents, including our own students, went hungry. Our foodservice and nutrition programs have attracted substantial grant funding and we have received numerous program awards; these are detailed on pages 6 and 7 of this report. The foodservice program serves two critical needs; the first is ensuring that the students at Kona Pacific have adequate healthy, nutritional food to support their learning experience at school. The local, national and international data documenting the critical role that nutrition plays in successful learning and academic achievement is overwhelming and indisputable. Students that are well nourished are ready and able to learn; students who are hungry have slower memory recall, lower test scores, a higher incidence of hyperactive, attention and behavior problems, and are more likely to repeat a grade. i, ii, iii, iv, v, vi, vii, viii, ix In February 2019, the Hawaii State Teachers Association (HSTA) released official testimony in strong support of a pair of companion Hawaii legislative bills establishing state funding in support of charter school nutrition programs, stating: “Low-income students are, again, less likely to receive adequate meals at home, leaving them without the calories necessary to perform basic academic tasks. Cases of chronic hunger can lead to achievement gaps, concentration loss, illness, increased absenteeism, behavioral problems, depression, and misdiagnosed learning disabilities. Thus, providing a decent meal for our impoverished children–or in this case, ensuring that those meals aren't unnecessarily taken away–is a moral and educational imperative. Hungry students cannot focus. To ensure that our students are well-fed and ready to learn, the Hawaii State Teachers Association asks your committee to support SB 937.” In addition to providing high quality nutritional support for the children of Kona Pacific, the foodservice program also supports healthy enrollment at Kona Pacific. When the school launched the foodservice in 2012, the administration conducted a survey of the parent body and determined that at least 10 students would not be able to attend the school if school lunch was not offered, which would have potentially meant a loss of something in the range of


$60,000 income in per-pupil funds (based on the per-pupil amount at that time of about $6,000). The school administration, after consultation with foodservice specialists and program managers, determined that the break-even point for the program, with two kitchen staff and one driver, and two on-site staff members who spent a portion of their time on the program, would be the production of 250 daily lunches. With this data in mind, the school’s governing board approved the new program. On Monday, October 29 2013, the first school lunch produced by Kona Pacific was served at Kona Pacific. In addition to serving the students of Kona Pacific, our community foodservice currently also provides daily meals to Punana Leo o Kona, Parents and Children Together, and Family Support Services, a total of 65 lunches in addition to the 50-70 produced daily for Kona Pacific students and staff. In the summer months, we also serve up to 300 daily meals in our Summer Lunch program, as well as 85-90 daily lunches for Hawaii County’s Summer Fun Recreation program. The Summer Lunch program, with its higher reimbursement rate, benefits the program’s bottom line. The purpose of the community foodservice is two-fold: 1) these “vended meals” (the term for the meals we sell to our partner organizations) create efficiencies of cost and manpower that result in economies of scale and a cost-effective approach to school nutrition. Finding the most effective balance between labor, food and other program costs, and the volume of meal output with the resulting income from vended meals, is a critical key to optimizing potential program revenues and creating program sustainability; 2) it provides essential nutrition services for the struggling clients of these partner organizations, which raises awareness in the community about the school and our commitment to healthy food and supporting our community. The vended meal component is a crucial strategic aspect of Kona Pacific’s foodservice program. Without this additional meal volume, the cost per pupil for a school lunch would be significantly higher. Because we serve the larger community, we are able to take advantage of financial economics of scale and provide student meals that the school would otherwise not be able to provide at this price point. Our partner client organizations purchase complete meals, which are subsidized by state and federal programs. The price for a lunch with milk, for example, delivered to the client’s site, is $5.89. The price represents the actual cost of the meal; we operate the program to meet urgent community need and aim for break-even while doing so. For the lunch example above, partner organizations are reimbursed up to $4.11 through the Hawaii Office of Child Nutrition Programs. The partner organization makes up the difference between what they receive for reimbursement and the price of the meal, and that amount can be challenging for some schools and community service agencies. Recognizing this challenge to our partner organizations, we try to control costs to keep prices as low as possible, while


