School-Meals Programs: USDA Has Enhanced Controls, but Additional Verification Could Help Ensure Legitimate Program Access
Published: 2014-05-15T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: In fiscal year 2012, over 31.6 million children participated in USDA's National School Lunch Program (NSLP) at a cost of about $11.6 billion. In fiscal year 2013, USDA estimated NSLP certification errors of more than 8 percent, or $996 million. GAO was asked to review possible beneficiary fraud within the program.
This report assesses (1) steps taken to help identify and prevent ineligible beneficiaries from receiving benefits in school-meal programs and (2) what opportunities exist to strengthen USDA's oversight of the school-meals programs.
GAO reviewed NSLP policies, interviewed program officials, and randomly selected a nongeneralizable sample that included 25 of 7.7 million approved household applications from 25 of 1,520 school districts in the Dallas, Texas, and Washington, D.C., regions. GAO performed limited eligibility testing using civilian federal-employee payroll data from 2010 through 2013 due to the unavailability of other data sources containing nonfederal employee income. GAO also conducted interviews with households. Ineligible households were referred to the Inspector General.
section_title: What GAO Found
paragraphs: The U.S. Department of Agriculture (USDA) has taken several steps to implement or enhance controls to identify and prevent ineligible beneficiaries from receiving school-meals benefits. For example:
USDA worked with Congress to develop legislation to automatically enroll students who receive Supplemental Nutritional Assistance Program benefits for free school meals; this program has a more-detailed certification process than the school-meals program.
Starting in the 2013-2014 school year, USDA increased the frequency with which state agencies complete administrative reviews of school districts from every 5 years to every 3 years. As part of this process, state agencies review applications to determine if eligibility determinations were correctly made.
In 2012, USDA issued guidance to clarify that school districts have the authority to verify approved applications for school-district employees when information indicates that the applicant misrepresented his or her income.
GAO identified opportunities to strengthen oversight of the school-meals programs while ensuring legitimate access, such as the following:
Exploring the feasibility of computer matching external income data, such as state payroll data, with participant information to identify households whose income exceeds eligibility thresholds for verification could help identify ineligible participants. Currently, school districts verify a sample of approved applications deemed “error-prone”—statutorily defined as those with reported income within $1,200 of the annual income levels specified in program- eligibility guidelines—to determine whether the household is receiving the correct level of benefits (referred to as standard verification in this report). In a nongeneralizable review of 25 approved applications, GAO found that 9 of 19 households that self-reported household income and size information were ineligible and only 2 could have been subject to standard verification.
Verifying a sample of categorically eligible applications could help identify ineligible households. Currently, school-meal applicants who indicate categorical eligibility (by participating in certain public-assistance programs or meeting an approved designation, such as foster children) are eligible for free meals and are generally not subject to standard verification. In a nongeneralizable review of 25 approved applications, 6 households indicated categorical eligibility, 2 of which were ineligible, and another may have been eligible for reduced-price meals instead of free school meals.
Results of GAO's Analysis of a Nongeneralizable Sample of 25 Approved Household Applications from the 2010-2011 School Year
section_title: What GAO Recommends
paragraphs: Among other things, GAO recommends that the Secretary of Agriculture develop a pilot program to explore the feasibility of using computer matching to identify households with income that exceeds program-eligibility thresholds for verification, and explore the feasibility of verifying a sample of categorically eligible households. USDA generally agreed with the recommendations.

section_title: Letter
paragraphs: A well-balanced and nutritional diet for school children is essential for  their overall health and well-being, and helps promote academic  achievement. With children spending a considerable amount of their day  at school, meals served during the school day play an important role in  providing such a diet. In 1946, the Richard B. Russell National School  Lunch Act (NSLA)—established the National School Lunch Program  (NSLP), and in 1966 the Child Nutrition Act established the School  Breakfast Program (SBP). These programs provide reimbursement to  school districts and independent schools based on the number of meals  served that meet certain federal requirements. Any child may purchase a  meal through the NSLP or SBP; however, depending on household  income, children may be eligible for reduced-price or free meals. The  NSLP and SBP have the same eligibility requirements—families with  incomes at or below 130 percent of the federal poverty level are eligible  for free meals, and those with incomes between 130 and 185 percent of  the federal poverty level are eligible for reduced-price meals. In fiscal year  2012, over 31.6 million children participated in the NSLP each school day  at a program cost of about $11.6 billion. Of the NSLP participants, 21.4  million—or about 68 percent—received their lunches free or at a reduced  price. In fiscal year 2012, approximately 12.9 million children participated  in the SBP each school day, at a program cost of about $3.3 billion. Of  those, over 10.8 million—or about 84 percent—received their breakfasts  free or at a reduced price.
