Report to Congressional Requesters

United States General Accounting Office 

GAO 

May 2003 SCHOOL MEAL 

PROGRAMS 

Revenue and Expense 

Information from 

Selected States 

GAO-03-569 
Revenue from federal reimbursements and the sale of food were the 

principal sources of revenue for school food services in the six states GAO 

reviewed for school years 1996-97 through 2000-01. Federal reimbursements 

decreased slightly in proportion to the total, while revenues from food sales 

increased slightly. Funds from state governments and other sources 

represented a relatively small portion of total revenues and remained 

relatively stable as a share of total revenues. 

Labor and food purchases were the principal expenses for the six states, 

sharing nearly equal proportions and changing only slightly. Labor expenses, 

which included salaries and benefits for food service employees, grew 

slightly while food expenses decreased slightly. Other expenses, such as 

contract services, made up a smaller portion of expenses, and this portion 

remained constant. 

The six states had a small though increasing shortfall in total revenue 

compared to expenses over the 5-year period, as shown below. Their total 

expenses increased by about 22 percent, while their total revenues increased 

by about 20 percent. The portion of total school food service expenses 

covered by federal reimbursements declined from 54 to 51 percent, and the 

portion of expenses paid by state funds was small and declined slightly.

Changes in Total School Food Service Revenues and Expenses in Six States 

Dollars (in billions)

School year

Revenues

Expenses

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.

3.0

3.2

3.4

3.6

3.8

4.0

4.2

1996-97 1997-98 1998-99 1999-2000 2000-01

To limit their expenses and maximize their revenues, local school food 

authority officials reported buying food in bulk, hiring more part-time staff, 

expanding a la carte food sales and catering programs, and other strategies. 

The National School Lunch and 

Breakfast Programs provide 

millions of children with low-cost 

or free nutritious meals each 

school day. In school year 1996-97, 

the Department of Agriculture 

instituted more stringent 

requirements for the nutritional 

content of school meals. GAO was 

asked to study the school food 

service revenues and expenses and 

how they have changed since the 

requirements went into effect. This 

report includes information on the 

sources of revenues available for 

providing meals, the expenses of 

producing meals, the revenues 

compared to expenses, and the 

approaches that local school food 

authorities have adopted to manage

their school food service finances. 

It uses data from six selected 

states. This report does not provide 

specific information on the 

expense of producing a 

reimbursable school lunch or 

breakfast. 

www.gao.gov/cgi-bin/getrpt?GAO-03-569.

To view the full report, including the scope 

and methodology, click on the link above. 

For more information, contact David D. Bellis 

at (415) 904-2272. 

Highlights of GAO-03-569, a report to 

Congressional Requesters 

May 2003

SCHOOL MEAL PROGRAMS 

Revenue and Expense Information from 

Selected States 
Page i GAO-03-569 School Meal Programs 

Letter 1

Results in Brief 3

Background 5

Federal Reimbursements and Food Sales Were the Principal 

Sources of Revenue over the Period, with Slight Changes in 

Their Proportionate Share of the Total 8

Labor and Food Were the Principal School Food Service Expenses 

over the 5-Year Period, with Slight Changes in Their 

Proportionate Share of the Total 12

States Experienced a Small but Increasing Revenue Shortfall 16

States Used a Variety of Expense-Containment and RevenueProducing Strategies to Manage School Food Service Finances 20

Conclusions 24

Agency Comments and Our Evaluation 25

Appendix I Scope and Methodology 27 

Appendix II Federal School Meal Cash Reimbursement Rates, 

School Years 1996-97 through 2002-03 30 

Appendix III GAO Contact and Staff Acknowledgments 31 

GAO Contact 31

Staff Acknowledgments 31

Table 

Table 1: Minimum School Meal Programs Reimbursement Rates, 

School Year 2002-03 7

Figures 

Figure 1: Sources of Revenues for School Food Services in Six 

States, School Years 1996-97 through 2000-01 9

Figure 2: School Food Service Revenue Components as a 

Percentage of Total Revenues in Six States, School Years 

1996-97 through 2000-01 10

Contents 
Page ii GAO-03-569 School Meal Programs 

Figure 3: School Food Service Revenue Components by State, 

School Year 2000-01 12

Figure 4: School Food Service Expense Components in Six States, 

School Years 1996-97 through 2000-01 13

Figure 5: Changes in Proportion of School Food Service Expense 

Components in Six States, School Years 1996-97 through 

2000-01 14

Figure 6: School Food Service Expense Components by State, 

School Year 2000-01 15

Figure 7: Changes in Total School Food Service Revenues and 

Expenses in Six States, School Years 1996-97 through 

2000-01 17

Figure 8: Proportion of Total School Food Service Expenses Paid 

by Revenue Component in Six States, School Years 1996-

97 through 2000-01 18

Figure 9: Federal Reimbursements as a Percentage of Total School 

Food Service Expenses by State, School Years 1996-97 

and 2000-01. 20

Abbreviations

SFA school food authority 

USDA U.S. Department of Agriculture 

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Page 1 GAO-03-569 School Meal Programs 

May 9, 2003 

The Honorable Tom Harkin 

Ranking Minority Member 

Committee on Agriculture, 

 Nutrition, and Forestry 

United States Senate 

The Honorable Tom Daschle 

The Honorable Tim Johnson 

The Honorable Jay Rockefeller 

United States Senate 

The National School Lunch and the School Breakfast Programs provide 

millions of children with nutritious meals each school day. The U.S. 

Department of Agriculture’s (USDA) Food and Nutrition Service provides 

states with federal cash reimbursements for each meal served that meets 

federal requirements.1

 USDA also provides states with donated 

commodities for each school lunch served. Any child at a participating 

school may purchase these meals, and children from certain low-income 

households may receive the meals free or at a reduced price. A 

comprehensive study conducted a decade ago concluded that the 

combined federal reimbursements paid to states for the free breakfasts 

and lunches that students received covered the expenses of producing 

them.2

 However, the study was conducted before USDA established more 

stringent requirements for the nutritional content of school meals, 

beginning in school year 1996-97. The effect of these revised requirements 

on school food service finances is not known. Meanwhile, a recent rise in 

 1

School lunches, for example, must meet the applicable recommendations of the Dietary 

Guidelines for Americans, which recommend that no more than 30 percent of an 

individual’s calories come from fat and less than 10 percent from saturated fat. Regulations 

also establish a standard for school lunches to provide one-third of the Recommended 

Dietary Allowances of protein, Vitamin A, Vitamin C, iron, calcium, and calories. When 

schools serve meals that do not comply with federal nutrition requirements, program 

regulations allow the states to withhold federal reimbursements if the schools have not 

been acting in good faith to meet the requirements. However, USDA officials questioned 

whether holding back federal reimbursements offers a practical or realistic solution 

because of the possibility of program cutbacks or closure and the effect on the students, 

especially those receiving free or reduced price lunches. 