offering very high quality, nutritious meals. The closer that our price approaches the reimbursement rate offered, the more meals our partner organizations can purchase and provide to citizens in need. Our W.H.O.L.E. Foodservice program is the only approved vendor of federally subsidized meals in West Hawai’i. Having launched a successful program, and operating it at break-even or a subsidy of up to about $40,000 for many years, Kona Pacific has seen the subsidy grow larger in the past two years; the projected subsidy for 2018-19 is about $98,000. The reasons for this are being examined, but poor maintenance of vended meal client relationships, resulting in the necessary economies of scale not being achieved, and an unacceptable level of food waste have emerged as two of the contributory factors. According to federal law, school boards are the entity responsible for the administration of school nutrition programs that utilize USDA’s four major school nutrition programs for reimbursement. The boards of SFAs (School Food Authorities – Kona Pacific is one) must establish strong management systems that include a framework for long- and short-term decision making, and to ensure that the nutrition/foodservice program remains in a healthy financial position with an operating plan that provides clear program direction that is consistent with the school’s overall strategic plan. With more effective management of the program and expansion of the community clientele list back to its former level, the program has the capacity to be returned to its former level of sustainability. This governing board analysis is undertaken to determine whether to continue operating the program while making substantial program adjustments, or to suspend the program temporarily while preparing for moving operations to the new kitchen, which is now scheduled for completion in August 2019. III. Proposal to Suspend Program At its 11/13/18 regular meeting, Kona Pacific’s governing board received a proposal from the director and finance team to temporarily suspend the nutrition/foodservice because of its net expense amount. In order to ensure that the children and families who currently receive meals from our foodservice program, and are dependent on those meals, continue to receive nutritional support, it was proposed that we provide vended meals from an outside source until the new kitchen is operational. Several prospective vended meal providers were contacted and it appeared that it is possible to receive delivered vended meals for a cost of $5/meal. Along with the potential vended meal providers that had already been contacted by the administration as part of developing the proposal to suspend the program, the GB subcommittee reached out to Konawaena, which provides meals for other DOE schools (Hoʻokena and Hōnaunau), but they have not previously provided meals for non-DOE schools and are at full production capacity already.


Under the proposal, the sale of vended meals to outside clients would cease. An overall nutrition program budget was supplied to the GB, as well as a nutrition subsidy review. The GB committee asked some follow-up questions of the finance team, and, based on their responses, developed a corrected budget and subsidy review. The financial information about the program can be found on pages 8 and 9. IV. Beyond Green Report In September and October of 2018, Greg Christian and his Beyond Green team conducted a grant-funded assessment of the school’s foodservice/nutrition program. Greg and Beyond Green are nationally renowned foodservice consultants who were hired by the State of Hawaii to work with DOE public schools and school complexes to overhaul their foodservice programs. The confidential report highlighted several strengths and weaknesses of the current program, along with some suggestions for improvement. These include: Strengths

• Kitchen staff has a wealth of experience and a real passion for serving the children • Solid clientele for vended meals; should be expanded

Weaknesses • Unfocused program management • Low usage of program by the students (we should do a survey!) • Production records are not reconciled • Unacceptable amount of food waste • On-site service procedures not up to par • Lack of communication between kitchen, service, management, children

Suggestions • Better menu costing; track costs in real time • More training for batch preparation • Use electric pound scales; convert recipes to weight and have scaled recipes • Increase options for plant-based meals.

The report concludes with a number of recommendations and possible approaches to addressing and mitigating current program challenges while continuing to run the program, creating a system of continuous improvement for the program.


