United States General Accounting Office

GAO Report to the Chairman, Committee on

Education and the Workforce, House of

Representatives

November 1998 WELFARE REFORM

Effects of Reduced

Reimbursements on

the Summer Food

Service Program

GAO/RCED-99-20

GAO United States

General Accounting Office

Washington, D.C. 20548

Resources, Community, and

Economic Development Division

B-281248 

November 10, 1998

The Honorable William F. Goodling

Chairman, Committee on Education

 and the Workforce

House of Representatives

Dear Mr. Chairman:

The U.S. Department of Agriculture’s (USDA) Summer Food Service

Program provides free meals to needy children when school is not in

session. In fiscal year 1997, over 3,800 sponsors—such as schools and

local government agencies—provided these meals to over 2 million

children at a federal cost of about $258 million. The Personal

Responsibility and Work Opportunity Reconciliation Act of 1996 (known

as the Welfare Reform Act) made major changes to this program, effective

in January 1997. It reduced the federal reimbursements that sponsors

receive for meals served and eliminated the federal reimbursement for a

fourth daily meal provided in summer camps and in programs that

primarily serve migrant children.1

Because of questions raised about the impact that the reductions in the

federal reimbursements might have had on access to the program, you

asked us to report on (1) the number and characteristics of sponsors

participating in and dropping out of the program before and after the

decrease in the reimbursements, (2) the number of children and meals

served by the program before and after the reduction, and (3) the changes

sponsors made to their programs as a result of the reduced

reimbursements.

Our report is based on our analyses of the data provided to us by the 50

states about the program’s sponsors. Through two mail surveys, we

collected detailed information on the sponsors for fiscal years 1996 and

1997 and on sponsors’ participation in 1998.2

 We also conducted a

telephone survey with officials for the Summer Food Service Program in

the 50 states and the District of Columbia. In addition, to obtain their

views on the effect the changes had on the program, we visited 20

sponsors in six states as well as advocacy organizations. Appendix I

discusses our scope and methodology in more detail.

1

On Mar. 10, 1998, we testified on our preliminary findings on these issues. See Welfare Reform:

Effects of Changes Made to the Summer Food Service Program (GAO/T-RCED-98-120).

2

This information does not include the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.

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B-281248 

Results in Brief The reduction in meal reimbursements that resulted from the 1996 Welfare

Reform Act had a minimal impact on the number and characteristics of the

sponsors of the Summer Food Service Program. Since the reduction went

into effect in 1997, the number of sponsors participating in the program

increased by 8 percent overall, from 3,753 to 4,046. Additionally, the

characteristics of the sponsors providing meals remained about the same

between 1996, the year before the subsidies were reduced, and 1997. In

both years, a relatively small percentage of sponsors—5 percent—served

most of the children in the program. Most sponsors continued to be

schools and camps. In terms of the sponsors that dropped out after the

welfare reform changes, fewer than 10 percent left the program in each of

the 2 years since the reduced reimbursements have been in effect.

However, only a small percentage of these dropouts left because of the

reduction, according to officials in the 50 states. Nevertheless, after the

reduced reimbursements were mandated, USDA and some states took

actions, such as expanding outreach efforts, to maintain the level of

participation of sponsors and children. These efforts may have mitigated

the impact of the rate reduction.

Despite the reduced reimbursements, the number of children and meals

served in fiscal year 1997 was greater than in previous years. The total

number of children participating in the program increased by over 2

percent after the reimbursements were reduced, to almost 2.3 million, in

1997. The number of meals served rose by 2 percent, to over 128 million,

despite a new restriction on the number of meals for which some sponsors

could receive reimbursements. However, state officials identified a small

number of sponsors that left the program because of the reduced

reimbursements, which meant that some of the children whom the

sponsors had served lost access to the program. Over 820 children lost

access to the program in fiscal year 1997 because the sponsors that had

served them in 1996 did not participate in 1997 as result of the reduction,

and no other sponsor was available. Similarly, at least 780 children lost

access in fiscal year 1998. Other children may have lost access when

continuing sponsors reduced the number of sites they operated because of

the rate reduction.

In response to the reduced meal reimbursements, some sponsors reported

making changes to their program operations. These changes included

substituting less expensive foods for those previously served, such as

replacing fresh fruit with fruit juices; reducing staff’s wages; and reducing

the number of sites at which meals are served. Even with these changes,

according to the information provided by the 50 states, more sponsors

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B-281248 

reported that their operating costs exceeded the amount they received in

federal reimbursements in fiscal year 1997 than in 1996. The limited impact

on the number of sponsors, children, and meals served that has been

observed to date is due in part to sponsors’ continuing to contribute funds

to offset the decreased reimbursements.

Background The Summer Food Service Program is a federal entitlement program that

provides funds for program sponsors to serve free nutritious meals to

children in low-income areas when school is not in session. It is

administered by USDA’s Food and Nutrition Service, which provides money

to state agencies to operate the program and to reimburse local eligible

sponsors for meals served to children at designated locations.3

 Eligible

sponsoring organizations include (1) public or private nonprofit schools;

(2) units of local, municipal, county, or state governments, such as county

or city recreation programs; (3) private nonprofit groups, such as Boys and

Girls Clubs or churches; (4) residential camps; and (5) National Youth

Sports Programs.4

 In fiscal year 1997, sponsors served over 128 million

meals at a total federal cost of about $258 million.

Local program sponsors can qualify to be reimbursed for the free meals

served to all children 18 or younger by operating a site in an eligible area.

Eligible areas are those in which at least 50 percent of the local children

are from households with an income at or below the eligibility level for

free and reduced-price school meals—185 percent of the federal poverty

guidelines ($29,693 for a family of four in the summer of 1997).5

 Sponsors

can also qualify for reimbursements for free meals served to all children at

sites not located in eligible areas if at least 50 percent of the children

enrolled at such sites are eligible for free or reduced-price school meals.