These programs—administered by the United States Department of  Agriculture’s (USDA) Food and Nutrition Service (FNS)—operate in over  89,000 schools and institutions.  All schools participating in the NSLP or SBP must make free and reduced-price meals available to eligible  children. Individual student or household eligibility for free or reduced- price meals is determined by school-district review of applications  submitted by households or through a process referred to as “direct  certification.” Under direct certification, state agencies provide school  districts with a list of students whose households receive certain public- assistance benefits, such as through the Supplemental Nutrition  Assistance Program (SNAP), and school districts confer eligibility for free  school meals to these students. Thus, participants are automatically  certified for school-meals benefits without having to fill out a separate  school-meals application. Students receiving certain public-assistance  benefits or meeting an approved designation, such as if they are  homeless or foster children, are categorically eligible for free-meal  benefits. Categorically eligible students can be certified into the school- meals program either through an application or direct certification. The  Office of Management and Budget (OMB) has designated the NSLP as 1  of 13 federal “high-error” programs due to its large estimated improper  payments—approximately $1.8 billion in fiscal year 2013. According to  OMB guidance, an improper payment is any payment that should not  have been made or that was made in an incorrect amount (including  overpayments and underpayments) under statutory, contractual,  administrative, or other legally applicable requirements.
In July 2012, we reported that some children were inappropriately  certified for free school meals because their households were considered  categorically eligible for SNAP even though they were not receiving  SNAP benefits. NSLA, as amended by the Child Nutrition and WIC  Reauthorization Act of 2004 (CNR), requires participants in SNAP to be  directly certified for school-meals benefits without a separate school- meals application. We recommended that USDA provide guidance  clarifying that children in households receiving no SNAP benefits should  not be directly certified to receive free school meals. USDA agreed with  our recommendation and has taken steps to address it. In September  2009, we also reported that states and school food authorities conduct  program-integrity reviews, but that gaps in federal requirements for these  reviews limit the reviews’ effectiveness at identifying meal counting and  claiming errors. We recommended that USDA modify the requirements  for state and school food authority reviews and improve guidance on data  collection; USDA agreed with and implemented our recommendations.
Given the cost of the USDA school-meals programs and the high  estimated improper-payment rates, you asked us to review possible  beneficiary fraud occurring within the programs. Specifically, we assessed  (1) what steps, if any, has USDA taken to help identify and prevent  ineligible beneficiaries from receiving benefits in the school-meals  programs, and (2) what opportunities, if any, exist to strengthen USDA’s  oversight of the school-meals programs? We also report case-study  examples of households that may have improperly received program  benefits. Because of limited salary and income data available for all U.S.  households, our case-study examples are limited to civilian executive- branch employees and United States Postal Service (USPS)  employees.
To determine any steps USDA has taken to identify and prevent ineligible  beneficiaries from receiving benefits and what opportunities, if any, exist  to strengthen USDA’s oversight of the school-meals programs, we  reviewed FNS policies and regulations, as well as the laws authorizing  the school-meals programs. We also reviewed prior USDA reports and  other studies concerning the programs. Further, we interviewed FNS  officials to discuss the agency’s administration of the programs. We  selected the Washington, D.C., and Dallas, Texas metropolitan regions—   areas with different federal-employee concentrations—for further work. We conducted interviews of officials responsible for administration and  oversight of the program at the city level in Washington, D.C., and at the  state level in Maryland, Texas, and Virginia, as well as at 25 school  districts located in these regions. We initially obtained data from 28  school districts for our review—14 located in the Dallas, Texas  metropolitan region and 14 in the Washington, D.C., metropolitan region,  which includes Washington, D.C., and its Maryland and Virginia  suburbs.districts with student enrollment over 10,000 students. We selected all  school districts in the Washington, D.C., metropolitan region excluding 56  charter school districts in Washington, D.C. However, we did not use data  from 3 school districts—1 located in the Dallas, Texas metropolitan region  and 2 located in the Washington, D.C., metropolitan region—because the  data were not reliable for our purposes. During the 2010-2011 school  year, there were 57 school districts in Washington, D.C.; 49 in Maryland;  1,260 in Texas; and 154 in Virginia for a total of 1,520. This selection is  not representative of all states, school districts, or school-meal   In the Dallas, Texas metropolitan region we selected school  participants. We assessed controls related to the identification and  prevention of ineligible beneficiaries in accordance with internal control  standards.
To further identify opportunities, if any, that exist to strengthen USDA’s  oversight of the school-meals programs, we tested controls that are  designed to identify and prevent ineligible school-meal beneficiaries. To  do this, we selected a nongeneralizable sample of 48 households  participating in the NSLP for further review and investigation. To select  the sample, we matched school-meals eligibility data for the 2010-2011  school year from the 25 school districts to executive-branch civilian  federal-employee payroll data for approximately 2.5 million individuals to  identify households that school districts deemed eligible for free or  reduced-price school meals. We used civilian federal-employee payroll  data obtained in 2010 through 2013 due to the unavailability of other data  sources containing salary information for nonfederal employees.  According to a January 2012 Congressional Budget Office Report, in  2010, 1.7 percent of the U.S. workforce was made up of federal civilian  employees—approximately 2.3 million compared to 111 million that were  employed by the private sector and 20 million employed by state and   The results of our work were not designed to be  local governments.generalizable and do not include private-sector employees.