V. Grants and Awards Grants that support KPPCS regular nutrition program operations 2014 Hawaii Appleseed School Breakfast $ 25,000 2015 NSLP Equipment POS Counting System $ 6,358 2015 HCF FLEX Nutrition/Foodservice Operations $ 24,000 2015 Walmart Found. Summer Lunch start-up costs $ 28,000 2016 HCF FLEX Nutrition/Foodservice Operations $ 20,000 2017 Chocolate Festival Summer Lunch Program $ 6,000 2017 HCF FLEX Nutrition/Foodservice Operations $ 20,000 2018 Chocolate Festival Summer Lunch Program $ 6,000 2018 HCF FLEX Nutrition/Foodservice Operations $ 25,000 Total $ 160,358 Capital and equipment grants that support KPPCS nutrition program improvement 2015 NSLP Equipment Baked Goods System $ 13,647 2015 State of Hawaii Community Kitchen $1,200,000 2017 NSLP Equipment Planetary Mixer $ 17,587 2018 State of Hawaii Community Kitchen $ 400,000 Total $1,631,234 Pilot project grants with the potential to support program improvement 2015 USDA Farm to School planning $ 41,785 2015 Kaiser Charter School Foodservice Hui $ 12,000 2016 Bill Healy Charter School Foodservice Hui $ 35,000 Total $ 88,785 Federal, state, and private foundation funders together have invested $1.88 million in the operation and ongoing development of Kona Pacific’s nutrition/foodservice programs, which is a robust statement regarding the importance of this program in our community and the confidence that these agencies and funders have in Kona Pacific’s capacities and dedication. Kona Pacific is the first charter school in Hawaii to receive such funding, based primarily on our capacity to deliver high quality services. Nutrition Program Awards and Recognitions Kona Pacific has received numerous awards and recognitions for its various nutrition programs. Because the school has never received an award in any other area, these awards demonstrate how effectively our nutrition programs allow Kona Pacific to shine its light in the wider community and across the state and nation.


2014 Hawaii Public Charter Schools Network Creating New Best Practices: Nutrition Programs State of Hawaii, Governor’s Office Special Recognition for Universal Breakfast 2015 USDA Western Region Summer Sunshine Award Hawaii State Lt. Governor’s Office KPPCS selected as site for launching Hawaii F2S 2016 Hawaii State Senate Ways and Means Committee site visit to Kona Pacific in recognition of the foodservice program 2017 Hawaii Appleseed Center Good Apple Award Hawaii Agriculture Conference Kukui Award VI. Program Financials and Data The proposal to temporarily suspend the nutrition/foodservice program was brought forward as a potential way to achieve cost savings for the school. The GB subcommittee reviewed the financials for the proposed alternative program, as well as the financials for continuing the current program, and determined that no cost savings will be realized if the nutrition program is suspended and replaced with the suggested alternative. The financial information can be found on the following two pages.


2018–19 Nutrition Program Budget

Original(BudgetBudget(after(

1st(QTR(actuals4400 Nutrition Funding

4400.1 NSLP Reimbursement 25,000.00 22,000.00%%%%%%%%%%%%%4400.2 FFVP Reimbursement 8,000.00 19,000.00%%%%%%%%%%%%%4400.3 SFSP Reimbursement 25,000.00 47,499.00%%%%%%%%%%%%%4400.4 KPPCS Student Meal Sales 7,000.00 9,500.00%%%%%%%%%%%%%%%4400.5 KPPCS Adult Meal Sales 100.00 800.00%%%%%%%%%%%%%%%%%%%4400.6 Outside Foodservice Sales 70,000.00 65,000.00%%%%%%%%%%%%%

Private Grants (HCF $6,000/FLEX $25,000) 31,000.00%%%%%%%%%%%%%Total Nutrition Funding 135,100.00 194,799.00

