Definitely Not a Free Lunch | Citizens Against Government Waste

Definitely Not a Free Lunch

The WasteWatcher

In fiscal year (FY) 2012, 30.7 million out of 50 million, or 61 percent, of U.S. students enrolled in public and non-profit private schools participated in both the National School Lunch Program (NSLP) and the School Breakfast Program (SBP), federally assisted meal programs funded by the United States Department of Agriculture’s (USDA) Food and Nutrition Service.  Unfortunately, a June 15, 2014 Government Accountability Office (GAO) report found that when it comes to certifying beneficiaries for the NSLP, the federal government’s eyes are certainly bigger than its stomach.

The GAO report highlighted a small, nongeneralizable sample of 25 approved NSLP applications from the 1,520 school districts in the Dallas, Texas and Washington, D.C., regions.  The GAO found that 9 of 19 households, or 47 percent, that self-reported income and family size information were found ineligible.  While the findings are appalling, they are not surprising.

A March 28, 2012 GAO report regarding government-wide improper payment rates noted that “verification errors related to benefit calculation error, duplicate payments, insufficient documentation, and fraud or misrepresentation by program participants” contributed to a 16 percent error rate for the NSLP.  The program made $1.7 billion in improper payments in FY 2011, the second highest among all government assistance programs.

The Office of Management and Budget (OMB) has echoed the GAO’s findings, placing the school meals program on its “high-error list” since 2009 due to its lack of internal controls and oversight in the certification process.  The USDA and OMB estimated that in 2013, $1.8 billion in improper payments were made, which is 15.7 percent of the $11.6 billion total cost of NSLP.

At the beginning of each school year, NSLP applications are sent home with every student for one member of his or her household to self-report, at their discretion, both household income and family size.  While only families with incomes at or below 130 percent of the federal poverty level are eligible to receive free meals, and those with incomes between 130 and 185 percent of the poverty level are eligible to receive reduced-price meals, self-reporting leads to a significant number of ineligible households applying for, and receiving, free or reduced-price meals. 

In accordance with USDA guidance, school districts are not requires to conduct any income verification activities on the application during the certification process.  In fact, no supporting documentation, such as tax reforms, pay stubs, or applications from other public assistance programs is required.  Unless an application is deemed “error prone,” meaning applications in which the stated income is within $100 of the monthly or $1,200 of the annual applicable income eligibility guideline, they must simply be taken at face value.

To address the high improper payment rates in the NSLP, USDA and Congress implemented the Child Nutrition and WIC Reauthorization Act of 2004 (CNR), which required school districts to directly approve students who receive benefits from the Supplemental Nutrition Assistance Program (SNAP) for free meals in all school districts.  While the USDA claims that this type of direct certification “helps prevent errors without compromising access” by reducing the number of applications school districts must review, unfortunately, the SNAP program is also rife with improper payments.

Since the passage of the CNR, the number of school districts directly certifying SNAP-participant children has steadily increased, even though school districts do not have to access the original SNAP-eligibility documents and are not required to review household SNAP applications when approving applications for NSLP.  The number of students directly certified for the school-meals program exploded from 35 percent in 2004 to 91 percent in 2013.  The annual cost of NSLP increased by 75 percent from $6.6 billion in FY 2004 to $11.6 billion in FY 2013.  

NSLP participation rates serve as the main criteria for the allocation of Title I funds to school districts.  Schools with a higher percentage of students deemed eligible for free or reduced-price lunch are also automatically eligible to receive a larger discount on the federal government’s E-Rate program, which facilitates access to telecommunications services for schools and libraries.

The GAO and other government watchdog groups have identified numerous examples of NSLP fraud that could be prevented if requirements for the collection of data and oversight of the applicant certification process were more robust. 

In FY 2012, the Chicago Board of Education OIG reported that 21 principals, assistant principals, and other high-level staff in the Chicago Public Schools falsified information on applications in order to receive school-meals benefits.  In July 2013, the New Jersey Office of the State Comptroller reported that elected school board officials and school district employees underreported their household income in order to receive more than $1 million in reimbursements for school lunches in the 2010-2011 school year. 

School officials are not the only perpetrators of NSLP fraud.  Across the country, individuals have submitted faulty applications that blatantly omit large categories of annual income, falsify the total number of family members living in a household, or disregard changes in income or eligibility for other overlapping and duplicative public assistance programs.

For example, in one household the GAO reviewed, an applicant submitted a school-meals application seeking benefits for two children based on an annual income of $26,000 per year and the school district certified the applicant.  However, after the GAO reviewed payroll records, it was determined that that applicant’s income was approximately $52,000. 

Another household included in the GAO’s sample self-attested to earning an income of $32,000 for a family of five.  After payroll reviews, the GAO discovered that at the time of application, the household’s annualized income was $60,000, rendering the household ineligible.  When questioned by the GAO, the adult applicant claimed that “her children completed the application and that she had signed it.”  Even though each NSLP application contains a statement that advises applicants that they “may be prosecuted” if they “purposefully give false information,” few, if any, applicants have been held accountable for cheating on the verification process. 

The USDA claims that during the 2013-2014 school year, it enhanced controls by increasing the frequency with which state agencies review school districts for errors and eligibility occurrences from every five years to every three years.  These efforts may be too little, too late. 

Electronically matching household applications information to other accurate data sources, such as state income databases or public assistance databases, and holding individuals accountable will strengthen control and oversight of the school meals program.  The GAO recommended that the USDA create a pilot program to “explore the feasibility of using computer matching to identify households with income that exceeds program-eligibility thresholds for verification.”

President Ronald Reagan once said that the country should measure a welfare program’s success by how many people leave it, not by how many are added.  As with most public assistance programs, the school lunch program has become yet another categorical link in a long chain of programs that has lead to a costly expansion of entitlements.

The disputatious political climate in Washington makes it doubtful Congress will be able to reform the fundamentally broken certification process for verifying eligible applicants for NSLP.  But after years of waste, fraud, and abuse, it is time to ensure that ineligible applicants can no longer feast at the trough in school lunchrooms at the expense of the taxpayers.

Alexandra Booze

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