A household member earning income does not preclude children in the  household from being eligible for school-meals benefits. The purpose of  our work was to select households for review and to determine whether  any of the selected households were potentially ineligible for benefits  based upon their pay and USDA eligibility guidelines. To assess the  reliability of the school-meals eligibility and payroll data, we reviewed  relevant documentation including NSLP applications, interviewed  knowledgeable agency officials, and examined the data for errors and  inconsistencies. We concluded that the school-meals eligibility data and  payroll data were sufficiently reliable for the purposes of this report.
In selecting our sample, we narrowed the civilian federal-employee  payroll data to those with income during the July 2010 to December 2010  period—to coincide with the start of the school year, when most school- meals eligibility determinations are made. We then matched the school- district beneficiary data to the federal-employee payroll data using the  Social Security number, address, and name fields, to the extent they were  available. On the basis of these matches, we randomly selected up to  two households in each of the 25 school districts for an in-depth review,  for a total of 48 cases. Specifically, for each of the school districts, we  reviewed one household that submitted an application that was used for  benefit determination (25 cases), as well as one household that was  directly certified (23 cases). For the 25 applicant cases, we reviewed  available applications from 2010-2011 and salary information during this  period, as well as any applications these households submitted during the  2011-2012 and 2012-2013 school years. For the 23 cases in which the  household was directly certified into the school-meals programs without  submitting an application due to the household’s participation in SNAP or  other assistance programs, we reviewed 2010-2011 salary information  and obtained and reviewed the application the household submitted for  the assistance program that allowed direct certification.
Our investigators interviewed the federal employees associated with the  48 households in our nongeneralizable sample to obtain additional  information about their applications, households, and employment. The  specific findings from the selected cases cannot be generalized to other,  or all, school-meals beneficiaries or federal-employee households that  received school-meals benefits. Because our data were limited to federal- employee households in 25 school districts that were randomly selected  on a nongeneralizable basis, the results of our cases cannot be  generalized to a larger population of school-meals participants or to the  entire federal workforce. We plan to refer any potentially ineligible  households to USDA and their school districts for appropriate action as  warranted.
We conducted this performance audit from February 2012 to May 2014 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from June 2013 to May 2014 in accordance with  standards prescribed by the Council of the Inspectors General on Integrity  and Efficiency. For a more-detailed description of our scope and  methodology, see appendix I.
subsections: section_title: Background
subsections: section_title: School-Meals Programs Administration
paragraphs: Within USDA, FNS has overall responsibility for overseeing the school- meals programs, which includes promulgating regulations to implement  authorizing legislation setting nationwide eligibility criteria and issuing  guidance. School-meals programs are administered at the state level by a  designated state agency that issues policy guidance and other  instructions to school districts providing the meals to ensure awareness of  federal and state requirements. School districts are responsible for  completing application, certification, and verification activities for the  school-meals programs, and for providing children with nutritionally  balanced meals each school day. The designated state agency conducts  periodic reviews of the school districts to determine whether the program  requirements are being met. Schools and households that participate in  free or reduced-price meal programs may be eligible for additional federal  and state benefits. Appendix II discusses those benefits. A graphic  depicting the responsibilities of FNS, state agencies, and school districts  can be found in appendix III.
section_title: Eligibility Determinations and Verification
paragraphs: Children from families with incomes at or below 130 percent of the federal  poverty level are eligible for free meals. Those with incomes between 130  percent and 185 percent of the federal poverty level are eligible for  reduced‐price meals. Income is any money received on a recurring  basis—including, but not limited to, gross earnings from work, welfare,  child support, alimony, retirement, and disability benefits—unless  specifically excluded by statute. Table 1 below shows the annual  income-eligibility guidelines in effect for a family of four during the 2010- 2011 through the 2013-2014 school years.
Children from families with incomes over 185 percent of the federal  poverty level pay full price, though their meals are still subsidized to some  extent.
In addition, students who are in households receiving benefits under  certain public-assistance programs—specifically, SNAP, Temporary  Assistance for Needy Families (TANF), or Food Distribution Program on  Indian Reservations (FDPIR)—or meet certain approved designations  (such as students who are designated as homeless, runaway, or migrant;  a foster child) are eligible for free school meals regardless of income.
subsections: section_title: Certification
paragraphs: School districts certify students into the school-meals programs using one  of two methods—either through (1) a household application identifying  household information such as income and household size, or information  on participation in public-assistance programs or (2) direct certification.  During the 2012-2013 school year, 11.7 million students were certified for  free or reduced-price meals through a household application, and 12.3  million students were directly certified. Once a child is certified into the  school-meals program, the eligibility determination is in effect for the  entire year; households are not required to inform the school if wages rise  above the income-eligibility guidelines during the school year.