2

Abt. Associates, Inc., School Lunch and Breakfast Cost Study - Final Report, a special 

report prepared at the request of USDA, Oct. 1994. 

United States General Accounting Office 

Washington, DC 20548 
Page 2 GAO-03-569 School Meal Programs 

the percentage of children who are overweight or obese underscores the 

importance of these programs, since they are designed to provide children 

with nutritionally balanced meals and to help them develop healthy eating 

habits.3

To participate in these programs, states provide a partial match to the 

federal reimbursements. They usually fund and operate the programs 

through their departments of education, which in turn have agreements 

with school food authorities (SFA). SFAs are local offices that are 

responsible for the administration of school food services in one or more 

schools. In addition to receiving federal cash reimbursements and state 

funds, SFAs may also receive funds from student and adult food sales and 

other sources, such as catering services, interest on deposits, and 

revenues from the sale of used equipment. 

In view of the revised nutritional requirements, you asked us to study 

school food service revenues and expenses since the requirements went 

into effect. The objective of this report is to provide detailed information 

from school years 1996-97 through 2000-01 on the (1) sources of revenues 

available for providing school meals and how they have changed; (2) 

school food service expenses of producing meals and how they have 

changed; (3) school food service revenues, and particularly federal 

reimbursements, compared to the expenses of producing meals over this 

period; and (4) approaches that SFAs have adopted to manage their school 

food service finances. We are also issuing two other school meal related 

reports, one addresses the safety of the school meals and the other covers 

the efforts to serve nutritious meals and promote healthy eating in 

schools.4

To address each of these objectives, we collected and analyzed school 

year 1996-97 through 2000-01 revenue and expense data as reported to 

state agencies by all public school SFAs located in six states: Florida, 

Missouri, New York, Ohio, Texas, and Virginia. We selected these states 

 3

The percentage of children ages 6 to 11 who are overweight has more than doubled, from 

about 7 percent in 1980 to about 14 percent in 1999, and the incidence of Type II diabetes—

closely associated with obesity—has increased from 4 to 20 percent over the last decade. 

4

U.S. General Accounting Office, School Meal Programs: Few Instances of Foodborne 

Outbreaks Reported, but Opportunities Exist to Enhance Outbreak Data and Food Safety 

Practices, GAO–03-530 (Washington, D.C.: May 9, 2003) and School Lunch Program: 

Efforts Needed to Improve Nutrition and Encourage Healthy Eating, GAO-03-506

(Washington, D.C.: May 9, 2003). 
Page 3 GAO-03-569 School Meal Programs 

because, of those states able to provide us with the needed data, they had 

the highest school meal programs reimbursement amounts in six of the 

Food and Nutrition Service’s seven regions.5

 As a group, the six states 

received about 30 percent of the total federal school lunch and breakfast 

reimbursement funds dispersed nationwide in fiscal year 2001. In addition, 

we interviewed each of the six states’ school food service directors, and 12 

local SFA directors (2 in each state), to obtain information on approaches 

they took to manage their school food service finances in light of their 

overall revenue and expense picture.6

 We did not verify the information 

collected for this study. However, we reviewed the data we collected for 

reasonableness and followed up where appropriate. Moreover, the data we 

collected provided information on SFA revenues and expenses but did not 

permit us to calculate the cost of producing a reimbursable meal. A more 

detailed description of our study methodology is provided in appendix I. 

The results of the financial data in our study are reported in nominal 

dollars that can be generalized only for those states included in our 

review. We conducted our work between October 2002 and March 2003 in 

accordance with generally accepted government auditing standards. 

The principal sources of revenue for school food services in the six states 

combined for school years 1996-97 through 2000-01 were federal 

reimbursements and food sales; their proportionate share changed slightly 

over the 5-year period, with federal revenues decreasing from 55 to 53 

percent of total revenues and food sales increasing from 38 to 39 percent 

of total revenues. Specific to food sales, revenue from a la carte foods, 

which are food items sold separately from the school meal programs and 

therefore not eligible for federal reimbursement, increased from about 40 

percent of total food sales to about 43 percent over the period. Funds from 

state governments and other sources represented a relatively small portion 

of total revenues. Combined, total revenues grew from about $3.4 billion 

to about $4 billion in the six states over the period. While federal 

reimbursements and sales were consistently the largest revenue sources in 

 5

We also requested the same data from California, the state in the seventh Food and 

Nutrition Service region with the highest school meal reimbursement amount; however, 

state officials were not able to provide us with the needed data. USDA does not require 

these data, and not all states collect them. 

6

We were also able to interview the California state director and 2 local SFA directors, and 

we include their responses in objective 4. 

Results in Brief 
Page 4 GAO-03-569 School Meal Programs 

each of the six states, their share of total revenues varied considerably by 

state. 

Labor and food purchases were the principal expenses in the six states 

combined, sharing nearly equal proportions and changing slightly over the 

period. Labor expenses, which include salaries and benefits for food 

service employees, grew from about 43 percent of total expenses to 44 

percent. Food, which includes the value of USDA-donated commodities as 

well as purchased food, decreased from about 42 to 41 percent of total 

expenses during the period. Other expenses, such as contract services and 

capital expenditures, remained constant at about 15 percent of total 

expenditures. Combined, total school food service expenses increased 

from about $3.4 billion to about $4.1 billion over the period. While labor 

and food represented the principal expenses of school food services 

across the six states, their share of total expenses varied somewhat by 

state. There were greater variations among the states, however, in the 

proportion of their labor expenses made up of salaries and benefits. For 

example, in New York salaries and benefits ranged from about 90 and 10 

percent respectively, while in Florida they ranged from about 74 and 26 

percent respectively. 

The six states’ SFAs had a small though increasing shortfall in their total 

revenues compared to expenses over the 5-year period. Their total 

expenditures increased by about 22 percent, while their total revenues 

increased by about 20 percent. Although the federal reimbursements are 

adjusted annually for inflation, the portion of total school food service 

expenses they covered declined from 54 to 51 percent. The portion of total 

expenses covered by state funds declined by less than 1 percentage point 

to less than 3 percent. At the same time, the portion of expenses paid by 

other sources of revenue increased slightly, and the portion of expenses 

paid by revenues from school food service sales remained essentially 

unchanged over the period. We cannot determine the reason for the 

decline in the portion of total expenses covered by federal 

reimbursements because of data limitations. However, the decline in the 

portion of total expenses covered by state funds is likely a result of the 

federal method of calculating the state matching contributions, which are 

based on school year 1980-81 data and are not adjusted for inflation. 

Finally, the percentage of total expenses covered by federal 

reimbursements varied by state. 