Finally, camps may be reimbursed only for meals that are served to

children who have been individually determined to be eligible because of

their household income.

The meals that sponsors provide must meet the program’s nutritional

requirements. Most sponsors can receive federal subsidies for only two

3

In 1997, USDA operated the program in the place of state agencies in four states—Georgia, Michigan,

New York, and Virginia. Throughout this report, the term “state officials” includes the USDA officials

who manage the program in these four states.

4

The National Youth Sports Program offers sports and educational activities to disadvantaged children

who are 10 to 16 years old. The program is typically at colleges or universities and is associated with

the National Collegiate Athletic Association.

5

These levels are slightly higher in Alaska and Hawaii.

Page 3 GAO/RCED-99-20 Welfare Reform
B-281248 

meals per child per day.6 However, camps and programs primarily serving

migrant children can receive subsidies for up to three meals each day for

each child. This three-meal allowance is a change in the program made by

the Welfare Reform Act. Previously, these sponsors could receive

reimbursements for up to four meals per day.

Sponsors are reimbursed in two different categories for their costs of

preparing and serving free meals. One category covers the administrative

costs incurred in the management of the Summer Food Service Program,

such as office expenses, the support staff’s salaries, insurance, and some

financial management costs. The second category covers the operating

costs for purchasing, preparing, transporting, and serving the food;

supporting program activities, paying salaries for the staff supervising the

children; and providing transportation in rural areas. Sponsors must

maintain records to document all costs and the number of meals they

claim for reimbursements.

Sponsors’ reimbursements are based on the lesser of (1) the number of

approved meals served multiplied by the established rate for each type of

meal or (2) the actual costs reported. The reimbursement rates for both

administrative and operating costs are set by law and adjusted each year

to reflect changes in the Consumer Price Index. Sponsors with costs that

exceed the federal reimbursements must find other sources of funding to

pay their additional costs. Some sponsors anticipate that program costs

will exceed the federal reimbursements, and these sponsors offset their

excess costs with other sources of funds. Other sponsors inadvertently

exceed the federal reimbursements by small amounts because it is difficult

to budget the program exactly. Because sponsors can claim

reimbursements only for meals that are served to eligible children, their

costs would exceed reimbursements if they have low attendance or

prepare too many meals that cannot be claimed for reimbursements.

The Welfare Reform Act reduced the operating subsidies for meals and

snacks served under the Summer Food Service Program, effective for the

1997 summer. It did not reduce subsidies for administrative costs.7

 Table 1

highlights the changes in the reimbursement rates for meals since 1996.

While the 1997 and 1998 rates reflect increases to account for inflation,

they are still lower than the rates established for 1996.

6

A meal can be breakfast, lunch, supper, or a snack.

7

The 1998 administrative rate ranges from 4.75 cents to 21.75 cents per meal and varies by type of

meal; sponsor (e.g., rural); and preparation (e.g., sponsor-prepared meal).

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B-281248 

Table 1: Reimbursement Rates, Per

Meal Served, 1996-98 1997 rates

Meal 1996 rates

Prior to welfare

reforma Actualb 1998 rates

Breakfast $1.2075 $1.24 $1.16 $1.19

Lunch/supper 2.1675 2.23 2.02 2.08

Snack 0.57 0.58 0.47 0.48

aThese are the rates that would have been in effect if the Welfare Reform Act had not been

enacted. Rates would have been higher than 1996 rates because of indexing for inflation.

bThe Welfare Reform Act set the rates at $1.13 for breakfast, $1.97 for lunch/supper, and $0.46

for snacks. However, the 1997 rates were slightly higher than the rates established in the law

because they were indexed for inflation.

Number and

Characteristics of

Sponsors

Participating in and

Dropping Out of the

Program Since the

Reimbursements Were

Reduced

Since the reduced reimbursements went into effect in 1997, the number of

sponsors participating in the program has increased by 8 percent overall.

Although there were some changes in sponsors from one year to the next,

the characteristics of these sponsors—by the type of organization, number

of sites operated, and number of meals and children served—remained

about the same. Of those sponsors leaving the program, fewer than

10 percent left in each of the 2 years, and of these sponsors, few left

because of the rate reduction, according to state officials. USDA and some

states took actions following the rate reduction aimed at enrolling new

sponsors and/or encouraging current sponsors to expand their programs.

Number of Sponsors

Increased Overall After the

Reimbursements Were

Reduced

Since the reduced reimbursements have gone into effect, the total number

of sponsors has increased by about 8 percent. According to the data

provided by state officials, the total number of sponsors participating in

the program rose from 3,753 in fiscal year 1996 to 3,875 in 1997, and to

4,046 in 1998. While some sponsors left the program, the number of

sponsors joining it exceeded the number leaving.

This overall increase in the number of sponsors occurred after virtually no

increase from 1995 through 1996, according to USDA’s data. However, this

overall increase is lower than the increases that occurred from 1991

through 1994, when the number of sponsors grew each year by about 8 to

10 percent. According to USDA officials, no growth occurred from 1995 to

1996 because of uncertainty stemming from the public policy debates over

the future of the Summer Food Service Program and other child nutrition

Page 5 GAO/RCED-99-20 Welfare Reform
B-281248 

programs. Figure 1 shows the rate of change in the number of sponsors

each year from 1991 through 1998.

Figure 1: Rate of Change in Sponsors’

Participation, 1991-98 Percent change from prior year

-1

0

1

2

3

4

5

6

7

8

9

10

1991 1992 1993 1994 1995 1996 1997 1998

Year

9.7

7.9

8.6

9.1

0.6

-0.7

3.3

4.4

Notes: Rates of change for 1991 to 1996 are based on USDA’s data on the number of sponsors

operating in July. Rates of change for 1997 and 1998 are based on state-provided data on the

total number of sponsors, including those that did not operate in July. USDA’s data for 1997 show

an increase in the number of sponsors—4.8 percent—that is higher than that shown by the states’

data, which is 3.3 percent.