Household application. Under the household-application method, a  household submits an application provided by the school district.  Since a household application is used for all members in the  household, a single application can list multiple students. Schools  send school-meals applications home at the beginning of each school  year, but household applicants may apply at any time during the  course of the year. Online applications are also available in some  school districts. The applicant lists all sources of household income,  the frequency with which it is received, and the names of all  household members, among other information. One adult from the  household signs the application, certifying that the information  provided is correct. No supporting documentation—such as tax  returns or pay stubs—is required at the time of application. In  accordance with USDA guidance, school districts are not to conduct  any actions to verify the information on the application during the  certification process; they must accept the applications at face value  and determine eligibility based on the information voluntarily disclosed  in the application. In addition, students who are in households  receiving benefits under certain public-assistance programs, including  SNAP or TANF, or meet an approved designation—regardless of  income—are categorically eligible for free school meals. For example,  students who are designated as (1) homeless, runaway, or migrant;  (2) a foster child; or (3) enrolled in a federally funded Head Start  Program are categorically eligible for free meals. These households  must state the reason for their categorical eligibility on the application  along with any applicable public-assistance identification numbers.  FNS officials told us that school district officials have a responsibility  to verify homeless, runaway, and migrant applications as part of the  application approval process. Figure 1 below is an example of a  school-meals application and information required to be deemed  categorically eligible. Appendix IV provides a sample school-meals  household application. The school district reviews data on the  application, such as household size, income, or participation in an  approved public-assistance program or other approved designation,  and makes an eligibility determination. Starting with the 2011-2012  school year, applicants are required to provide the last four digits of  their Social Security numbers rather than the entire nine-digit  number.
Direct Certification. Children in households that receive certain  public-assistance benefits—SNAP, FDPIR, or TANF—are  automatically eligible for free school meals through “direct  certification.” Under the direct-certification method, school districts  certify children who are members of households receiving public  assistance as eligible for free school meals based on information  provided by the state or local agency administering those programs.  Starting in the 2008-2009 school year, school districts were required  to directly certify SNAP households into the school-meals programs.
A student or household that meets an approved designation—such as  homeless or foster children—can also be directly certified into the  school-meals programs without having to complete a household  application.
Figure 2 below describes the household-application and direct- certification methods that households use to become certified for free or  reduced-price meals.
After school districts certify household eligibility for school-meals program  benefits, they must annually verify a sample of household applications  approved for free or reduced-price school-meals benefits to determine  whether the household has been certified to receive the correct level of  benefits—we refer to this process as “standard verification.” As dictated  by statute, school districts are required to verify a random sample of  applicants. The sample size is equal to the lesser of 3 percent of  approved applications, selected from error-prone applications, or 3,000  error-prone applications unless an alternative sample size is used. For  the purposes of standard verification, the NSLA defines error-prone  applications as certified applications with monthly income within $100  of—or with annual income within $1,200 of—the income eligibility limits  for free or reduced-price meals. Households that indicate categorical  eligibility on an application and households that enter the program  through direct certification are generally not subject to the standard  verification process.
Further, as described in USDA’s eligibility manual for school meals,  school districts are obligated to verify additional applications if they deem  them to be questionable, which is referred to as for-cause verification.  Verification—whether standard or for-cause—is conducted only for those  beneficiaries receiving benefits through the household-application  process; directly certified households are not subject to verification.  Households selected for verification (standard or for-cause) must submit  supporting documentation—such as pay stubs, benefit award letters from  state agencies for benefits such as Social Security, or supplemental  security income, or support payment decrees from courts—to the school  district, or be removed from the program. The school district reviews the  information, determines whether the household’s free or reduced-price  status is correct, and makes corrections, as necessary.
section_title: Improper Payment Rates Associated with the School Meals Programs
paragraphs: The Improper Payments Information Act of 2002, as amended, requires  agencies to identify, measure, prevent, and report their improper payment  amounts and to develop and implement improper payment reduction  plans, among other things. For fiscal year 2013, USDA reported that the  NSLP and SBP had estimated improper payment rates of approximately  15.7 percent and 25.3 percent, respectively—equating to about $1.8  billion and $831 million.payments in the NSLP and SBP attributable to certification errors versus  counting and claiming errors, as reported for fiscal year 2013.