Local SFA officials reported adopting a variety of measures to both limit 

expenses and enhance revenues in order to manage their school food 

service finances. To contain expenses, they focused primarily on food and 
Page 5 GAO-03-569 School Meal Programs 

labor costs. To reduce food costs, for example, they purchased food in 

bulk, found new ways to shop for lower-priced foods, and planned menus 

around USDA-donated commodities. To contain labor costs, they reduced 

staff numbers, replaced full-time staff with part-time staff, and served 

more pre-packaged foods that required less preparation. To increase 

revenues, they reported efforts to encourage more students to purchase 

their meals at school, such as increasing the number of food choices and 

enhancing the atmosphere of the school cafeteria. Officials also reported 

expanding their a la carte sales and catering. Raising school meal prices, 

another option for increasing revenues, was viewed as a last resort by 

most officials. Despite these strategies, many SFAs experienced year-end 

shortfalls, which were covered by their school districts’ general revenue 

funds. However, some SFA officials expressed concern that their districts 

are also facing tighter budgets and may not be able to absorb the shortfalls 

in the future. 

The National School Lunch Act and the Child Nutrition Act of 1966 

authorized the school lunch and school breakfast programs, respectively.7

These school meal programs provide federal cash reimbursements to help 

states pay for nutritious lunches and breakfasts for children in 

participating public and private schools and residential child care 

institutions. The federal per meal cash reimbursement is adjusted annually 

for inflation.8

 Administered by the USDA’s Food and Nutrition Service, the 

school meal programs are usually operated by state departments of 

education that have agreements with about 20,000 SFAs to provide the 

meals. SFAs that choose to take part in the school meal programs receive 

a federal cash reimbursement for each qualifying school lunch and 

breakfast they serve to children. SFAs participating in the school lunch 

program may also receive a federal reimbursement for snacks served to 

children participating in supervised after school educational or 

enrichment activities. These school meal programs are available in the 50 

 7

The National School Lunch Act, as amended (42 U.S.C. 1751-1769), and the Child Nutrition 

Act of 1966, as amended (42 U.S.C. 1773). 

8

School lunch and breakfast reimbursement rates are adjusted annually by law to reflect 

the programs’ operating expenses as indicated by the change in the series for food away 

from home of the Consumer Price Index for all Urban Consumers, published by the Bureau 

of Labor Statistics of the U.S. Department of Labor. 

Background 
Page 6 GAO-03-569 School Meal Programs 

states and the District of Columbia, Guam, Puerto Rico, and the Virgin 

Islands.9

The amount that SFAs may charge for their school meals depends on the 

family income of participating children.10 SFAs may charge for school 

meals according to the following categories: 

• Full price meals. Children from families with incomes above 185 

percent of the poverty level pay the meal price set by their SFA. There 

are no set limits on the amount that schools may charge students for a 

full price meal; however, participating SFAs must agree to operate a 

nonprofit school food service. 

• Reduced price meals. Children from families with incomes between 

130 percent and 185 percent of the poverty level may not be charged 

more than 40 cents for lunch and 30 cents for breakfast. 

• Free meals. Children from families with incomes at or below 130 

percent of the poverty level receive their meals free. 

To receive federal reimbursement, SFAs must process an individual 

household application for most participants in the free and reduced price 

programs,11 verify eligibility for at least a sample of households that apply, 

and keep daily track of school meals provided by eligibility category. 

The levels of federal reimbursement per meal also vary according to the 

three categories. According to USDA, the per meal federal cash 

reimbursement is intended to cover the average expense of producing a 

school meal nationwide. The reimbursement rates shown in table 1 are the 

minimum amounts reimbursed to the contiguous states. Alaska and Hawaii 

receive higher reimbursement rates. Higher reimbursement rates are also 

 9

The programs are also available to the children of armed forces personnel who attend 

schools overseas operated by the U.S. Department of Defense. 

10After school snack reimbursements are provided to SFAs on the same basis as the income 

eligibility categories for school meals. 

11In some cases, SFAs are not required to process an application. For example, children 

from households that participate in the Food Stamp Program, Temporary Assistance for 

Needy Families, or Food Distribution Program on Indian Reservations, are categorically 

eligible to receive free school meals and their families may not have to complete an 

application. 
Page 7 GAO-03-569 School Meal Programs 

established for SFAs in certain low-income areas and districts identified 

by states as having critical needs. 

Appendix II provides a more detailed listing of the school meal programs 

reimbursement rates and how they varied for school years 1996-97 through 

2002-03. 

Table 1: Minimum School Meal Programs Reimbursement Rates, School Year 

2002-03 

Minimum reimbursement rates 

Reimbursement category Lunch Breakfast Snack

Full price $0.20 $0.22 $0.05

Reduced price 1.74 0.87 0.29

Free 2.14 1.17 0.58

Source: USDA. 

SFAs also receive revenues from states for their school meal programs. As 

a requirement of participation, states must provide annual revenues for 

their school lunch program operations.12 SFAs may also generate revenues 

by offering fee-based catering services and selling a la carte foods, which 

are food items that are sold separately from the school meal programs and 

therefore not eligible for federal reimbursement, as other methods of 

increasing their school food service revenues. Finally, SFAs may receive 

other cash revenues, such as the interest on deposits, and revenues from 

the sale of used equipment. In addition to cash reimbursements, SFAs may 

also receive donated commodity foods13 from USDA, valued in school year 

2002-03 at 15.5 cents for each lunch served in the previous school year. 

 1242 U.S.C. 1756 requires, generally, that states annually provide revenues for the operation 

of the School Lunch Program of not less than 30 percent of a portion of the federal 

reimbursements they received for the school year beginning July 1, 1980. 

13One of the 50 states receives cash in lieu of USDA commodities. Schools may also receive 

“bonus” commodities, as they are available from surplus agricultural stock. 
Page 8 GAO-03-569 School Meal Programs 

Federal reimbursements and sales revenues, which include student and 

adult meal payments, were the largest sources of school food service 

revenues in the six states during school years 1996-97 through 2000-01, 

with the share of federal reimbursements declining slightly and sales 

revenues increasing slightly. Funds from state governments and other 

sources represented a small portion of total revenues during this period. 

Specific to sales revenues, student payments for a la carte sales increased 

as a percentage of total school food service sales revenue. Finally, 

although federal reimbursements and revenues from sales were 

consistently the most significant revenue sources in each of the six states, 

their share of total revenues varied considerably by state. 

Total school food service revenues reported by the six states increased 

from about $3.3 billion in school year 1996-97 to almost $4 billion in school 

year 2000-01. Federal reimbursements, including the value of donated 

USDA commodities, accounted for the largest share of revenues. Sales 

revenues, which include student and adult (e.g., schools administrators, 

teachers, and parents) payments, were the second largest source of 

revenues in these states. Revenues from state and local governments and 

other sources, which include catering services, interest on deposits, and 

the sale of used equipment, provided a relatively small portion of total 

revenues.14 Figure 1 shows the various sources of revenues for school 

years 1996-97 through 2000-01. 