From 1982 through 1989, most private nonprofit sponsors were not allowed to participate in the

program. The growth in the number of sponsors beginning in 1991 is partially due to private

nonprofit sponsors joining the program.

Source: GAO’s analysis of data provided by USDA and the states.

Characteristics of

Sponsors Were Similar

Before and After Rate

Reduction

The types of organizations serving as program sponsors were similar in

fiscal years 1996 and 1997. In both years, schools represented the largest

group of sponsors (about 45 percent), followed by camps (19 percent),

government agencies (about 17 percent), private nonprofit organizations

(about 16 percent), and National Youth Sports Programs (3 percent).

School sponsors can serve meals to children at school buildings as well as

at other types of locations, such as parks and churches.

Page 6 GAO/RCED-99-20 Welfare Reform
B-281248 

Similarly, the rate reduction did not have a significant effect on the

number of sites operated by sponsors. For example, in both fiscal years,

half of the sponsors (51 percent) operated 1 site, and 6 percent operated

25 or more sites. In addition, between fiscal years 1996 and 1997, the total

number of sites increased by 5 percent, from 29,220 to 30,587.

As tables 2 and 3 show, the 1997 reduction in meal reimbursements did not

appear to cause sponsors to change the size of their programs. There was

little change in the size of sponsors—in terms of the number of meals and

children served—between fiscal years 1996 and 1997. However, the

number of meals and children served by individual sponsors varied greatly

in each year.8

 For example, one of the smallest nonprofit sponsors served

92 meals in 1997, while the largest—the New York City Board of

Education—served over 8.8 million meals.9

 In both years, a small

percentage of the sponsors provided most of the meals. Only 5 percent of

the sponsors served 62 percent of children participating in July of each

year, 1996 and 1997. Similarly, 5 percent of the sponsors served 58 percent

and 59 percent of all meals in 1996 and 1997, respectively.

Table 2: Size of Sponsors’ Programs in

Terms of Children Served, 1996 and

1997

Average number of children

served daily

Percent of sponsors in

1996a

Percent of sponsors in

1997b

75 or fewer 25.9 25.7

76 to 299 34.0 32.9

300 to 999 20.9 20.4

1,000 or more 11.9 11.9

No July program 7.4 9.0

aDoes not include data from New Jersey and Arkansas.

bDoes not include data from New Jersey.

Source: GAO’s analysis of states’ data.

8

USDA generally reports the number of children served on the basis of average daily attendance in July

because the highest number of children are typically served in July. While we requested the states to

provide average daily attendance in July for each sponsor, a few states provided us with a different

estimate for participation. (See app. I.) New Jersey did not provide attendance data for 1996 and 1997,

and Arkansas did not provide data for 1996. Our analyses of the number of children served is based on

state-provided data, excluding New Jersey and Arkansas, as appropriate.

9

Private nonprofit sponsors tended to operate smaller programs for a number of reasons. For example,

subsection 1761 (a) (7) of Title 42, United States Code, limited private nonprofit sponsors to serving no

more than 2,500 children per day at 5 urban sites or 20 rural sites. However, these limits on private

nonprofit sponsors were changed by legislation signed by the President on October 31, 1998, which

(1) limits the number of sites to 25 without any distinction between rural and other areas and

(2) eliminates the 2,500 children ceiling.

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B-281248 

Table 3: Size of Sponsors’ Programs in

Terms of Meals Served, Fiscal Years

1996 and 1997

Characteristic Fiscal year 1996 Fiscal year 1997

Percent of sponsors serving

Fewer than 3,500 meals per

year 25.4% 26.7%

3,500 to 9,999 meals per year 32.2% 31.3%

10,000 to 29,999 meals per

year 24.9% 24.9%

30,000 or more meals per

year 17.5% 17.1%

Median number of total

meals served annually 7,832 7,746

Minimum number of meals

served annually by a

sponsor 62 92

Maximum number of meals

served annually by a

sponsor 6,673,337 8,843,294

Total meals served during

the year 120,539,635 125,082,928

Source: GAO’s analysis of states’ data.

Few Sponsors Left

Because of the Reduced

Reimbursements

After the first year’s experience with the reduced reimbursements, both

USDA and some state officials expressed concern that more sponsors would

drop out of the program in the future than did in 1997 because of the

reduced rates. USDA officials believed that some sponsors chose to

continue participating in the program in 1997 to test their ability to

manage the program financially with the reduced reimbursements and to

determine whether they would continue in 1998. However, an increase in

dropouts did not occur in 1998.

According to the states’ information, a total of 675 sponsors have stopped

participating in the Summer Food Service Program since the

reimbursements were reduced. Of those that participated in fiscal year

1996, 370, or 9.9 percent, did not return in 1997; and 305, or 7.9 percent, of

those that participated in 1997 did not return in 1998.10

According to state officials, few of the sponsors that dropped out of the

program left specifically because of the reduced reimbursements. State

officials identified the reduced reimbursements as the major reason for

10We did not compare these dropout rates with the rates of prior years because USDA does not collect

information on dropouts, and we did not obtain this information from the states.

Page 8 GAO/RCED-99-20 Welfare Reform
B-281248 

dropping out for only 37 (5.5 percent) of the 675 sponsors that left in fiscal

years 1997 and 1998. For an additional 182 sponsors, state officials were

unable to identify the major reason for dropping out. For some of these

sponsors, the reduction may have been the reason they dropped out. The

remaining 456 sponsors left for a variety of other reasons, such as the loss

of personnel or lower participation than anticipated. Table 4 shows the

number and percentage of sponsors leaving the program for various

reasons since the rate reduction.

