B-176994, DEC 5, 1972

B-176994, DEC 5, 1972

FOOD SERVICE PROGRAMS - DELIVERY TO PROGRAM SITES DECISION ALLOWING PAYMENT BY THE SECRETARY OF AGRICULTURE OF AN ADDITIONAL SUM TO THE BRONX PARENTS ASSOCIATION IN CONNECTION WITH THE 1971 SUMMER OPERATIONS OF THE SPECIAL FOOD SERVICE PROGRAM FOR CHILDREN IN NEW YORK CITY. IN VIEW OF THE EXTENUATING CIRCUMSTANCES AND THE INFORMATION AVAILABLE, THERE IS A REASONABLE BASIS IN THIS PARTICULAR CASE FOR PRESUMING THAT THE ADDITIONAL LUNCHES WERE PRODUCED AND DELIVERED TO SERVICE SITES FOR THE PROGRAM. ACCORDINGLY, GAO WILL NOT OBJECT TO THE PAYMENT OF THE PROPOSED ADDITIONAL SUM.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER OF OCTOBER 12, 1972, FROM ASSISTANT SECRETARY RICHARD LYNG, REQUESTING OUR CONCURRENCE IN THE PROPOSAL BY YOUR DEPARTMENT TO PAY AN ADDITIONAL SUM OF $521,427 TO THE BRONX PARENTS ASSOCIATION IN CONNECTION WITH THE 1971 SUMMER OPERATIONS OF THE SPECIAL FOOD SERVICE PROGRAM FOR CHILDREN IN NEW YORK CITY.

THE SPECIAL FOOD SERVICE PROGRAM FOR CHILDREN IS CONDUCTED UNDER THE PROVISIONS OF SECTION 13 OF THE NATIONAL SCHOOL LUNCH ACT, 42 U.S.C. 1761, WHICH AUTHORIZE THE SECRETARY OF AGRICULTURE TO FORMULATE AND CARRY OUT A PROGRAM TO ASSIST STATES THROUGH GRANTS-IN-AID AND OTHER MEANS TO INITIATE, MAINTAIN, OR EXPAND NONPROFIT FOOD SERVICE PROGRAMS.

IT IS EXPLAINED THAT PROGRAMS OPERATED IN NEW YORK ARE ADMINISTERED BY THE STATE DEPARTMENT OF EDUCATION. IN 1971 NEW YORK STATE ENTERED INTO AN AGREEMENT WITH THE FOOD AND NUTRITION SERVICE, DEPARTMENT OF AGRICULTURE. UNDER THAT AGREEMENT THE NEW YORK STATE DEPARTMENT OF EDUCATION ENTERED INTO A CONTRACT WITH THE BRONX PARENTS ASSOCIATION (SPONSOR) TO OPERATE THE 1971 SUMMER PROGRAM IN THE NEW YORK CITY METROPOLITAN AREA. THE SPONSOR CONTRACTED WITH ARA SERVICES, INC., TO DELIVER LUNCHES, AT 52 CENTS PER LUNCH, TO DESIGNATED SERVING SITES. THIS CONTRACT ALSO PROVIDED THAT UPON DELIVERY OF LUNCHES AT THE SITES, A REPRESENTATIVE OF THE SPONSOR WOULD SIGN A RECEIPT, IN TRIPLICATE: ONE COPY TO BE RETAINED BY THE REPRESENTATIVE, ONE TO BE KEPT BY THE DRIVER, AND THE THIRD TO BE DELIVERED TO ARA SERVICES, INC.

DURING THE SUMMER THE NEW YORK STATE DEPARTMENT OF EDUCATION BECAME CONCERNED ABOUT THE SPONSOR'S OPERATION OF THE PROGRAM AND, AS A RESULT, AN AUDIT OF THE PROGRAM WAS CONDUCTED BY THE OFFICE OF THE INSPECTOR GENERAL (OIG), DEPARTMENT OF AGRICULTURE. IN ITS REPORT OF SUCH AUDIT OIG RECOMMENDED THAT PAYMENT OF THE SPONSOR'S CLAIM FOR REIMBURSEMENT BE MADE ONLY FOR THOSE LUNCHES FOR WHICH DELIVERY COULD BE SUBSTANTIATED BY SIGNED RECEIPTS, OR IN THEIR ABSENCE, A SIGNED ROUTE SHEET (AN INTERNAL CONTROL DEVICE EMPLOYED BY ARA SERVICES, INC., SHOWING THE SITES TO WHICH DELIVERIES WERE MADE). BASED ON OIG'S REPORT, THE FOOD NUTRITION SERVICE ADVISED THE STATE DEPARTMENT OF EDUCATION THAT THE SERVICE WOULD NOT OBJECT IF THE SPONSOR WERE PAID $2,420,408 (4,656,457 LUNCHES AT 52 CENTS, LESS $950 FOR LUNCHES SERVED TO ADULTS AS DETERMINED BY ON-SITE OBSERVATIONS) OR ABOUT $762,841 LESS THAN THAT CLAIMED BY THE SPONSOR FOR MEALS DELIVERED BY ARA SERVICES, INC.