350 350 · Food Services/NUTRITION PROGRAM350.10 350.10 · Food Services· Kindergarten Snacks Excluded for this reporting purpose350.20 350.20 · Food Services· Wages350.21 350.21 · Food Services· Wages: Food Preparation 128,425.00 103,540.00%%%%%%%%%%%350.22 350.22 · Food Services· Wages: Program Management 40,000.00 40,000.00%%%%%%%%%%%%%350.30 350.30 · Food Services (NUTRITION PROGRAM COGS)350.30 · Food Services· (NUTRITION PROGRAM COGS)350.31 350.31 · Nutrition: Food Costs 60,000.00 60,000.00%%%%%%%%%%%%%350.32 350.32 · Bread350.33 350.33 · Dairy350.34 350.34 · Dry Goods350.35 350.35 · Produce350.36 350.36 · Protein350.37 350.37 · Snacks350.38 350.38 · Nutrition: Beverage Costs 15,000.00 18,000.00%%%%%%%%%%%%%350.39 350.39 · Nutrition: Paper Products 15,000.00 10,000.00%%%%%%%%%%%%%350.40 350.40 · Nutrition: Equipment/Supplies 2,000.00 3,000.00%%%%%%%%%%%%%%%350.50 350.50 · Nutrition: FFVP 18,000.00%%%%%%%%%%%%%350.60 350.60 · Kitchen Licenses & Permits 1,000.00%%%%%%%%%%%%%%%350.70 350.70 · Consulting Nutrition 5,500.00%%%%%%%%%%%%%%%350.80 350.80 · Rent 34,200.00 34,200.00%%%%%%%%%%%%%

Total 350 294,625.00 293,240.00

Projected Subsidy (159,525.00)%%%%%%%%%%% (98,441.00)%%%%%%%%%%%%


2018–19 Nutrition Program Subsidy Review

The proposed substitute program would, then, cost approximately $5,000 more (rather than less than) the existing program, negating any financial incentive to suspend our regular program and utilize the proposed alternative program. The school director also identified some areas for improvement in the program, many of which were also addressed in the Beyond Green report:

• Long-standing non-compliance issues with serving of food • Not serving complete meals • Pre-traying/plating of meals too far ahead of time • Incomplete portions • Food safety issues regarding hand washing and improper use of gloves • Lack of up to date knowledge regarding menu planning and compliance, costing and

inventory • Children not eating or liking food

Kona%Pacific%Public%Charter%School

Nutrition%Subsidy%Review%2018>2019%

Total&Annual&Projected&Subsidy&for&current&program 98,441.00$&&&&&&&&&&&1/2&year&Projected&Subsidy&for&current&program 49,220.50$&&&&&&&&&&&

Projected&Subsidy&with&temporary&suspension&of&nutrition&program 54,324.00$&&&&&&&&&&& %%%%%%Cost%for%alternate%nutrition%program

Potential&Savings&&(Difference&of&1/2&year&subsidy&and&projected)) (5,103.50)$&&&&&&&&&&&& Alternate%program%will%cost%$5,103.50%more%than%current%program

10&Month&Schedule LunchMonthly&Meals&Served 599 5&Month&Meals&Served 2995Annual&(10&month)&meals&served 5990 Cost&if&vended&out&at&$5/meal 14,975$&&&&&&&&&&Cost&if&vended&out&at&$5/meal 29,950.00$&&&&&&&&&&& Student&Meal&Income&5&months 947.5 (4,737.50)&&&&&&&&Student&Meal&Income&Annual (9,475.00)&&&&&&&&&&&&&& 5&Month&Subsidy& 10,237.50$&&&&&Annual&(10&month)&Subsidy&less&student&meal&income 20,475.00$&&&&&&&&&&&

10&Month&Schedule BreakfastMonthly&Meals&Served 108&&&&&&&&&&&&&&&&&&&&&&&& 5&Month&Meals&Served 540Annual&(10&month)&meals&served 1077 Cost&if&vended&out&at&$3/meal 1,620.00$&&&&&&&Cost&if&vended&out&at&$3/meal 3,230.00$&&&&&&&&&&&&& Student&Meal&Income&5&months S511.5Student&Meal&Income&Annual (1,023.00)&&&&&&&&&&&&&& 5&Month&Subsidy& 102.3 1,108.50$&&&&&&&Annual&(10&month)&Subsidy&less&student&meal&income 2,207.00$&&&&&&&&&&&&&