Table 4: Reasons Sponsors Dropped Out of the Program Since the Reduced Reimbursements

Reason

Dropped out between

1996 and 1997

Dropped out between

1997 and 1998

Total dropped out since

reduced reimbursements

Number of

sponsors Percent

Number of

sponsors Percent

Number of

sponsors Percent

All reasons 370 100.0 305 100.0 675 100.0

Because of the reduced

rates 24 6.5 13 4.3 37 5.5

Because of other reasons

such as 218 58.9 238 78.0 456 67.6

Low participation 17 4.6 45 14.8 62 9.2

Personnel loss or change 28 7.6 34 11.1 62 9.2

Primary activity changed or

canceled 23 6.2 29 9.5 52 7.7

Costs exceeded

reimbursements 17 4.6 24 7.9 41 6.1

Poor management 11 3.0 16 5.2 27 4.0

Disruption because of

construction 9 2.4 17 5.6 26 3.9

Paperwork burden 8 2.2 12 3.9 20 3.0

Replaced by another meal

program 8 2.2 13 4.3 21 3.1

Othera 97 26.2 48 15.7 145 21.5

Reason unknown 128 34.6 54 17.7 182 27.0

aOther reasons include sponsors that merged with other sponsors in the program, could not

locate a site, or moved to another state.

Source: GAO’s analysis of states’ data.

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B-281248 

Small Sponsors and Private

Nonprofit Sponsors Were

More Likely to Leave the

Program

According to our nationwide data, small sponsors were more likely to

drop out of the Summer Food Service Program than large sponsors, and

private nonprofit sponsors were more likely to drop out than other types

of sponsors. This was also true for the sponsors that state officials

identified as leaving the program because of the reduced reimbursements.

For example, the sponsors that left the program in fiscal year 1997

because of the decrease had served an average of 207 children in

July 1996, while the sponsors that remained in the program in 1997 had

served an average of 809 children in July 1996. (App. II provides

information on the dropout rates for various types of sponsors.)

USDA and Some States

Initiated Actions Aimed at

Mitigating the Potential

Impact of the Reduced

Reimbursements on the

Number of Sponsors

Some states and USDA took actions following the reduced reimbursements

for meals served to enroll new sponsors and/or encourage current

sponsors to expand their programs. These actions may have mitigated the

impact of the rate reduction. For example, officials from several states

said that they expanded outreach efforts to enroll more new sponsors.

Some states’ Summer Food Service Programs—such as those in

Minnesota, New York, Vermont, and Washington—received state funds to

offset the loss of federal funds in fiscal years 1997 and 1998.

In addition, in 1998, USDA began an initiative to encourage sponsors’

participation by conducting outreach and reducing the administrative

burden on sponsors. To encourage participation in 1998, USDA provided

program information to the American School Food Service Journal, the

National Conference of Mayors, and the National Recreation and Park

Associations for distribution to schools, local governments, and private

nonprofit organizations. USDA also provided materials to the states for their

own outreach efforts. Furthermore, the Department issued 13 policy

memorandums to the states revising and clarifying policies to improve the

program’s operations and reduce its administrative burden.

Despite the actions by USDA and the states to encourage new organizations

to participate, one state official reported that the reduced reimbursement

rates discouraged some organizations from entering the program.

Number of Children

and Meals Served

Since the Reduced

Reimbursements

The total number of children participating in the program continued to

increase in 1997 after the reduced reimbursements, as it had in all but one

of the previous 6 years. However, some of the children served by sponsors

in 1996 lost access to the program in 1997 when those sponsors left the

program. The number of meals served also increased in 1997, as in the

Page 10 GAO/RCED-99-20 Welfare Reform
B-281248 

prior 6 years, even though welfare reform limited the number of meals that

some sponsors could claim for reimbursements.

Number of Children

Participating Continued to

Increase After the Reduced

Reimbursements

In the year following the implementation of the reduced rates, the number

of children participating in the program increased overall, as it did in all

but one of the prior 6 years. According to the latest available USDA data, the

average number of children served daily in July for the entire program

increased by 2.3 percent, from 2,215,625 in 1996 to 2,266,319 in 1997.11

Figure 2 shows the rate of change in children’s participation from 1991 to

1997.

Figure 2: Rate of Change in the

Average Number of Children Served

Daily, 1991-97

Percent change from prior year

-5

-3

-1

1

3

5

7

9

11

1991 1992 1993 1994 1995 1996 1997

Year

9.2

4.1

10.3

4.2

-4.5

5.1

2.3

Note: According to a USDA official, the reduction in the number of children served in 1995 was

due in part to active and potential sponsors’ anticipation of major program changes, including a

possible reduction in the meal reimbursement rates.

Source: GAO’s analysis of USDA’s data.

11USDA’s data for the 1998 program were not available at the time of our review. Our survey data show

that approximately 340 sponsors that participated in 1997 were not active in July. These sponsors

accounted for approximately 2 percent of the total meals served in 1997.

Page 11 GAO/RCED-99-20 Welfare Reform
B-281248 

When we used the states’ data to determine which types of sponsors

contributed to the growth in the number of children served after the rate

decrease in 1997, we found that existing sponsors had expanded their

programs while new sponsors in 1997 were smaller than the sponsors that

left the program after 1996. Sponsors that participated in both fiscal years

1996 and 1997 served 8 percent more children, on average, in 1997 than in

1996. On the other hand, new 1997 sponsors did not serve as many

children, on average, as sponsors that left the program after 1996.

Specifically, new 1997 sponsors served 19 percent fewer children, on

average, in 1997, than were served in 1996 by sponsors that left the

program.

Some Children Lost Access

to the Program

Despite the overall increase in the number of children served between

1996 and 1997, some children lost access to program benefits because the

sponsors serving them dropped out, and the children were not served by

other sponsors. These fluctuations in sponsors’ participation and in

children’s access to the program occur even in years when the program’s

rules and reimbursements do not change, according to USDA officials.

The 370 sponsors that participated in 1996 and did not return in 1997

served approximately 118,224 children per day in July 1996. According to

our analysis of the information provided by state officials, at least 17,238,

or about 15 percent, of these children lost access to the program in 1997.