section_title: USDA Has Taken Steps to Help Identify and Prevent Ineligible Participants from Receiving Benefits
subsections: section_title: USDA Has Increased the Use of Direct Certification
paragraphs: To address the high improper-payment rates in the school-meals  programs, among other actions, USDA worked with Congress to develop  the Child Nutrition and WIC Reauthorization Act of 2004 (CNR).required school districts to directly certify students that receive SNAP  benefits for free meals in all school districts by the 2008-2009 school  year. USDA officials told us that they are emphasizing the use of direct  certification, because, in their opinion, it helps prevent certification errors  without compromising access. School-meals programs and SNAP have   CNR  similar income-eligibility limits.SNAP is more detailed than the certification process under the NSLP.  Direct certification has reduced the administrative burden on SNAP  households, as they do not need to submit a separate school-meals  application. It also reduces the number of applications school districts  must review. In commenting on a draft of this report, USDA reiterated that  school districts do not have access to SNAP eligibility documents, are not  required to review household SNAP applications, and therefore accept  the SNAP eligibility determination at face value. FNS officials also told us  that once school districts receive confirmation that a household is eligible  for direct certification, they are not required to determine whether the  household is still eligible throughout the year.
Further, the application process for  To test the effectiveness of direct certification in identifying and  preventing ineligible participants from receiving benefits, we reviewed a  nongeneralizable sample of 23 households who were directly certified for  free-meal benefits and found two cases where the household appeared  ineligible for SNAP benefits, and therefore may have been inappropriately  directly certified into the school-meals programs, as described below.  Because these households were directly certified for school-meals  benefits, the school district would not be aware of the SNAP error unless  notified by the appropriate state agency.
One household received SNAP benefits from October 2009 to  October 2010. However, one household member started employment  in March 2010 and, based upon his biweekly pay of approximately  $3,300, his household of four members would no longer have  qualified for SNAP benefits. The SNAP Notice of Food Benefit  Extension sent to the household dated March 7, 2010, required  notification of changes to job status and rate within 10 days beginning  in May 2010. Based on the change of wages in March 2010, this  household would have not have remained eligible for SNAP benefits  and thus would not have been eligible for direct certification for free  school meals during the 2010-2011 school year.
One household’s SNAP application incorrectly omitted a member of  the household who earned income and provided financial support.
Had the SNAP application included this household member’s income,  the household would not have qualified for SNAP benefits; therefore,  this household should not have been directly certified for free school  meals during the 2010-2011 school year.
We will include these instances in our referrals to USDA and the state  agency administering SNAP for appropriate action, as warranted.
Since passage of the CNR, the number of school districts directly  certifying SNAP-participant children has continued to increase. For  example, during the 2008-2009 school year, 78 percent of school districts  directly certified students, and by the 2012-2013 school year, this  percentage had grown to 91 percent of school districts, bringing the  estimated percentage of SNAP-participant children directly certified for  free school meals to 89 percent.
In all states, the combined income eligibility limit for Medicaid exceeds the NSLP income  eligibility limit of 130 percent of the federal poverty guideline. school year, and more are expected to participate during the 2014-2015  school year.
section_title: USDA Has Increased the Frequency of State Agency Reviews
paragraphs: USDA requires administering state agencies to conduct regular, on-site  reviews—referred to as administrative reviews—to evaluate school  districts that participate in the school-meals programs. Hunger-Free Kids Act of 2010 increased the frequency of these reviews  from every 5 years to every 3 years. Starting with the 2013-2014 school  year, state agencies are required to conduct administrative reviews at  least once during a 3-year review cycle, with no more than 4 years  between the reviews. During this process, state agencies are to  determine whether free, reduced-price, and paid lunches were properly  provided to eligible students; and that meals are counted, recorded,  consolidated, and reported through a system that consistently yields  correct claims.
7 C.F.R. § 210.18, Prior to the 2013-2014 school year, these reviews were referred to as  Coordinated Review Efforts. In commenting on a draft of this report, USDA clarified that  administrative reviews include off-site procedures where state agencies evaluate the  school district’s system for making eligibility determinations including direct certification. lunch, including nutrition and portion requirements—as well as the  process of counting and recording meals. School districts that have  administrative review findings are to submit a corrective-action plan to the  state agency, and the state agency is to follow up to determine whether  the issue has been resolved. USDA regulations require all state agencies  to report the results of administrative reviews to FNS by March 1 of each   FNS officials told us that as part of their oversight of state  school year.agencies, they confirm that agencies have completed the administrative  reviews.
We reviewed administrative review reports from the 25 school districts we  selected that were completed between February 2008 and December  2012. Administrative review reports from 11 school districts cited some  incorrect eligibility determinations. Incorrect eligibility determinations  ranged from 1 to 15 per district—based on the stated information on the  application. The number of incorrect determinations found in each school  district was small compared to the number of applications reviewed,  which ranged from 687 to 8,398. As required, these 11 school districts  submitted a corrective-action plan to the state addressing how they would  ensure that all meal-benefit applications are reviewed and certified based  on eligibility guidelines. The state agency determines if the school  district’s corrective action satisfactorily resolves the problem; the state  agency cannot close the review until all identified issues have been  addressed. The administrative review reports from the remaining 14  school districts in our sample did not cite any incorrect eligibility  determinations.