SUBSEQUENT TO THE ISSUANCE OF A CHECK IN THE ABOVE AMOUNT, ARA SERVICES, INC., SUBMITTED SECONDARY EVIDENCE TO SHOW THAT ENOUGH COMPONENTS FOR THE ORIGINAL NUMBER OF LUNCHES CLAIMED HAD BEEN PURCHASED AND DELIVERED TO THE SERVING SITES. THIS SECONDARY EVIDENCE CONSISTED OF ITS PURCHASE INVOICES AND CHECKS AND INVOICES FOR VENDORS. THE OFFICE OF THE INSPECTOR GENERAL REVIEWED THIS EVIDENCE AND RECONCILED IT TO ACCOUNTING RECORDS MAINTAINED BY ARA SERVICES, INC., AND TO RESULTS OF A PREVIOUS REVIEW CONDUCTED BY AN INDEPENDENT ACCOUNTING FIRM EMPLOYED BY ARA SERVICES, INC.

ON THE BASIS OF ITS REVIEW OF THE SECONDARY EVIDENCE SUBMITTED, OIG CONCLUDED THAT SUCH EVIDENCE SUPPORTED PRODUCTION BY ARA SERVICES, INC., OF 5,679,868, LUNCHES. BASED ON SUCH EVALUATION, IT IS NOW PROPOSED TO AUTHORIZE AN ADDITIONAL REIMBURSEMENT OF $521,427 TO THE SPONSOR (WHICH SUM INCLUDES A DEDUCTION FOR FAILURE TO USE A SUFFICIENT QUANTITY OF MARGARINE).

IN ARRIVING AT SUCH CONCLUSION, IT IS STATED THAT CREDITABILITY WAS GIVEN TO THE UNUSUAL CIRCUMSTANCES IN WHICH ARA SERVICES, INC., HAD TO FUNCTION. IN THIS CONNECTION IT IS EXPLAINED THAT THE SPONSOR IS A NONPROFIT ORGANIZATION WHICH DEPENDS ALMOST ENTIRELY ON FEDERAL FUNDS FOR SUPPORT. IN 1971 IT ADMINISTERED THE SPECIAL FOOD SERVICE PROGRAM (SUMMER OPERATIONS) IN OVER 900 CENTERS WHICH WERE DISTRIBUTED OVER FIVE BOROUGHS AND 140 SQUARE MILES. IN AN EFFORT TO MEET ONE OF ITS OTHER PROGRAM GOALS - FINDING WORK FOR UNEMPLOYED - THE SPONSOR REQUIRED ARA SERVICES, INC., TO HIRE THOSE UNEMPLOYED WORKERS WHOM THE SPONSOR DESIGNATED. THIS, IT IS REPORTED, LED TO CONSIDERABLE LOSS OF CONTROL BY ARA SERVICES, INC., AS EVIDENCED BY THE LOSS OF ROUTE SHEETS AND UNSIGNED RECEIPTS.

THE EVIDENCE RELIED ON AS FURNISHING A BASIS FOR NOW PAYING THE PROPOSED ADDITIONAL AMOUNT TO THE SPONSOR, IS NOT CONCLUSIVE AND GENERALLY SHOULD NOT BE RELIED UPON IN DETERMINING THE AMOUNTS PROPERLY PAYABLE. HOWEVER, WE ARE INCLINED TO AGREE THAT, IN VIEW OF THE EXTENUATING CIRCUMSTANCES, THE INFORMATION DEVELOPED BY OIG AND OTHER INFORMATION AVAILABLE, PROVIDES A REASONABLE BASIS IN THIS PARTICULAR CASE FOR PRESUMING THAT THE ADDITIONAL LUNCHES WERE PRODUCED BY ARA SERVICES, INC., AND DELIVERED TO THE SERVICE SITES.

ACCORDINGLY, WE WILL NOT OBJECT TO THE PAYMENT OF THE PROPOSED ADDITIONAL SUM TO THE BRONX PARENTS ASSOCIATION.