Sponsors that dropped out of the program specifically because of the

reduction had served approximately 4,559 children in July 1996. At least

823, or 18 percent, of these children did not have access to the program in

1997. These 823 children represented about .03 percent of all children who

participated in the program in 1996. (See app. II.) Other children may have

lost access when continuing sponsors reduced the number of sites they

operated because of the rate reduction.12

In fiscal year 1998, following the loss of 305 sponsors, at least 17,983

children, or 31 percent of the 58,562 children that had been served by

these sponsors, lost access to the program. Of the 2,926 children served by

sponsors that left the program specifically because of the reduction, at

least 780 (27 percent) did not have access to the program through another

sponsor in 1998. These children represent about .03 percent of all children

who participated in the program in 1997. Appendix III provides more

detailed information on our estimates of the number of children who had

12437 sponsors operated fewer sites in 1997 than in 1996. We did not obtain the reasons these sites

were closed or the number of children who lost access to the program as a result.

Page 12 GAO/RCED-99-20 Welfare Reform
B-281248 

been served by sponsors that dropped out of the program and who were

served by other sponsors the following year.

The Number of Meals

Served Increased Slightly

The number of meals served by sponsors increased by over 2

percent—from over 125 million meals in fiscal year 1996 to over

128 million meals in 1997—the year after the reimbursements were

reduced.13 The number of meals had increased during each of the previous

6 years reviewed.

The increase in meals served in fiscal year 1997 would probably have been

larger without the welfare reform change that affected camps and

sponsors that primarily serve migrant children. As mentioned earlier, the

1996 act decreased the number of meals that these groups could claim for

reimbursements from four to three. According to many state officials, if

these sponsors had previously submitted four meals for

reimbursements—breakfast, lunch, supper, and a snack—they did not

submit the snack for reimbursement in 1997 because it has the lowest

reimbursement rate. Our analysis of USDA’s data supports this conclusion.

From 1996 to 1997, the number of meals for which sponsors requested

reimbursements increased by only 2.4 percent. However, excluding

snacks, the number of meals for which sponsors requested

reimbursements increased by 4.7 percent. Figure 3 compares the rate of

change for total meals and meals not including snacks for fiscal years 1991

to 1997.

131997 is the latest year for which USDA has data on program meals.

Page 13 GAO/RCED-99-20 Welfare Reform
B-281248 

Figure 3: Rate of Change in All Meals

and Meals, Excluding Snacks, Fiscal

Years 1991-97

1991 1992 1993 1994 1995 1996 1997

0

2

4

6

8

10

12

14

6.1

10.8

5.7

3.6

1.0

3.4

4.7

5.5

11.7

5.5

3.1 2.9

4.2

2.4

Year

Percent change from prior year

Total meals served, excluding snacks

Total meals served, including snacks

Note: The number of meals served, excluding snacks, increased at a slower rate in 1995 than in

any other year. According to a USDA official, this occurred because some sponsors anticipated

that major changes in the program might include greatly reduced reimbursement rates.

Source: GAO’s analysis of USDA’s data.

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B-281248 

Some Sponsors

Changed Their

Programs Because of

the Reduced

Reimbursements, and

Some Paid More of

the Program Costs

Themselves

Because sponsors received lower federal reimbursements for their

Summer Food Service Programs in 1997 and 1998, some adjusted their

programs to lower their costs, according to many officials interviewed in

our nationwide survey and the sponsors we visited. Frequently reported

changes were to lower meal, labor, and/or location costs. Nevertheless,

more sponsors reported operating costs that exceeded their

reimbursements in 1997 than in 1996.

Some Sponsors Made

Program Changes to Lower

Costs

In our telephone survey, officials in 24 states reported that there were

program changes resulting from the loss of federal funds that were not

related to the number of sponsors and children participating in the

program. Some sponsors also told us that they made changes to mitigate

the effects of the reduction. Following are frequently mentioned changes

and examples of how these changes were implemented:

• Meal changes. The Maine program director reported that sponsors in his

state had to select their food more cautiously, favoring less costly items.

Wisconsin officials said sponsors provided more prepackaged juices in

place of fruit and vegetables to decrease labor and food costs. In Hawaii,

where the Department of Education prepares the food for sponsors to

distribute, an official said that while the Department did not change the

entree or fruit/vegetable servings, it did serve smaller bread and dessert

portions to save money. The Georgia director said that sponsors served

less fresh fruit and did not offer additional foods, such as desserts and

chips, as often as in the past.

• Staff adjustments. Several sponsors we visited reported decreasing their

labor costs in 1997 and/or 1998. For example, a school sponsor in South

Carolina decreased its workers’ salaries from $7.25 per hour to $6.25 per

hour. A school in Texas did not pay cafeteria personnel the cost-of-living

adjustments that they had received during the school year. A school in

Oregon hired fewer, less experienced staff and reduced their hours.

• Fewer meal sites. According to Pennsylvania officials, sponsors had to

close or consolidate sites that were too expensive to operate. The small

sites that served only 15 to 20 children could not afford to provide meals at

the reduced rate. California officials also reported that some sponsors

closed sites they could no longer afford to operate. For example, one

school sponsor closed three of its six sites because it could no longer

afford the labor costs. One of the largest sponsors in Texas, a school

Page 15 GAO/RCED-99-20 Welfare Reform
B-281248 

district, closed almost all the sites that served fewer than 50 children a day

in 1997, and almost all the sites that served fewer than 100 children a day

in 1998. However, the total number of children served by the sponsor has

increased since 1996.