 14Available school meal program funds may also include unused program revenues, 

referred to as carryover, from prior school years, and unreported contributions from local 

governments, individuals, and other sources. 

Federal 

Reimbursements and 

Food Sales Were the 

Principal Sources of 

Revenue over the 

Period, with Slight 

Changes in Their 

Proportionate Share 

of the Total 

School Food Service 

Revenues Come Primarily 

from Two Sources 
Page 9 GAO-03-569 School Meal Programs 

Figure 1: Sources of Revenues for School Food Services in Six States, School 

Years 1996-97 through 2000-01 

As figure 2 shows, federal reimbursements declined modestly in 

proportion to total school food service revenues during school years 1996-

97 through 2000-01. Federal reimbursements’ share of total revenues 

decreased from about 55 to 53 percent. Conversely, during this period, 

revenues from food sales in relation to total revenues increased slightly 

from about 38 to 39 percent. Moreover, there was a less than 1 percentage 

point decrease in state funds to about 3 percent over this period and a 1 

percentage point increase in other revenues to about 5 percent. 

Federal Revenues 

Declined Slightly in 

Relation to Total 

Revenues, While Sales 

Revenues Increased 

Slightly 

0

0.5

1.0

1.5

2.0

2.5

1996-97 1997-98 1998-99 1999-2000 2000-01

Dollars (in billions)

School year

Federal reimbursements

Sales revenues

State funds

Other funds

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.
Page 10 GAO-03-569 School Meal Programs 

Figure 2: School Food Service Revenue Components as a Percentage of Total 

Revenues in Six States, School Years 1996-97 through 2000-01 

Specifically regarding revenue from food sales, information from five 

states that were able to separate the payments for a la carte foods from 

other meal sales showed an increase in a la carte revenues from about 40 

percent of total sales revenues in school year 1996-97 to about 43 percent 

of total sales revenues in school year 2000-01. Because a la carte foods are 

not part of the school meal programs, they are not covered by the 

programs’ nutritional requirements. As a result, some a la carte foods are 

nutritious, while others may have limited nutritional value.15

 15For more information on the use of a la carte foods in schools and their implications for 

children’s food choices, see GAO-03-506. 

Percentage

School year

Federal reimbursements

Sales revenues

State funds

Other funds

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.

0

5

10

1996-97 1997-98 1998-99 1999-2000 2000-01

30

40

50

60
Page 11 GAO-03-569 School Meal Programs 

Although federal reimbursements and sales comprised the principal 

source of revenues for the school food services in each of the six states, 

their share of total revenues varied from state to state. As shown in figure 

3, during school year 2000-01, federal reimbursements as a share of total 

revenue ranged from about 59 percent in Texas to about 39 percent in 

Ohio. A number of factors may be responsible for the variation in the 

share of federal reimbursements to total revenues reported across the six 

states. For example, a state may have a high proportion of low-income 

students that qualify for free or reduced price meals that receive a higher 

federal reimbursement rate, thereby increasing the relative share of its 

federal reimbursements. Another reason may be higher a la carte food 

sales that could increase the proportion of revenue from nonreimbursable 

food sales. Differences in the extent to which states utilize available USDA 

commodities may also account for some of the variation in federal 

reimbursements as a share of total revenues between states. However, 

because of data limitations, we cannot determine the reason for the 

variation. Sales revenues ranged from about 30 percent of total revenues 

in New York to about 56 percent in Ohio during the period. State revenues 

ranged from about 1 percent of total revenues in Missouri to about 6 

percent in New York. Other revenues ranged from zero percent of total 

revenues in Missouri to almost 12 percent of total revenues in New York 

during the period. 

Share of Federal 

Reimbursements and Sales 

Revenues to Total Revenue 

Varied Considerably 

among the States 
Page 12 GAO-03-569 School Meal Programs 

Figure 3: School Food Service Revenue Components by State, School Year 

2000-01 

Labor and food purchases accounted for most of the expenses of 

operating the school food services, with nearly equal shares of the 

expenditures and slight changes in their relative shares during school 

years 1996-97 through 2000-01. Other school food service expenses 

represented a smaller, but significant, portion of total expenditures. 

During this period, labor expenses slightly increased as a portion of total 

expenses, while food expenses slightly decreased. While labor and food 

were consistently the most significant expenses of operating the school 

food services in each of the six states, their share of total expenses varied 

somewhat by state. 

Labor and Food Were 

the Principal School 

Food Service 

Expenses over the 5-

Year Period, with 

Slight Changes in 

Their Proportionate 

Share of the Total 

0

10

20

30

40

50

60

Florida Missouri New York Ohio Texas Virginia

Percentage

Federal reimbursements

Sales revenues

State funds

Other funds

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.
Page 13 GAO-03-569 School Meal Programs 

Total school food service expenses reported by the six states have 

increased from about $3.4 billion to about $4.1 billion between school 

years 1996-97 and 2000-01. Labor and food purchases accounted for 

significant and nearly equal portions of the total expenses during the 

period. Labor expenses include the cost of salary and benefits of food 

service staff. Food expenses include the cost of purchased food and the 

value of USDA commodities used by schools in all food service activities. 

Finally, other school food service expenses, such as supplies, contract 

services, and capital expenditures, account for the remaining portion. 

Figure 4 shows the various expense components for school years 1996-97 

through 2000-01. 

Figure 4: School Food Service Expense Components in Six States, School Years 

1996-97 through 2000-01 

Labor and Food Accounted 

for a Significant Portion of 

Expenses 

0

0.5

1.0

1.5

2.0

1996-97 1997-98 1998-99 1999-2000 2000-01

Dollars (in billions)

School year

Labor

Food

Other

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.
Page 14 GAO-03-569 School Meal Programs 

As shown in figure 5, as a percentage of total school food service 

expenses, labor costs increased slightly—from about 43 to about 44 

percent—during school years 1996-97 through 2000-01. Food expenses as a 

percentage of total expenses modestly decreased—from about 42 to about 

41 percent—during this period. Other expenses remained at about 15 

percent of the total throughout the period. 

Figure 5: Changes in Proportion of School Food Service Expense Components in 

Six States, School Years 1996-97 through 2000-01 

Specifically regarding labor expenses, salaries and benefits changed less 

than 1 percentage point during this period, with salary expenses 

comprising about four-fifths of total labor expenses and benefit expenses 

comprising about one-fifth of the total across the states. 

Labor Expenses Increased 

Slightly in Proportion to 

Total Expenses, While 

Food Expenses Decreased 

Slightly 

Percentage

Labor

Food

Other

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.