In commenting on a draft of this report, USDA told us that it makes grant  funds available annually to states to fund the performance of additional  administrative reviews, oversight, and training for school districts with a  high level or risk of administrative errors. USDA stated that since fiscal  year 2005, $4 million has been set aside annually for these grants.  According to USDA, from fiscal year 2005 to 2013, FNS awarded 60  grants totaling $26.5 million.
section_title: USDA Has Issued Guidance on the Use of For-Cause Verification
paragraphs: As discussed earlier in this report, school districts are obligated to verify  the eligibility of applicants whose application information is deemed  questionable under the “for-cause” verification process. Examples of  relevant recent cases include the following:
The Chicago Board of Education OIG reported that in fiscal year  2012, a cohort of highly paid and high-level Chicago Public Schools  administrators falsified information on school-meals applications and  the office noted the possibility of system-wide school-meals fraud.  Specifically, the report cited 21 principals, assistant principals, and  recently promoted assistant principals who understated their own  income or falsified the number of household members, including  leaving themselves off the applications.
In July 2013, the State of New Jersey Office of the State Comptroller  issued a report on fraudulent school-lunch program applications filed  by public employees. The report, reviewing a sample of schools that  received more than $1 million in reimbursements for school lunches in  the 2010-11 school year, found a number of public employees who  materially underreported their household income on school-lunch  applications, including 101 public employees (elected school-board  members and school-district employees among them) who provided  materially false information. Further, according to the July 2013 report,  numerous applicants substantially underreported the income of  household members and many failed to list income-generating  household members on their applications.
In February 2012, USDA distributed guidance to state administrators to  clarify that school districts have the authority to review approved  applications for free or reduced-price meals for school-district employees  when known or available information indicates school-district employees  may have misrepresented their incomes on their applications. However,  this for-cause verification should be used selectively and not to verify the  household income of all school district employees whose children are  certified for free or reduced-price meals. Under the guidance, school  districts can identify children of school-district employees and use salary  information available to them to identify questionable applications and  then conduct for-cause verification on the questionable applications, if  necessary. In August 2012, USDA also updated its school-meals eligibility  manual—used by school districts to determine and verify eligibility—with  this guidance. Our analysis of this guidance is presented below.
section_title: USDA Could Explore Options to Enhance the Verification Process to Further Strengthen Integrity While Ensuring Legitimate Access
subsections: section_title: Guidance to Clarify Use of For-Cause Verification Could Enhance Oversight
paragraphs: As discussed earlier in this report, USDA regulations require that school districts conduct for-cause verification of all questionable applications.Officials from 11 of the 25 school districts told us during our interviews  that they conduct for-cause verification. These officials provided  examples of how they would identify suspicious applications, such as  when a household submits a modified application—changing income or  the household members—after being denied or when different  households include identical public-assistance benefit numbers (e.g., if  different households provide identical SNAP numbers). However, officials  from 9 of the 25 school districts told us that they did not conduct any for- cause verification. For example, one school-district official explained that  the school district accepts applications at face value. An official from  another school district said that his district does not conduct for-cause  verification and added that he is not sure how to identify questionable  applications. Additionally, officials from 5 of the 25 school districts told us  they only conduct for-cause verification if someone (such as a member of  the public or a state agency) informs them of the need to do so on a  household. Although not generalizable, responses from these school  districts provide insights about if and under what conditions for-cause  verifications are conducted.
USDA officials stated that school districts have the obligation to conduct  for-cause verification if they suspect inaccurate information, but added  that staff may be hesitant to perform it because of the potential work  burden it may create. USDA officials also told us that some school  districts may be reluctant to conduct for-cause verification because of  concerns about appearing to target certain groups of people. In April  2013, USDA issued a memorandum stating that effective for the 2013- 2014 school year, all school districts must specifically report the total  number of applications that were verified for cause. Prior to this, USDA  did not collect any information on applications that have undergone for- cause verification. USDA officials told us that they will use the information  to determine the frequency with which school districts conduct for-cause  verification. This information is to be provided to USDA in April 2014;  however, since this is the first year the information is being collected, it  may take school districts additional time to finalize the reports. While  school districts are to report the number of applications verified for cause,  the outcomes of those verifications will be grouped with the outcomes of  applications that have undergone standard verification. As a result, USDA  plans to review the results to determine the frequency with which school  districts conduct for-cause verification but will not have information on  specific outcomes, which it may need to assess the effectiveness of for- cause verifications and to determine what actions, if any, are needed to  improve program integrity.