More Sponsors Report

Costs Higher Than the

Reimbursements in 1997

Than Before the Reduction

More sponsors submitted operating costs that exceeded their federal

reimbursements in fiscal year 1997 than in 1996. This means that more

sponsors are covering some of the cost of operating the program with

other funds. In 1996, prior to the rate decrease, 30 percent (1,084) of

sponsors were reimbursed for all their reported program costs because

these costs were equal to or lower than the maximum reimbursements

(total meals multiplied by the reimbursement rates). The remaining

70 percent, or 2,565 sponsors, reported costs exceeding their federal

reimbursements. In 1997, fewer sponsors—25 percent (966)—were

reimbursed for their reported costs, while more sponsors—75 percent

(2,831)—reported costs that exceeded their reimbursements. These totals

include sponsors that dropped out of the program after 1996 and new

sponsors in 1997.14 The limited impact on the number of sponsors,

children, and meals served that has been observed to date is due in part to

sponsors’ continuing to contribute funds to offset the decreased

reimbursements. Appendix IV provides more details on the type of

sponsors that reported operating costs in excess of their reimbursements.

Agency Comments We provided USDA with copies of a draft of this report for review and

comment. We met with Food and Nutrition Service officials, including the

Branch Chief for Program Analysis and Monitoring Branch, Child Nutrition

Division, who generally agreed with the report’s findings and provided us

wih a number of technical comments that we incorporated into the report

as appropriate.

We are sending copies of this report to appropriate congressional

committees, interested Members of Congress, the Secretary of Agriculture,

and other interested parties. We will also make copies available upon

request.

14These totals do not include 104 sponsors in 1996 and 78 sponsors in 1997 because the state-provided

data show that these sponsors received more in reimbursements than the costs they reported.

Page 16 GAO/RCED-99-20 Welfare Reform
B-281248 

If you have any questions about this report, please call me at

(202) 512-5138. Major contributors to this report are listed in appendix V.

Sincerely yours,

Lawrence J. Dyckman

Director, Food and

 Agriculture Issues

Page 17 GAO/RCED-99-20 Welfare Reform
Contents

Letter 1

Appendix I 

Objectives, Scope and

Methodology

20

Appendix II 

Information on the

Dropout Rates for

Various Types of

Sponsors in Fiscal

Years 1996 and 1997

23

Appendix III 

The Number of

Children Served by

Sponsors That

Dropped Out of the

Program

25

Appendix IV 

Sponsors That

Reported Program

Costs Exceeding the

Maximum Federal

Reimbursements

27

Appendix V 

Major Contributors to

This Report

28

Page 18 GAO/RCED-99-20 Welfare Reform
Contents

Tables Table 1: Reimbursement Rates, per Meal Served, 1996-98 5

 Table 2: Size of Sponsors’ Programs in Terms of Children Served,

1996 and 1997

7

 Table 3: Size of Sponsors’ Programs in Terms of Meals Served,

Fiscal Years 1996 and 1997

8

 Table 4: Reasons Sponsors Dropped Out of the Program Since

the Reduced Reimbursements

9

 Table II.1: Number and Percent of Sponsors That Dropped Out of

the Program by Number of Children Served in July, Fiscal Years

1996 and 1997

23

 Table II.2: Number and Percent of Sponsors That Dropped Out of

the Program by Number of Meals Served, Fiscal Years 1996 and

1997

23

 Table II.3: Number of Sponsors and Percent of Sponsors That

Dropped Out of the Program by Type of Sponsor, Fiscal Years

1996 and 1997

24

 Table III.1: Estimates of the Number of Children Served by 1996

Sponsors That Did Not Continue in 1997 Because of the Rate

Reductions and other Reasons and of the Number of Those

Children Who Did and Did Not Have Access to the Program in

1997

25

 Table III.2: Estimates of the Number of Children Served by 1997

Sponsors That Did Not Continue in 1998 Because of the Rate

Reductions and Other Reasons and of the Number of Those

Children Who Did and Did Not Have Access to the Program in

1998

26

 Table IV.1: Sponsors Reporting Program Costs That Exceeded

the Maximum Federal Reimbursements, by Participation

Category, Fiscal Years 1996 and 1997

27

 Table IV.2: Sponsors That Reported Program Costs Exceeding

the Maximum Federal Reimbursements, by Type of Sponsor,

Fiscal Years 1996 and 1997

27

Figures Figure 1: Rate of Change in Sponsors’ Participation, 1991-98 6

Figure 2: Rate of Change in the Average Number of Children

Served Daily, 1991-97

11

Figure 3: Rate of Change in All Meals and Meals, Excluding

Snacks, Fiscal Years 1991-97

14

Abbreviations

USDA U.S. Department of Agriculture

Page 19 GAO/RCED-99-20 Welfare Reform
Appendix I 

Objectives, Scope and Methodology

Because of questions raised about the impact that the reduction in the

meal reimbursement rate might have had on the Summer Food Service

Program, the Chairman of the House Committee on Education and the

Workforce asked us to report on (1) the number and characteristics of

sponsors participating in and dropping out of the program before and after

the decrease in reimbursements, (2) the number of children and meals

served by the program before and after the reduction, and (3) the changes

sponsors made to their program as a result of the reduced

reimbursements.

To address these objectives, we conducted three nationwide surveys with

officials from the 50 states.1

 First, we conducted a telephone survey to

gather information and views on the impact of the rate reduction on

sponsors, children, and meals.

Second, we sent a mail survey to officials in the 50 states to collect

detailed fiscal year 1996 and 1997 data on their sponsors. The survey

covered the number of meals, sites, July’s average daily attendance, and

reported operating costs and reimbursements. State officials were also

asked to identify (1) sponsors that dropped out of the program after 1996,

(2) the major reason for dropping out, (3) the number of sites picked up by

another sponsor, and (4) the portion of the children served by a new

sponsor.

For states that did not identify the sponsors that dropped out, we

identified these sponsors by using financial and other data provided by the

states. Two states did not provide average daily attendance for both years,

and several provided different measures for attendance.2

 In March 1998,

we testified on the preliminary results of these surveys.3

Third, we sent a mail survey to the 50 states to collect their 1998 data. This

third survey was aimed primarily at collecting information on the

(1) number of sponsors that dropped out of the program after 1997,

1

The District of Columbia participated in the telephone survey but did not provide sufficient

information requested in the other surveys so that it could be included in our analysis.