Snack 1,200.00$&&&&&&&&&&&&& Snack&Cost 1,200.00$&&&&&&&(approx&$1.00&per&snack&food&cost)&

Food&Subsidy 12,546.00$&&&&&Wages/Labor&FTE&1.5&staff 16,500.00$&&&&&

Subtotal&Subsidy 29,046.00$&&&&&

Kitchen&staff&salaries&Jan&1–March&1 $13,378.00Vacation&leave&payouts&to&laid&off&employees $11,400.00Estimated&paper&goods&cost $500.00

Total%costs%for%alternate%nutrition%program $54,324.00

5&Month&ScheduleJan&2019&S&May&2019

LUNCH

BREAKFAST


• An estimate of food waste of 50-70 lbs. per day, backed by a compost survey carried out in the garden

• Upcoming maintenance and improvement costs for food trailer must be considered (meals will not be served directly out of the new kitchen)

• There are indirect costs associated with the director, finance team and development director

The following table shows the current average usage of the program by Kona Pacific students and staff: Meal Category # of Meals Students eligible for free lunch 38 Students eligible for reduced price lunch 8 Purchased meals 8 Breakfast 5-6 An average of 38 students out of 97 eligible for free lunches = 40% usage by these students An average of 8 out of 21 eligible for reduced price lunches = 38% usage by these students VII. Pros and Cons of Proposed Approaches The table below summarizes the other pros and cons of continuing with our existing program, or substituting an alternative program for the balance of this school year.

Pros and Cons of Nutrition Program Approaches Existing Nutrition Program Alternative Nutrition Program

Pros • Costs the school less than (or about the same as) the proposed alternative program.

• Established relationships with suppliers and vended meal customers will continue and can be expanded on.

• Continuing employment for our long-term kitchen staff (honoring their contracts)

• Opportunity to survey families with the goal of increasing student participation in the program now.

• Opportunity to expand vended meal clientele list now for increased program income.

• Opportunity to create new menus and revised procedures now in order to minimize waste and increase efficiency, in preparation

• The suspension of the program may mean we have more staff time to develop a business plan for the new kitchen.


for moving to the new kitchen. Move into new kitchen with a foodservice model already humming on all cylinders so operations can easily expand.

• Kona Pacific is known and respected statewide for its nutrition programs.

• Kona Pacific will already be in compliance with the upcoming state mandate that all charter schools must operate a school lunch program

Cons • We will need to establish a new management system for the program for the balance of the fiscal year, staying within the established available budget of $20,000.

• Costs the school more than (or about the same as) the existing program.

• If relationships with vended meal clients are interrupted, it may be difficult or impossible to re-establish them when the new kitchen is ready, and the economies of scale for school meals cannot be achieved without outside clients.

• Tasha (kitchen staff) has been in training to be a kitchen manager; if program is suspended she will get another job and not be available when our new kitchen comes on line. Other schools have reported difficulty in finding qualified kitchen managers who are also trained and willing to do healthy scratch cooking.

• The costs for delivered vended meals from various suppliers have not been firmly confirmed and may change.

• Vended meals will be primarily cold sandwiches.

• Suspension and re-start of the program will take significant staff time

• Potential for negative community perception of Kona Pacific if service to needy community is suspended