During our review of 25 households that applied for and received school- meals benefits, we identified one household that reapplied for school- meals benefits during the 2011-2012 school year less than 2 weeks after  being denied benefits for not meeting the eligibility requirements. The new  application removed a source of income—child support—and the  household was approved for reduced-price meals. When we interviewed  the applicant, she said that she could not remember if she received child  support payments at the time she resubmitted the application. This  household also applied for school-meal benefits during the 2012-2013  school year. The application did not indicate child-support payments, and  the household was subsequently approved for reduced-price meals. This  household was not subjected to for-cause verification by the school  district even though households resubmitting an application with less  income a short time after being denied benefits could be a red flag to  indicate that for-cause verification should be conducted.
While USDA has issued guidance specific to school-district employees  and instructs school districts to verify questionable applications in its  school-meals eligibility manual, we found that the guidance does not  provide possible indicators or describe scenarios that could assist school  districts in identifying questionable applications. Standards for Internal  Control in the Federal Government call for agencies to design control   Reviewing  activities to ensure management’s directives are carried out. the data gathered on for-cause verification for the 2013-2014 school year  could help USDA determine if data on the outcome of for-cause  verifications should be reported separately from standard verification  results. Further, as noted above, evaluating this data could help USDA  determine whether additional guidance would be beneficial to assist  school districts in identifying applications that should be subject to for- cause verification. Such guidance could include criteria and examples of  possible indicators of questionable or ineligible applications.
section_title: Income-Based Verification Could Enhance Oversight
paragraphs: USDA’s standard verification process—the terms of which are statutorily  defined—makes it difficult to detect all households that misreport their  income and that are ineligible for program benefits. It could also result in  the removal of eligible beneficiaries, as households that do not respond to  the verification notice are removed from the program. Electronically  matching household-application information to other data sources—such  as state income databases or public-assistance databases—could hold  promise in identifying high-income households for validation while not  disrupting program benefits to eligible households.
GAO/AIMD-00-21.3.1.
subsections: section_title: Standard Verification Limited to Small Portion of Beneficiaries
paragraphs: As described earlier in this report, with the exception of for-cause  verification, standard verification is generally limited to approved  applications considered “error-prone.” Error-prone is statutorily defined  as approved applications where stated income is within $100 of the  monthly or $1,200 of the annual applicable income-eligibility guideline.  Households with reported incomes that are more than $1,200 above or  below the free-meals eligibility threshold and more than $1,200 below the  reduced-price threshold would generally not be subject to this verification   Figure 3 shows the income thresholds of applicants that would  process.and would not be considered error-prone for a four-person household  during the 2010-2011 school year.
In addition to the nongeneralizable sample of 23 households receiving  school-meal benefits through direct certification discussed in the previous  section, we reviewed a nongeneralizable sample of 25 households  receiving school-meals benefits through an approved application.  Nineteen household applications were certified based upon their stated   Of these, we determined that 9 were not  income and household size.eligible for free or reduced-price-meal benefits they were receiving  because their income exceeded eligibility guidelines. Further, 2 of these 9  households stated annualized incomes that were within $1,200 of the  eligibility guidelines. These two households could have been subject to  standard verification had they been selected as part of the sample by the  district; however, they were not selected or verified. The remaining 7 of 9  households stated annualized incomes that did not fall within $1,200 of  the eligibility guidelines and thus would not have been subject to standard  verification. Figure 4 shows the results of our review.
Of the 19 households shown above that indicated eligibility based on self- reported household size and income, we determined that 9 were not  eligible for free or reduced-price-meal benefits they were receiving  because their known income exceeded eligibility guidelines. For example,  one household we reviewed submitted a school-meals application for the  2010-2011 school year seeking school-meals benefits for two children.  The household stated an annual income of approximately $26,000 per  year, and the school district appropriately certified the household to  receive reduced-price-meal benefits based on the information on the  application. However, through review of the payroll records, we  determined that the adult applicant’s income at the time of the application  was approximately $52,000—making the household ineligible for benefits.  This household also applied for and received reduced-meal benefits for  the 2011-2012 and 2012-2013 school years by understating its income.  Its 2012-2013 annualized income was understated by about $45,000.  Because the income stated on the application during these school years  was not within $1,200 per year of the income-eligibility requirements, the  application was not deemed error-prone and was not subject to standard  verification. Had this application been subjected to verification, a valid pay  stub would have indicated the household was ineligible. We interviewed  the adult applicant as part of our investigation, and the applicant admitted  to underestimating her income.
Another household in our sample submitted a school-meals application  for the 2010-2011 school year—stating an income that equated to  approximately $32,500 annually and a household size of five members— and was approved for free-meal benefits. However, at the time of the  application, the household’s annualized income was at least $60,000,  making the household ineligible for free or reduced-price meals. The  household application stated an annualized income that put it within the  error-prone range; however, it was not among the 3 percent sample of  error-prone applications selected for verification. This household applied  for school-meals benefits for the 2011-2012 school year—stating an  annualized income that equates to approximately $39,600—and was  approved for reduced-price meals. However, based on our review of  payroll information, household income was at least $73,000 during  2011—a difference of about $33,000—making this household ineligible  for free or reduced-price meals. When interviewed, the applicant said that  her children completed the application and that she signed it.