0

10

20

30

40

50

1996-97 1997-98 1998-99 1999-2000 2000-01

School year
Page 15 GAO-03-569 School Meal Programs 

While labor and food represented the principal school food service 

expenses across the six states, their share of total expenses varied by state 

as shown in figure 6. Labor expenses ranged from about 45 percent of total 

expenses in Missouri, Texas, and Virginia to about 42 percent of total 

expenses in Florida and New York. Food expenses ranged from about 45 

percent of total expenses in Missouri and Ohio to about 39 percent of total 

expenses in Florida in school year 2000-01. Other expenses ranged from 10 

percent of total revenues in Missouri to about 19 percent of total revenues 

in Florida during that school year. 

Figure 6: School Food Service Expense Components by State, School Year 2000-01 

Variations in the portion of labor expenses representing either benefits 

(e.g., health insurance and pensions) or salaries were more significant 

among the states. As a portion of total labor expenses, school year 2000-01 

salaries ranged from about 90 percent in New York to 74 percent in 

Florida; conversely, benefits ranged from about 26 percent in Florida to 10 

percent in New York. Over this period, the salary increases in two states—

Florida and New York—grew more quickly relative to their benefit 

increases, whereas benefits grew more quickly than salaries in the other 

Share of School Food 

Service Expense 

Components to Total 

Expenses Varied 

Somewhat among the 

States 

0

10

20

30

40

50

Florida Missouri New York Ohio Texas Virginia

Percentage

Labor

Food

Other

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.
Page 16 GAO-03-569 School Meal Programs 

four states. The salary increases in Florida and New York were responsible 

for the overall increase in salaries outpacing the overall increase in 

benefits across the six states. 

Total school food service expenses were greater than total revenues in 

school years 1996-97 through 2000-01, and the gap between expenses and 

revenues grew slightly over this period for the six states combined. 

Moreover, federal reimbursements paid a smaller portion of school food 

service expenses during the period, as did state revenues. Conversely, the 

portion of expenses paid by other sources of revenues slightly increased, 

while the portion of expenses paid by revenues from school food service 

sales remained essentially unchanged during the period. Finally, federal 

reimbursements as a percentage of total expenses varied considerably by 

state. 

During school years 1996-97 through 2000-01, total SFA expenses 

increased from about $3.4 billion to about $4.1 billion, or about 22 percent 

across the six states, while total SFA revenues increased from about $3.3 

billion to about $4.0 billion, or about 20 percent. As figure 7 indicates, the 

shortfall grew slightly over the 5-year period. 

States Experienced a 

Small but Increasing 

Revenue Shortfall 

School Food Service 

Expenses Have Slightly 

Outpaced Increases in 

Revenues 
Page 17 GAO-03-569 School Meal Programs 

Figure 7: Changes in Total School Food Service Revenues and Expenses in Six 

States, School Years 1996-97 through 2000-01 

As figure 8 shows, the proportion of total school food service expenses 

paid by federal reimbursements and state funds declined slightly during 

school years 1996-97 through 2000-01 for the six states combined. Federal 

reimbursements paid a smaller portion of total expenses, declining from 

about 54 to 51 percent. The proportion of total expenses paid by state 

funds also declined by less than 1 percentage point to less than 3 percent 

during the same period. Conversely, the proportion of total expenses paid 

from other funds grew by about 1 percentage point to almost 5 percent, 

while revenues from meal sales as a proportion of total expenses were 

essentially unchanged at about 38 percent during the period. 

Total School Food Service 

Expenses Covered by 

Federal Reimbursements 

and State Funds Have 

Declined 

Dollars (in billions)

School year

Expenses

Revenues

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.

3.0

3.2

3.4

3.6

3.8

4.0

4.2

1996-97 1997-98 1998-99 1999-2000 2000-01
Page 18 GAO-03-569 School Meal Programs 

Figure 8: Proportion of Total School Food Service Expenses Paid by Revenue 

Component in Six States, School Years 1996-97 through 2000-01 

The proportionate decline in federal reimbursement overall reflects the 

fact that total school food service expenses grew more quickly than 

federal reimbursement revenue. This may have occurred because the 

federal per meal reimbursement rate may not have risen as quickly as the 

cost per meal. However, without data on the average cost of reimbursable 

meals, we cannot determine if this is a reason for the decline. There are 

other possible reasons. For example, the growth in expenses may have 

exceeded the growth in federal reimbursement because schools are 

serving more a la carte foods, which could increase both expenses for 

nonreimbursable meals and revenue from nonreimbursable food sales, 

potentially decreasing the federal share. As another reason, a smaller 

proportion of students in an SFA may be eligible for or receiving free or 

reduced price school meals. 

The decrease in the share of expenses paid by state revenues is the result 

of the federal funding requirement for states. To participate in the school 

lunch program, states must provide annual matching cash contributions 

Percentage

0

10

20

30

40

50

60

1996-97 1997-98 1998-99 1999-2000 2000-01

School year

Federal reimbursements

Sales revenues

State funds

Other funds

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.
Page 19 GAO-03-569 School Meal Programs 

for program operations that equal 30 percent of the full price 

reimbursement for each eligible lunch they served in school year 1980-81.16

Because each state’s contribution is calculated on the fixed 1980-81 school 

year dollar amount, the contribution continues to decline each year as a 

share of the total school food service revenues and expenses. 

The proportion of expenses covered by federal reimbursements varied 

among the six states. As figure 9 shows, during school year 2000-01, 

federal reimbursements covered about 37 percent of total expenses in 

Ohio and about 59 percent of total expenses in Texas. There are several 

potential explanations for this difference. For example, suppose that the 

sale of a la carte foods as a percentage of total revenues is higher in one 

state than another. This means that the proportion of expenses covered by 

a la carte revenues is also higher for that state, and therefore the 

proportion of expenses covered by federal reimbursements is lower. 

Further, improvements in a state’s economic situation could result in 

fewer children eligible for free or reduced price meals. This change in 

eligibility category would result in schools receiving less federal 

reimbursement as a percentage of expenses. However, because of data 

limitations, we cannot determine specifically why the difference exists. 

Despite the variation among the states, the proportion of federal 

reimbursements as a percentage of total expenses was lower in school 

year 2000-01 than in school year 1996-97, ranging from less than 1 

percentage point in Texas to about 6 percentage points in Florida. 

 16The required contribution is reduced to less than 30 percent if a state’s average per capita 

personal income is lower than the national average. Of the six states, New York and 

Virginia had personal per capita incomes above the national average; Florida, Missouri, 

Ohio, and Texas had personal per capita incomes below the national average in 2001 

(Annual State Personal Income, Bureau of Economic Analysis, U.S. Department of 

Commerce: Feb. 6, 2003). 

Federal Reimbursements 

as a Percentage of Total 

Expenses Varied by State 
Page 20 GAO-03-569 School Meal Programs 

Figure 9: Federal Reimbursements as a Percentage of Total School Food Service 

Expenses by State, School Years 1996-97 and 2000-01. 