VIII. Charter School Nutrition Programs in Hawaii Currently there are fourteen Hawaii charter schools that operate nutrition programs through the Hawaii Child Nutrition Program office. The subcommittee conducted interviews with several of these schools to discuss the challenges they face and the amount of “subsidy” they commit to their programs. The schools surveyed agreed on some basic points regarding their commitment to provide nutrition programs for their students. Investing in this core element of student readiness to learn outweighs the cost/subsidy issues; it is a moral/ethical obligation to their students and families and an integral aspect of the educational program. Similar to the other school operations costs that are not explicitly covered by per-pupil funding for charter schools (facilities and transportation – all three are fully funded for DOE public schools), the nutrition program is considered an essential part of, and not separate from, all other school operations costs. Therefore, most schools do not use the term “subsidy” to describe the net expense of operating their nutrition programs, any more than they would consider that they are subsidizing their lease rent, their garden programs, or their after-school programs. A note on charter school nutrition program accounting procedures: several schools reported that they do not include the cost of nutrition program administrative tasks in their nutrition program accounting procedures because they consider those staff positions as essential student services costs, undifferentiated from any other student services offered by the school. Some schools include the kitchen labor in the program accounting, but not the compliance/reimbursement paperwork. For the purposes of this report, those schools were asked to estimate and include all of the nutrition program labor in order to provide information in comparable terms. According to the office of Hawaii Child Nutrition Programs, the charter schools that currently operate nutrition programs are: Kona Pacific PCS Kua O Ka La PCS Ke Ana La‘ahana PCS Ho‘okako‘o Schools (Kamaile Academy, Waimea Middle, Kualapu'u El) Connections PCS Na Wai Ola PCS Volcano School of Arts and Sciences Hawaii Academy of Arts & Sciences PCS Laupahoehoe PCS Ke Kula Nawahiokalaniopu‘u PCS Ka ‘Umeke Kā ʻEo PCS Ke Kula Ni‘ihau O Kekaha Learning Center PCS


Volcano School of Arts and Sciences Number of Students: 210 Annual Budgeted Nutrition Program Net Expense: $97,000 We spoke with Kalima Kinney, the school’s principal, who says the school administration and GB are committed to providing their students with healthy nutrition and would like to follow Kona Pacific’s model in expanding their program to include a higher level of service to and integration with the greater community, and to play a greater role in food security and sustainability on Hawaii Island. She pointed out that meal programs for charter schools is a huge statewide issue, along with facilities and transportation funding, that represents the funding inequities between DOE school and charter schools. However, there is some indication that the DOE is particularly aware of the nutrition funding inequities and may be poised to help with solutions. Ka ʻUmeke Kā ʻEo Number of Students: 210 Annual Budgeted Nutrition Program Net Expense: $65,000 We spoke with Kelly in the school office, who has some managerial responsibilities related to their nutrition program. They currently purchase vended meals from two Hilo providers who are USDA-approved for supplying federally reimbursable meals. Laupāhoehoe PCS Number of Students: 260 on campus (and an additional 103 online students) Annual Budgeted Nutrition Program Net Expense: $70,000 Hawaii Academy of Arts and Sciences (HAAS) Number of Students: 520 on campus (and an additional 150 online students) Annual Budgeted Nutrition Program Net Expense: $250,000 We spoke with Jessica Rojas, the business manager at HAAS. She reported that one of their biggest challenges is finding and retaining good kitchen managers – they operate two kitchens (a main one and a satellite). She thanked Kona Pacific for providing such excellent leadership in the field of charter school nutrition and feels that the HAAS program has really benefitted from what they’ve learned from us. The one area of expansion they are looking at now is in the breakfast program – they have found that the higher ratio of reimbursement to cost helps their bottom line. Ke Kula Niʻihau o Kekaha Number of Students: 50 Annual Budgeted Nutrition Program Net Expense: $60,000 Kukui, the school administrator, explained that their 50 K-12 students benefit significantly from the program, which utilizes vended meals from USDA-approved providers in Hilo. She says that their net expense is high for the number of students they have, but they consider it an absolute necessity to support the desired learning environment for the school’s students.