2

New Jersey did not provide any data for average daily attendance in July for 1996 or 1997. Arkansas

did not provide average daily attendance in July for 1997. Delaware (1996 only), Florida, and Oregon

provided average daily attendance for the year. Mississippi provided attendance for June; Colorado

provided average daily participation, which is different from average daily attendance. Illinois

provided estimates of average daily participation; Texas provided a participation figure reflecting the

sponsors’ week of highest attendance.

3

Welfare Reform: Effects of Changes Made to the Summer Food Service Program,

(GAO/T-RCED-98-120, Mar. 10, 1998).

Page 20 GAO/RCED-99-20 Welfare Reform
Appendix I 

Objectives, Scope and Methodology

(2) reasons they dropped out, and (3) number of children who lost access

to the program. To estimate the number of children who lost access to the

program, we assigned percentages to the various response categories. For

example, if state officials reported that “all or almost all” of participants

were picked up by another sponsor, then we estimated that 95 percent of

the participants had program access through another sponsor and

5 percent lost access to the program.4

We combined the 1996, 1997, and 1998 data provided by the states to

provide a picture of welfare reform to date. For example, we determined

the percentage of sponsors that reported costs higher than their

reimbursements prior to and after the rate reductions.

Although we did not verify the accuracy of all the data provided by the

states for each of the over 4,000 sponsors, we did conduct a variety of tests

to verify the data’s internal consistency. For example, we ensured that for

sponsors categorized as dropping out after fiscal year 1996 there were no

1997 reimbursement data. We also identified any sponsors for which the

data provided were outside of expected ranges. Where possible, we

contacted the states to correct obvious errors. For a small percentage of

sponsors, the state-provided information suggests the sponsors may have

been overpaid. For example, some sponsors received reimbursements in

excess of the costs they reported. A listing of these sponsors and their data

will be provided to USDA for further review. We also compared our state

data on the number of meals served in 1996 and 1997 with USDA’s data on

the number of meals served for 1996 and 1997. Our total was generally

within 5 percent of USDA’s total.5

To determine the changes sponsors made to their program because of the

reduced rates, we selected 20 sponsors to study in greater detail. These

sponsors—in California, Illinois, Oregon, Pennsylvania, South Carolina,

and Texas—were selected to represent a variety of sponsor sizes and

types (e.g., school, nonprofit, and government) in both rural and urban

areas. We conducted in-depth, in-person interviews with these sponsors to

determine the changes they had made to their programs in response to

rate reductions. We observed the operation of the program—including

4

If “more than half” was reported as picked up by another sponsor, we estimated that 75 percent had

program access and 25 percent did not. Our estimates for other categories’ access were (1) “about

half”—50 percent had access and 50 percent did not; (2) “less than half”—25 percent had access and

75 percent did not; and (3) “few, if any”—5 percent had access and 95 percent did not.

5

For the following states, our data for total meals were more than 5 percent different from USDA’s data

for 1 or both years: Alaska, Hawaii, North Dakota, New Hampshire, Oklahoma, and Vermont.

Page 21 GAO/RCED-99-20 Welfare Reform
Appendix I 

Objectives, Scope and Methodology

meals being prepared by vendors, transported to sites, and eaten by

children at 17 sites.

In addition to conducting these in-depth studies and three surveys, we

interviewed officials from USDA’s Food and Nutrition Service, the American

School Food Service Association, and the Food Research and Action

Center. We also reviewed related legislation, USDA documents—such as

program guidance and budget data—and studies conducted by

associations and states.

We conducted our review from October 1997 through October 1998 in

accordance with generally accepted government auditing standards.

Page 22 GAO/RCED-99-20 Welfare Reform
Appendix II 

Information on the Dropout Rates for

Various Types of Sponsors in Fiscal Years

1996 and 1997

This appendix provides information for 1996 and 1997 on the total number

of sponsors and the percent of sponsors that dropped out of the program

in terms of the (1) number of children served, (2) number of meals served,

and (3) type of sponsor.

Table II.1: Number and Percent of Sponsors That Dropped Out of the Program by Number of Children Served in July, Fiscal

Years 1996 and 1997

Fiscal year 1996 Fiscal year 1997

Average number of

children served daily in

July All 1996 sponsors

Percent of 1996

sponsors that dropped

out in 1997 All 1997 sponsors

Percent of 1997

sponsors that dropped

out in 1998

None—no July program 259 15 341 12

1 - 75 909 16 971 12

76 - 299 1,192 9 1,242 8

300 - 999 732 6 770 5

1,000 or more 418 5 449 2

Note: 1996 and 1997 sponsors in New Jersey and 1996 sponsors in Arkansas are excluded from

this table because data were not provided.

Table II.2: Number and Percent of Sponsors That Dropped Out of the Program by Number of Meals Served, Fiscal Years

1996 and 1997

Fiscal year 1996 Fiscal year 1997

Number of meals served All 1996 sponsors

Percent of 1996

sponsors that dropped

out in 1997 All 1997 sponsors

Percent of 1997

sponsors that dropped

out in 1998

Fewer than 3,500 meals 952 17 1,035 15

3,500 to 9,999 meals 1,208 10 1,211 8

10,000 to 29,999 meals 933 6 964 3

30,000 or more meals 658 5 663 4

Page 23 GAO/RCED-99-20 Welfare Reform
Appendix II 

Information on the Dropout Rates for

Various Types of Sponsors in Fiscal Years

1996 and 1997

Table II.3: Number of Sponsors and Percent of Sponsors That Dropped Out of the Program by Type of Sponsor, Fiscal

Years 1996 and 1997

Fiscal year 1996 Fiscal year 1997

Sponsor type All 1996 sponsors

Percent of 1996

sponsors that dropped

out in 1997 All 1997 sponsors

Percent of 1997

sponsors that dropped

out in 1998

School 1,665 9 1,747 6

Government 670 10 662 7

Private nonprofit 572 19 600 16

Camp 728 5 743 6

National Youth Sports

Program 117 3 123 4

Page 24 GAO/RCED-99-20 Welfare Reform
Appendix III 

The Number of Children Served by Sponsors

That Dropped Out of the Program

This appendix provides information on the number of children served by

sponsors that dropped out of the program who did and did not have access

to the program through other sponsors.