In an effort to minimize their revenue shortfalls, local SFAs employed two 

overall approaches to manage school food service finances—containing 

expenses and enhancing revenues. Efforts to contain school food service 

expenses focused primarily on food and labor—which comprised the 

largest share of all expenses. In order to contain these expenses, SFAs 

reduced expenditures, changed the way they purchased foods and the 

types of foods they purchased, reduced labor hours, and took steps to 

operate more efficient programs. SFAs further managed school food 

service finances by augmenting their food service revenues through 

increased sales from a la carte food items and catering; increased 

participation in the school meal programs; and in some cases, raising meal 

prices. 

Although fewer than half of the 14 local officials we interviewed said that 

their overall food expenses had increased in recent years because of 

USDA’s revised school meal nutritional requirements, most of these 

officials said they saw the need to control food expenses. The approaches 

States Used a Variety 

of ExpenseContainment and 

Revenue-Producing 

Strategies to Manage 

School Food Service 

Finances 

To Contain Expenses, 

Officials Focused on Food 

and Labor 

0

10

20

30

40

50

60

70

Florida Missouri New York Ohio Texas Virginia

Percentage

1996-97

2000-01

Source: Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of Education.
Page 21 GAO-03-569 School Meal Programs 

used to contain food expenses varied by SFA. Many officials, for example, 

said they participated in food cooperative arrangements with other SFAs 

that allowed them to purchase bulk food items at lower cost. Some small 

SFAs reported that this arrangement was particularly useful for them 

because it provided them with greater purchasing power than they would 

have individually. Other officials attended local food shows that allowed 

them to shop competitively for lower-priced food items. To offset the costs 

of buying fresh fruits and vegetables, one SFA located in a state that 

participates in a “farm-to-school” pilot program with the USDA, obtained 

this produce from small farmers at low cost.17 Taking another approach, 

one SFA reduced the number of school menu offerings and purchased 

fewer fresh fruits and vegetables for the school meal programs. Other 

officials planned their school meal menus around the donated food 

commodities from the USDA, which reduced the amount of additional 

food that needed to be purchased. 

SFAs attempted to contain labor expenses by reducing the amount of 

labor and sought ways to increase the efficiency of the staff. According to 

most state and local officials, certain aspects of labor expenses have been 

rising, particularly salary scales and benefits. However, both are usually 

determined at the school district level and are therefore beyond the 

control of the SFA. In addition, a few local officials noted that many food 

service employees who are a part of the “baby boom generation” have 

begun to retire, and SFAs have, in some cases, found it necessary to offer 

higher salaries and more benefits to replace them. 

Many local officials reduced their overall labor expenses by modifying 

staff numbers and hours—factors over which they did have control. For 

example, many local officials did not replace food service staff that 

retired, and they also reduced the number of hours worked by existing 

food service staff. According to three state directors we interviewed, SFAs 

were replacing full-time staff with part-time staff in order to reduce salary 

and benefit expenses. In addition, 10 SFAs reduced labor hours, and 

therefore labor expenses, by altering the type of foods they purchased. 

Officials of these SFAs said they reduced labor expenses by purchasing 

more prepared or prepackaged food items—such as chicken nuggets and 

 17The Small Farms/School Meals Initiative is a partnership program among USDA’s Food 

and Nutrition Service and Agricultural Marketing Service, and the Department of Defense 

that encourages small farmers to sell fresh produce to schools and schools to buy this 

produce from small farmers. This is a cooperative program among federal, state, and local 

governments, as well as local farm and educational organizations. 
Page 22 GAO-03-569 School Meal Programs 

frozen pizza—that required very little staff time to prepare. In addition, 

one SFA no longer offered sandwiches at lunch, because preparing them 

was too labor-intensive, and only provided fruits such as apples and 

bananas that did not need to be sliced. While some SFA officials noted that 

prepared food items tended to be more costly to purchase than “scratch” 

food items, many officials felt that these food cost increases were more 

than offset by the decrease in labor expenses. 

In addition to reducing food and labor expenses, a small number of SFAs 

reported that they reduced overall school food service expenses by 

delaying or eliminating expensive kitchen equipment purchases. For 

example, when a dishwasher broke down in one SFA, officials there opted 

to use paper plates and plastic utensils rather than purchase a new 

machine. 

A few SFA officials said that they undertook a variety of additional 

strategies that improved efficiency. In fact, five state directors told us that 

SFAs must operate meal programs as business-like operations with special 

focus on cutting costs wherever possible. One state agency reported that it 

sponsored seminars on increasing staff productivity and controlling costs 

for local directors. In another state, officials reported that an electronic 

point-of-sale system for the payment of food purchases improved staff 

productivity by increasing the number of students each staff member can 

serve by shortening the amount of time needed to pay for each meal.18 A 

few SFAs sought to reduce costs by consolidating food production and 

storage to a few sites. In addition, some SFAs increased the use of selfserve meal lines to reduce the number of staff needed in the cafeteria. In 

one local SFA, the director reduced the number of staff breaks as a way to 

increase staff efficiency. In another SFA, staff reduced food waste by 

monitoring food items discarded by students and eliminating those items 

from the school menu. 

SFAs employed a variety of strategies to increase the amount of revenues 

available for their school food services. Almost all of the 14 SFAs we 

spoke with enhanced revenues for their food services by encouraging all 

students to purchase meals at school rather than bring lunch from home 

or buy it off campus. SFAs engaged in various activities to promote 

 18This state’s electronic point-of-sale system used a credit-card-like device to conduct a 

cashless payment transaction. 

To Enhance Revenues, 

SFAs Promoted the School 

Meal Programs and Also 

Increased a la Carte Sales 
Page 23 GAO-03-569 School Meal Programs 

participation, including increasing food choices for the reimbursable 

school meal programs, enhancing the atmosphere of the eating 

environment, and seeking input from students on food options. For 

example, 1 SFA offered students their choice of 10 different entrée options 

each day, while a national study has shown that most schools offer 

students 3 or fewer entrée options each day.19 At another SFA, students 

were surveyed regarding which food items they preferred in the school 

cafeteria. Using yet another strategy, 1 SFA sought to increase the 

participation of students eligible for free or reduced price lunches by 

sending letters home to parents notifying them that although their children 

were approved to receive these meals, they were not participating. 

For many SFAs, a la carte food items generated additional revenues for 

their school food services that allowed them to make ends meet 

financially. According to five state directors, a la carte sales have become 

an increasingly important source of revenue for SFAs. Unlike 

reimbursable school meals, a la carte food items are generally not subject 

to USDA’s nutritional requirements.20 A la carte offerings vary greatly by 

SFA—from snack and dessert items such as ice cream and potato chips in 

some SFAs to lunch items such as pizzas, hamburgers, and chicken 

nuggets in others. Some officials noted that a la carte programs might 

actually reduce participation in the reimbursable school meal programs, 

by drawing students away from a reimbursable school lunch. Moreover, a 

couple of officials noted that the growth in a la carte programs might be 

“at odds” with the goal of providing a nutritious meal to students. 