Ho‘okāko‘o Schools Waimea Middle School Number of Students: 280 Annual Budgeted Nutrition Program Net Expense: $46,000 Kamaile Academy Number of Students: 900 Annual Budgeted Nutrition Program Net Expense: $225,000 Kualapuʻu School Number of Students: 335 Annual Budgeted Nutrition Program Net Expense: $105,000 Ke Ana La’ahana Number of Students: 40 Annual Budgeted Nutrition Program Net Expense: $10,000 (not including labor) Mapuana Waipa, the school’s director, reports that they have never quantified the cost of the administrative labor for the program because they consider it part of essential student services. All of the office staff pitches in to carry out the various aspects of nutrition program administration. Her closest estimate would be “one ½ to full time position,” which would put the total net expense at about $30-$50,000. IX. Hawaii State Charter School Commission We spoke with Scott Hall, the Financial Performance Officer at the commission office. He stated that the commission has no policies or guidelines regarding the fact that all charter school nutrition programs operate with a significant net expense, and that school nutrition programs are a completely allowable use of per-pupil funds. “It’s up to every individual school board to decide how to utilize their per-pupil funds to support the students’ academic experience,” he said. The commission’s position is that each school board sets their own budget, which is then submitted to the commission, and if the commission staff has any issue with the budget, that concern would be relayed directly to the governing board. The KPPCS governing board has not received any such notifications regarding concerns about the school’s nutrition program budget at any time in the school’s history. X. Hawaii Child Nutrition Program Office The Hawaii Child Nutrition Program office in Honolulu shared with the subcommittee that the state Attorney General’s office released an advice letter regarding charter school nutrition programs and equal access to federally supported nutrition programs for all Hawaii public school students. The specifics of the advice letter could not be shared, but it indicates that some changes in the way charter schools receive funding must also take place in order to support equal access. Currently, DOE schools share an allocation of $20 million to support their school nutrition programs, and it is anticipated that this funding must increase to include support for charter school nutrition programs. In the larger context of the issues included in this report, this is important information to take into consideration. The GB is pursuing an official opinion from the Attorney’s General’s office regarding this issue.


XI. Future Opportunities Throughout the 2012-13 school year, Kona Pacific’s administration and board were in conversation with the school’s partner nonprofit organization, Friends of Kona Pacific Public Charter School, about the school’s facilities needs. The school’s priority requests for capital development were 1) a new on-site commercial kitchen to reduce rent costs and increase production capacity and 2) Building G, a new multiuse building to replace what was then known as the “aftercare tent.” Friends supported these capital requests and agreed to allow Kona Pacific to use its 501c3 status to apply for a state Grant-in-Aid for construction funds. The school’s development team went to work and in 2014, submitted a grant proposal for funds to build both structures. That application was not successful. After gathering input and guidance from Hawaii’s most influential legislators, who stated that GIA funds would likely never be awarded for construction of a school building, the proposal was revised in 2015 to seek funds for the kitchen only. The kitchen design was also expanded to include two separate side-by-side kitchens, one for school foodservice and educational use, and one for value-added processing facilities for local farmers, enhancing the community service profile of the project. That proposal met with approval, and the first $1.2 million for the construction of the kitchen was awarded. In 2018, another GIA proposal for additional funds because of increased construction costs was submitted and approved for $400,000. The building permit for the kitchen has been issued as of November 2018 and construction will begin soon; the construction launch date is currently being worked out with the contractor. The completion of the new kitchen will bring major opportunities for Kona Pacific’s foodservice program. The reduction of kitchen rent costs and the increased efficiencies of a state-of-the-art kitchen will allow increased program sustainability at its current production level, and operations can expand to serve additional off-site customers. Early projections by Beyond Green – which should be confirmed by a solid business plan with three-year projections – are that Kona Pacific’s foodservice could become profitable within 2-3 year time frame. The major incentive for Kona Pacific’s request to Friends for capital funding for a foodservice kitchen, along with the convenience of having an on-site kitchen, were to substantially reduce the $36,000 in rent that the school currently pays for its leased kitchen space. Friends’ intention is to ideally provide the kitchen space to the school free of cost. Friends will incur expenses of building maintenance, cleaning and utilities (which should be minimal if the facility is solar-powered as planned), so there may be some nominal usage costs to the school. However, if the second kitchen – the value-added processing kitchen that will be operated by Friends – is financially viable as projected, all of the maintenance costs can accrue to that kitchen, resulting in 100% free use of the kitchen dedicated for Kona Pacific. The new kitchen will also provide some exciting opportunities for integration into Kona Pacific’s educational program. With an on-site kitchen, teachers and their students will be able to utilize the kitchen in the afternoons (foodservice operations run from 5:00 a.m. – 12:30 p.m.) as an


