Meal Counting and Claiming by Food Service Management Companies in the School Meal Programs

GAO-09-156R: Published: Jan 30, 2009. Publicly Released: Jan 30, 2009.

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Kay E. Brown
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The federal government spends about $10 billion each year to provide meals to over 30 million students through the National School Lunch and Breakfast Programs. However, a 2007 study estimated that of this amount, $860 million (8.6 percent) in school year 2005-2006 was paid improperly because of errors in the number of meals counted and claimed for reimbursement. These programs are administered by the United States Department of Agriculture's (USDA) Food and Nutrition Service (FNS) through state agencies that, in turn, oversee local school food authorities (SFA). SFAs that participate in the lunch and breakfast programs receive federal cash reimbursements through the state agency for each meal served, and in the lunch program they also receive USDA commodity donations based on the number of meals served. In return, SFAs must serve meals that meet federal nutrition requirements and offer meals free or at a reduced price to students whose family's income falls below certain thresholds. While most of the roughly 13,700 SFAs in traditional public school districts in the United States manage their own programs, about 13 percent choose to contract with private companies known as food service management companies (FSMC). FSMC involvement in food service activities varies among SFAs, depending on the duties specified in the contract, but these duties may include meal-counting and -claiming activities. Regardless of the duties specified in the contract, however, FNS guidance states that SFAs remain responsible for the overall operation of the school meal programs, including overall financial responsibility. SFAs are also required to ensure the accuracy of lunch claims through effective internal controls

USDA policies and regulations establish an oversight framework for school meal programs to help ensure accurate meal counting and claiming, and this framework is generally the same for meal services managed by both SFAs and FSMCs except for some additional oversight requirements for FSMCs. USDA regulations require that reviews be conducted at the federal, state, and local levels. FNS must conduct management evaluations of each state agency to review its administration of the school meal programs, including the state's review of SFA contracts with FSMCs. State agencies are required to conduct administrative reviews of each SFA's lunch program at least every 6 years, including a review of the meal-counting and -claiming system. Additionally, state agencies must compare SFA monthly lunch claims to a proxy for attendance to identify potential claim errors. When an SFA contracts with an FSMC, the state agency must also review the contract to ensure compliance with federal regulations, and some state agencies have developed prototype contracts to facilitate this review process. At the local level, SFAs are required to conduct annual on-site reviews of each school in the lunch program to detect problems that would lead to meal-counting and -claiming errors. SFAs are also required to review each school's daily lunch counts to identify potential overcounts. In addition, when an FSMC is present, SFAs must conduct periodic visits to monitor the FSMC's food service operation. Meal-counting and -claiming errors occur at similar or somewhat lower rates when FSMCs manage meal services compared to when SFAs manage meal services. Errors can occur when cashiers improperly determine whether a meal is reimbursable. Error rates at this stage, which tended to be the highest, were generally the same between the two management types. Errors can also occur when meal counts are totaled and reported incorrectly, and are called aggregation errors. They can occur at the point of sale, when meal counts are sent from the school to the SFA, and again from SFA to the state. The differences in error rates between FSMC-managed and SFA-managed meal services were not statistically significant for these aggregation errors, with the exception of errors that occurred when meal counts were sent from the school to the SFA. In this case, error rates for FSMC-managed programs were lower than those of SFA-managed programs. We could not determine if FSMCs directly contributed to this lower error rate because FSMC involvement in meal counting and claiming varied across locations. Finally, FNS and state officials we interviewed said that they do not find additional mealcounting and -claiming problems when FSMCs manage meal services.

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