Catering for school functions such as banquets and teacher training days 

was another important source of revenue for a few SFAs. Some SFAs also 

provided catering services to private schools, senior citizens, and others. 

For example, 1 SFA catered lunch a few days a week for a nearby senior 

citizen center as a way to raise additional revenue. 

While a small number of officials we interviewed indicated that increasing 

the price of a full price meal was a viable option for increasing revenue for 

 19U.S. Department of Agriculture, Food and Nutrition Service, School Nutrition Dietary 

Assessment Study-II Final Report, Report No. CN-01-SNDAIIFR (Alexandria, VA: 2001). 

According to this study, 68 percent of all schools offered students 3 or fewer different 

entrée options for lunch each day. 

20School meal regulations prohibit the sale of foods of minimum nutritional value, which 

includes carbonated beverages, certain candies, chewing gum, and water ices, in the school 

cafeteria during meal periods. 
Page 24 GAO-03-569 School Meal Programs 

the school food services, most officials viewed raising the meal price as a 

last resort. Although the local director can in most cases request or 

recommend a meal price increase to the local school board or 

superintendent, some state and local officials indicated that such 

proposals were likely to be met with resistance from board members and 

parents. In addition, officials noted that increases in meal prices often 

resulted, at least initially, in fewer students purchasing a school meal. 

Many state and local SFA officials noted that, despite using strategies to 

enhance revenues and contain school food service expenses, SFAs often 

have difficulty breaking even financially in a given school year. SFAs 

sometimes maintain a limited fund balance containing excess money 

carried over from year to year for the school food service, and this funding 

can be used to cover a revenue shortfall in a given year. However, when 

SFAs were unable to cover their school food service expenses, many 

officials told us that local school districts, using general revenue funds, 

normally covered any shortage of funds. Since local school districts are 

facing tighter budgets than in years past, many officials noted that it was 

unclear whether school districts would continue to provide funding for 

school food services if they had a revenue shortfall. In fact, several state 

officials told us that school food service-related expenses that were 

previously paid by local school districts were being transferred to SFAs. 

Although the costs of these services—such as trash removal, pest control, 

linen services, and utilities—were attributable to the school food services, 

school districts had provided these services at no cost to the SFAs in 

better financial times. 

According to our data, SFA revenues have not kept pace with expenses 

during school years 1996-97 through 2000-01; however, the extent of the 

shortfall could be considered modest to date. To cope with these shortfalls 

and to minimize the gap between revenues and expenses, some options 

are within the control of SFAs, while others are not. On the revenue side, 

federal law establishes the per meal reimbursement rates, the minimum 

state contribution, and the maximum rates SFAs can charge for reduced 

price meals. Options available to SFAs include increasing the number of 

students who obtain their meals at the school, expanding a la carte and 

catering sales, and increasing charges for full price meals. However, SFAs 

sometimes face resistance from parents and local officials to meal price 

increases. On the expense side, because SFAs usually do not set the 

salaries and benefits of food service personnel, available options to reduce 

their labor expenses include limiting the hours of their employees, cutting 

Revenue Shortfall 

Sometimes Covered by 

Carryover Funds and Local 

Revenues 

Conclusions 
Page 25 GAO-03-569 School Meal Programs 

the number of employees, altering the types and costs of foods they 

purchase for the programs, and enhancing other efficiencies related to 

labor and food expenses. 

All of the SFA officials we spoke with had implemented some combination 

of these options, and without such measures the gap between revenue and 

expenses would likely have been greater. It is not clear from our work 

whether or not the SFAs could take additional measures to improve 

efficiency and further close the gap. Nor is it clear whether the gap will 

remain, decrease, or continue to grow. Nevertheless, the strategies SFAs 

have chosen for limiting expenses and enhancing revenues can have 

varying effects on achieving the goal of the school meal programs to 

ensure that the nation’s youth consume nutritional and affordable meals 

while they are in school. Serving reimbursable meals that are more 

appealing to the student population could well encourage more students 

to eat a nutritious meal. On the other hand, relying more heavily on 

proceeds from the sale of a la carte items, which are not covered by the 

school meal programs’ nutritional standards, could undermine that goal or 

at least offer less assurance that students are eating balanced meals. Such 

choices can, therefore, have critical consequences, especially given the 

current health and nutritional trends among the nation’s children. 

We requested comments on a draft of this report from the Secretary of 

Agriculture or her designee. On April 21, 2003, officials from the 

Department’s Food and Nutrition Service, Child Nutrition Division, and 

Office of Analysis and Nutrition Evaluation, and the Department’s 

Economic Research Service, provided us with the following oral 

comments on the draft. The officials said they were in general agreement 

with the findings as presented in the report. However, they said that 

recipients of our report should be aware that the report does not identify 

the cost of preparing a reimbursable school meal. They also noted that 

there are many factors that can contribute to the revenue and cost 

differences that we found between states, such as school meal program 

participation levels, changes in the household income of students, and the 

extent to which states use donated USDA commodities. 

In addition, the officials provided data on the proportion of free, reduced 

price, and full price meals served for 4 of the 5 years in our study. The 

number of full price lunches served increased modestly in proportion to 

the number of free and reduced price lunches in five of our six states. 

This change may help explain the slight decline in federal reimbursement 

relative to other revenues and the declining share of total food service 

Agency Comments 

and Our Evaluation 
Page 26 GAO-03-569 School Meal Programs 

expenses covered by federal reimbursements. However, without 

additional information, such as the increase in the number of a la carte 

foods sold, we are unable to determine the extent to which these changes 

in school meal participation played a role in the declining share of federal 

reimbursement. Finally, in addition to these observations, USDA provided 

technical comments that we have incorporated as appropriate. 

We are sending copies of this report to the Secretary of USDA, appropriate 

congressional committees, and other interested parties. In addition, the 

report will be available at no charge on the GAO Web site at 

http://www.gao.gov. 

If you or your staff have questions concerning this report, please call me 

on (415) 904-2272 or Kay E. Brown on (202) 512-3674. Key contact and 

staff acknowledgments are listed in appendix III. 

David D. Bellis 

Director, Education, Workforce, 

 and Income Security Issues 
Appendix I: Scope and Methodology 

Page 27 GAO-03-569 School Meal Programs 

This appendix discusses in more detail the scope and methodology for 

developing the revenue and expense information presented and for 

identifying the actions taken by school food authority (SFA) officials to 

manage their school food service finances. The scope of our review 

included the National School Lunch Program and the School Breakfast 

Program as they relate to public SFAs in selected states. 

From the Food and Nutrition Service we obtained nationwide school meal 

programs information, including the (1) applicable federal reimbursement 

rates, (2) student participation, (3) number of school meals and snacks 

served, (4) cash reimbursements, and (5) commodity values. 