experiential learning classroom that focuses on the relationship between food and life. These educational opportunities can integrate culture, history, language, ecology, biology and mathematics and other classroom-related subject areas into the preparation of food. Teachers can use the kitchen as a tool to incorporate concepts that already exist in the curriculum, and the kitchen facility will particularly lend itself to the 3rd grade curriculum. The opportunities to integrate the kitchen with the school’s gardening program are, of course, myriad. Students will be able to cook what they have grown in the school garden, learn new recipes, understand the nutritional value of food products, understand the chemistry of food preparation and cooking and be exposed to other cultures through food. This “teaching kitchen” approach provides a unique opportunity for students to learn about nutrition with a hands-on approach. XII. In Conclusion The subcommittee recommended that regardless of what decision is made regarding temporary suspension of the nutrition/foodservice program, the GB should, at this time, initiate the development of a business plan for the new foodservice kitchen. The business plan would include these elements, among others:

• Goals and strategic development targets • Data on current kitchen activities and business relationships • Overview of USDA and state policies • Analysis of the environment in which the foodservice will be doing business (internal

and external) • Resources (personnel, financial) • Meal costing best practices • Performance standards • Marketing plan for expansion of services • Staff training specifics • Plan for afternoon use of kitchen by students/classes • A three-year budget

With the knowledge of the impending new requirements that every Hawaii charter school must operate a nutrition program, it’s important to recognize that Kona Pacific, along with the other schools already operating nutrition programs, have positioned their schools well to be in immediate compliance. The report was submitted to the full governing board for further discussion and a final decision. XII. Governing Board Decision The governing board, at its 12/11/18 meeting, deliberated the issue and set a follow-up meeting with the director to further discuss the information included in this report.


At that meeting, it was agreed that the program will continue. The school’s development director was asked to take a more active role in the management of the program. The school’s director supported this request, and a new team, which includes several of the existing program staff, has been put into place to carry the program forward while seeking ways to increase efficiency, decrease waste, improve menus and increase utilization of the program by KPPCS students. i Murphy, J. M., Pagano, M. E., Nachmani, J., Sperling, P., Kane, S., & Kleinman, R. E. (1998). The relationship of school breakfast to psychosocial and academic functioning: cross-sectional and longitudinal observations in an inner-city school sample. Archives of Pediatrics and Adolescent Medicine, 152(9), 899-907. ii Alaimo, K., Olson, C. M., Frongillo, E. A., Jr. (2001). Food insufficiency and American school-aged children’s cognitive, academic and psychosocial development. Pediatrics, 108(1), 44-53. iii Anderson, Michael L., Gallagher, J. and Ritchie, E.R. (2018) School Meal Quality and Academic Perfomance. USDA NIFA iv Wilder Research (2014) Nutrition and Students’ Academic Performance. www.wilderresearch.org. www.wilderresearch.org v Belot, M., & James, J. (2009). Healthy school meals and educational outcomes. Journal of Health Economics, 30(3), 489-504. vi Florence, M. D., Asbridge, M., & Veugelers, P. J. (2008). Diet quality and academic performance. Journal of School Health, 78(4), 209-215. vii Sorhaindo, A., & Feinstein, L. (2006). What is the relationship between child nutrition and school outcomes? Retrieved from the Centre for Research on the Wider Benefits of Learning website: http://www.learningbenefits.net/Publications/ResReps/ResRep18.pdf viii MacLellan D., Taylor J. & Wood K. (2008) Food intake and academic performance among adolescents. Can J Diet Pract Res. 2008;69(3):141-144. ix Taras, H. (2005) Nutrition and student performance at school. J Sch Health. 2005;75(6):199-213.

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