School Lunch Program:

Role and Impacts of Private Food Service Companies

RCED-96-217: Published: Aug 26, 1996. Publicly Released: Aug 26, 1996.

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Robert A. Robinson
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Pursuant to a legislative requirement, GAO examined the extent to which schools use private food service companies to operate their lunch programs, focusing on the: (1) terms and conditions of the contracts between schools and food service management companies (FSMC); and (2) percentage of schools offering brand-name fast foods that participate in the National School Lunch Program.

GAO found that: (1) the number of food authorities participating in the school lunch program and contracting with FSMC has increased from 4 to 8 percent; (2) most food authorities use FSMC to reduce their budget deficit and increase revenue; (3) the advantages of using FSMC include paying lower costs for food, payroll, employee benefits, and administration; (4) schools with food service contracts have fewer students participating in school lunch programs than those schools not using FSMC; (5) more food service workers remain employed as a result of schools' contracting with FSMC; (6) food service contracts vary depending on the type of meal and the federal regulations governing the contracts; (7) most food service contracts require an annual fee, half stipulate a per-meal fee, and some stipulate both fees; (8) about one-half to two-thirds of FSMC contracts do not contain standard contractual provisions to ensure compliance with federal requirements; (9) the provisions most often omitted from the contracts are intended to ensure that the food authority maintains control of the school meals program; (10) the failure to include these provisions creates uncertainty regarding FSMC responsibilities and diminishes the food authority's ability to ensure that FSMC adheres to federal requirements; and (11) although the percentage of schools offering brand-name fast foods has increased, the number of items offered is limited.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Food and Consumer Service (FCS) has taken steps to improve monitoring and administration of FSMC contracts. FCS actions include: (1) issuing a memorandum to all its Regional Directors, Special Nutrition Programs, apprising them of the GAO report findings and recommendation and reiterating FSMC contract oversight responsibilities at both the federal and state levels; (2) requesting the regional offices to notify states of the need to strengthen oversight of FSMC contracts and contract renewals; (3) requesting regional offices to review FSMC contracts in upcoming management evaluations of state agencies; (4) working on making FCS guidance for contracting with FSMCs readily accessible to state agencies and school food authorities; and (5) continuing to provide technical assistance to state agencies and school food authorities.

    Recommendation: To achieve improved compliance with the Department of Agriculture's (USDA) guidance, the Secretary of Agriculture should direct the Administrator, Food and Consumer Service, to work with appropriate state officials to ensure that FSMC contracts contain the provisions required by USDA guidance on contracting with FSMC.

    Agency Affected: Department of Agriculture


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