To obtain statewide data on the revenues available to SFAs for providing 

school food services and the expenses of operating school food services, 

we selected seven states—one state from each of the Food and Nutrition 

Service’s seven regions. We selected states that (1) were able to provide 

both school food service revenue and expense information for all of their 

SFAs and (2) received the highest amount of federal reimbursements in 

their respective region during fiscal year 2001. Five of the seven states 

selected—California, Florida, Missouri, New York, and Texas—received 

the largest federal cash reimbursements in their respective regions during 

fiscal year 2001. The two remaining states, Ohio and Virginia, received the 

second and third largest amount of federal reimbursements to the states in 

their respective regions. 

We requested that each state provide annual school food service expense 

and revenue data as reported to state agencies by all of the public SFAs for 

school years 1994-95 through 2001-02, or for the years that were available 

during the period. We requested information on the (1) total annual 

amounts of revenues provided by federal, state, and other sources, and the 

value of USDA donated commodities and (2) expenses associated with 

producing school meals, including food service staff salaries and benefits, 

and food purchases. Six of the seven states were able to provide the 

requested data for school years 1996-97 through 2000-01. We were unable 

to obtain sufficient data to report on school years 1994-95 and 1995-96. In 

addition, during the course of our study, California notified us that it was 

unable to provide all of the data needed. For this reason, the revenue and 

expense information contained in this report does not include California. 

We did not verify the data collected for this study. However, we reviewed 

the data for reasonableness and requested additional information when 

appropriate. First, we compared annual totals of certain data fields from 

year to year. If there were unusual jumps in these totals from year to year, 

Appendix I: Scope and Methodology 
Appendix I: Scope and Methodology 

Page 28 GAO-03-569 School Meal Programs 

we asked the responsible agency to offer an explanation. Second, for the 

states that provided SFA-level data, we compared the number of SFAs in 

the data with the number of SFAs reported by the responsible agency. 

Third, we examined the relationship of data elements to identify any 

illogical associations. Fourth, we conducted interviews related to data 

reliability with the state food service directors. In our interviews with the 

responsible agency, we presented graphs that were created using the data 

provided us. We asked why certain patterns occurred in the graphs. 

Finally, in addition to the steps that we took to assess the reliability of the 

data, federal regulations require that each SFA participating in the school 

meal programs be routinely reviewed to determine its compliance with 

performance and regulatory standards. As a part of these reviews, SFAs 

must meet minimum reporting and record-keeping requirements. Reviews 

are generally conducted by appropriate state agencies and include 

evaluation of financial reporting systems. 

To the extent possible, we excluded from our analyses other federal child 

nutrition programs, private schools, and residential child care institutions, 

which also participate in the school meals programs. While we collected 

only public SFA information for our study, the Missouri expense and 

revenue information includes both public and private SFA data because 

they were not tracked separately; however, the dollar amounts attributed 

to private schools are relatively small. Also, SFAs without full information 

for school years 1996-97 through 2000-01 were excluded from the analysis. 

To identify actions taken by SFA officials to manage their school food 

service finances, we conducted phone interviews with the appropriate 

manager at each of the seven state agencies administering the school 

meals programs and with two local SFA managers within each state. We 

selected SFAs that both (1) experienced expenses that were larger than 

revenues during the past few years and (2) had large increases in expenses 

related to either food or labor.1

 We gathered information from these 

managers on the sources and amounts of funds available for school food 

service operations, the cost of producing meals, and what approaches 

SFAs were using to manage their food service finances. We also obtained 

their insights regarding revenue and expense changes and their 

 1

Since the available data from California and Missouri did not allow us to identify the local 

SFAs that met our criteria, the state managers for the meal programs provided us with the 

names of SFAs they felt met our criteria. 
Appendix I: Scope and Methodology 

Page 29 GAO-03-569 School Meal Programs 

observations regarding how these changes may have affected the school 

food services that they manage. 

The results of the financial data described in our study are not 

generalizable beyond the six states that provided the required data. In 

addition, we cannot determine whether the changes we identified are 

statistically significant because we do not know the standard errors of our 

estimates. We conducted our work between October 2002 and March 2003 

in accordance with generally accepted government auditing standards. 
Appendix II: Federal School Meal Cash 

Reimbursement Rates, School Years 1996-97 

through 2002-03 

Page 30 GAO-03-569 School Meal Programs 

 Lunch Breakfast 

School year Meal type 

Less than 60% 

of lunches 

served free or 

at reduced price

60% or more of 

lunches served free 

or at reduced price Nonsevere need Severe need Snacks

1996-97 

Full price $0.1775 $0.1975 $0.1975 $0.1975 $0.0450

Reduced price 1.4375 1.4575 0.7175 0.9125 0.2525

Free 1.8375 1.8575 1.0175 1.2125 0.5050

1997-98 

Full price 0.1800 0.2000 0.2000 0.2000 0.0400

Reduced price 1.4900 1.5100 0.7450 0.9450 0.2600

Free 1.8900 1.9100 1.0450 1.2450 0.5175

1998-99 

Full price 0.1800 0.2000 0.2000 0.2000 0.0400

Reduced price 1.5425 1.5625 0.7725 0.9775 0.2675

Free 1.9425 1.9625 1.0725 1.2775 0.5325

1999-2000 

Full price 0.19 0.21 0.21 0.21 0.05

Reduced price 1.58 1.60 0.79 1.00 0.27

Free 1.98 2.00 1.09 1.30 0.54

2000-01 

Full price 0.19 0.21 0.21 0.21 0.05

Reduced price 1.62 1.64 0.82 1.03 0.27

Free 2.02 2.04 1.12 1.33 0.55

2001-02 

Full price 0.20 0.22 0.21 0.21 0.05

Reduced price 1.69 1.71 0.85 1.07 0.28

Free 2.09 2.11 1.15 1.37 0.57

2002-03 

Full price 0.20 0.22 0.22 0.22 0.05

Reduced price 1.74 1.76 0.87 1.10 0.29

Free 2.14 2.16 1.17 1.40 0.58

Source: Federal Registers and USDA. 

Note: Higher reimbursements are provided to SFAs in which 60 percent or more of the lunches were 

served at a free or reduced price. Higher breakfast reimbursement rates are established for “severe 

need” SFAs in which 40 percent or more of the lunches were served free or at a reduced price and 

the nonsevere need rate is insufficient to cover the costs of the breakfast program. USDA provides 

higher school meal and snack reimbursement amounts in Alaska and Hawaii. 

Appendix II: Federal School Meal Cash 

Reimbursement Rates, School Years 1996-97 

through 2002-03 
Appendix III: GAO Contact and Staff 

Acknowledgments 

Page 31 GAO-03-569 School Meal Programs 

Kay E. Brown (202) 512-3674 (Brownke@gao.gov) 

In addition to the individual named above, Peter M. Bramble, Jr., Cynthia 

G. Decker, and Michelle C. Verbrugge made key contributions to this 

report. 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 

(130188) 

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