Table III.1: Estimates of the Number of Children Served by 1996 Sponsors That Did Not Continue in 1997 Because of the

Rate Reductions and Other Reasons and of the Number of Those Children Who Did and Did Not Have Access to the

Program in 1997

Total

Had access to the 1997

program through another

sponsor

Did not have access to the

1997 program 1997 access was unknown

Children served in 1996 by sponsors that did not continue in 1997

Reasons

sponsors

dropped out of

program Number Percent Number Percent Number Percent Number Percent

Rate reductions 4,559 100 2,621 57 823 18 1,115 24

Other known

reasonsa 68,700 100 31,448 46 15,591 23 21,661 31

Unknown 44,965 100 190 <1 823 2 43,952 98

All reasons 118,224 100 34,258 29 17,238 15 66,728 56

aThese other known reasons include low participation, personnel loss, and construction.

Notes: Numbers may not add due to rounding.

For each sponsor that dropped out, state officials provided an estimate of the portion of

participants served by the sponsor who were served by other sponsors in the next year. We

assigned the following percentages to the various response categories: (1) “all or almost

all”—95 percent had access and 5 percent did not; (2) “more than half”—75 percent had access

and 25 percent did not; (3)”about half”—50 percent had access and 50 percent did not; (4) “less

than half”—25 percent had access and 75 percent did not; and (5) “few, if any”—5 percent had

access and 95 percent did not.

In 1996, 38 of the dropouts did not operate in July. An additional 19 sponsors were in New Jersey

or Arkansas, which did not provide data on the number of children served. These 57 sponsors

served 336,744 meals in 1996, or 6 percent of all meals served by dropouts. Two of the 24

sponsors that left because of the rate reduction did not operate in July.

Page 25 GAO/RCED-99-20 Welfare Reform
Appendix III 

The Number of Children Served by Sponsors

That Dropped Out of the Program

Table III.2: Estimates of the Number of Children Served by 1997 Sponsors That Did Not Continue in 1998 Because of the

Rate Reductions and Other Reasons and of the Number of Those Children Who Did and Did Not Have Access to the

Program in 1998

Total

Had access to the 1998

program through another

sponsor

Did not have access to the

1998 program 1998 access was unknown

Children served in 1997 by sponsors that did not continue in 1998

Reasons

sponsors

dropped out of

program Number Percent Number Percent Number Percent Number Percent

Rate reductions 2,926 100 1,963 67 780 27 183 6

Other known

reasonsa 47,243 100 25,807 55 15,507 33 5,928 13

Unknown 8,393 100 4,183 50 1,695 20 2,515 30

All reasons 58,562 100 31,954 55 17,983 31 8,626 15

aThese other reasons include low participation, personnel loss and construction.

Notes: Numbers may not add due to rounding.

For each sponsor that dropped out, state officials provided an estimate of the portion of

participants served by the sponsor that was served by other sponsors in the next year. We

assigned the following percentages to the various response categories: (1) “all or almost

all”-95 percent had access and 5 percent did not; (2) “more than half”-75 percent had access and

25 percent did not; (3)”about half”—50 percent had access and 50 percent did not; (4) “less than

half”—25 percent had access and 75 percent did not; and (5) “few, if any”—5 percent had

access and 95 percent did not.

Some programs did not operate in July and are not included in this table. In 1997, 42 of the total

drop-outs did not operate in July. An additional four sponsors were in New Jersey, which did not

provide data on the number of children served. These 46 sponsors served 152,038 meals in 1997

or 5 percent of all meals served by drop-outs. All sponsors that left due to the rate reduction

operated in July.

Page 26 GAO/RCED-99-20 Welfare Reform
Appendix IV 

Sponsors That Reported Program Costs

Exceeding the Maximum Federal

Reimbursements

This appendix provides information, for fiscal years 1996 and 1997, on

sponsors reporting costs that exceeded the maximum federal

reimbursements, by participation category and by type of sponsor.

Table IV.1: Sponsors Reporting

Program Costs That Exceeded the

Maximum Federal Reimbursements, by

Participation Category, Fiscal Years

1996 and 1997

Percent of sponsors that reported

costs exceeding the maximum

reimbursements

Participation category

Number of

sponsors Fiscal year 1996 Fiscal year 1997

Dropped out between

1996 and 1997 370 76 N/A

Dropped out between

1997 and 1998 305 46a 76

Participated in 1996,

1997, and 1998 3,190 67 73

aOf the 305 sponsors that dropped out between 1997 and 1998, 3 percent did not participate in

the program in 1996.

Table IV.2: Sponsors That Reported

Program Costs Exceeding the

Maximum Federal Reimbursements, by

Type of Sponsor, Fiscal Years 1996

and 1997

Percent of sponsors reporting costs exceeding the

maximum federal reimbursements

Sponsor type Fiscal year 1996 Fiscal year 1997

School 62 66

Government 58 66

Private nonprofit 69 74

Camp 91 95

National Youth Sports

Program 68 75

Page 27 GAO/RCED-99-20 Welfare Reform
Appendix V 

Major Contributors to This Report

Thomas Slomba, Assistant Director

Leigh McCaskill White, Evaluator-in-Charge

Peter Bramble, Senior Evaluator

Fran Featherston, Senior Social Science Analyst

Alice Feldesman, Supervisory Social Science Analyst

Beverly Peterson, Senior Evaluator

Carol Herrnstadt Shulman, Communications Analyst

John W. Shumann, Evaluator

(150285) Page 28 GAO/RCED-99-20 Welfare Reform
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