In another instance, a household submitted a school-meals application for  the 2010-2011 school year—stating an annualized income that equates to  approximately $19,200 and a household size of four—and was approved  for free school-meals benefits. This application omitted a parent living in  the household and earning annualized income of approximately $55,000.  Had the wage-earner and his income been included, this household  would not have qualified for free or reduced-price meals. This household  applied for and was approved for free school-meals for the 2011-2012  and 2012-2013 school years. Again, these applications omitted the parent  and his wages—which amounted to approximately $62,000 during 2011  and $64,000 during 2012. Had his income been included, the household  would not have qualified for free or reduced-price meals. When  interviewed, the parent said that he was not aware that his children had  been receiving free school-meals benefits. Because the stated income on  the application was outside the error-prone range, and the school district  only verified error-prone applications during these school years, this  household would not have been subject to standard verification.  Individuals with knowledge of the program-eligibility guidelines could  understate their income to avoid scrutiny, as this would likely prevent the  application from being reviewed under standard verification, although for- cause verification could identify the understatement.
For fiscal year 2013, USDA reported NSLP and SBP certification errors of  approximately 8.8 percent and 9.5 percent as part of its improper  payment estimation. As explained previously, USDA OIG noted that these estimates may be unreliable because they were based on the  2005-2006 school year and confidence levels could not be provided for  subsequent years. FNS has hired a contractor to conduct a revised study  for the 2012-2013 school year, which is expected to be complete in  November 2014.
section_title: Current Standard Verification Process Could Remove Eligible Beneficiaries
paragraphs: Once a household application has been certified as eligible to receive  benefits, and if it is selected for verification, school districts obtain  supporting documentation from the applicant—such as pay stubs or  benefit-award letters—in order to evaluate whether or not the household’s  free or reduced-price status is correct. verification process relies on responses from applicants, it could lead to  eligible children being removed from the program if the applicant does not  respond to the school district’s verification request. USDA told us that  during the 2012-2013 school year, school districts verified approximately   Of these, 43.5 percent were receiving the correct  203,200 applications.level of benefits, and approximately 23.6 percent had their level of  benefits adjusted to properly reflect their eligibility based on verification.  Of the applications selected for verification, 32.8 percent did not respond  and were excluded from receiving free or reduced-price school meals.
According to USDA guidance, school districts are not to conduct any actions to verify the  information on the application during the certification process; they must accept the  applications at face value and determine eligibility based on the information voluntarily  disclosed in the application. In 2004, USDA issued the results of a pilot study to determine  the effects of requiring documentation to households applying for benefits and reported  that it had the adverse effect of limiting access to students eligible to receive school-meals  benefits. Mathematica Policy Research, Inc., Evaluation of the National School Lunch  Program Application/Verification Pilot Projects, vol. 1: “Impacts on Deterrence, Barriers,  and Accuracy” (Princeton, N.J.: February 2004). This report was prepared for USDA. not understand the instructions, or may be hesitant to provide income  information, though the household is still eligible to receive the benefits.  Further, a study commissioned by the USDA to examine outcomes of the  verification process during the fall of 2002 found that approximately half of  the households that did not respond to the verification request were  eligible for free or reduced-price meals.
section_title: Electronic Matching Could Help to Identify Potentially Ineligible Applications
paragraphs: As described above, standard verification is generally limited to approved  applications where stated income is within $1,200 of the annual  applicable income-eligibility guideline amount. Applications with stated  income outside of these thresholds would generally not be subject to  standard verification. However, our review of a nongeneralizable sample  of 25 households found 9 applications that were ineligible for benefits, 7  of which would have been excluded from standard verification.
Standards for Internal Control in the Federal Government indicate that  internal controls should include control activities and risk assessments.  These, among other controls, should be effective and efficient in  enforcing program requirements. Independent verification is a key  detection and monitoring component of an agency’s fraud-prevention   One method to identify  framework and is a fraud-control best practice.potentially ineligible applicants and effectively enforce program-eligibility  requirements is through the independent verification of income  information with an external source, such as state payroll data. States or  school districts, through data matching, could identify households that  have income greater than the eligibility limits for further follow-up. This  risk-based approach would allow school districts to focus on potentially  ineligible families, while not interrupting program access to other  participants.
While electronic verification could yield positive results, there are some  potential limitations. For example, state income databases may not  contain all sources of household income—such as child-support  payments or income earned by individuals who do not have a Social  Security number. Additionally, it may not be cost-effective or possible for  school districts to use external data when conducting verification. Thus,  states may be better positioned to complete this matching and to report  findings to specific school districts.
A study commissioned by USDA to explore the feasibility of computer  matching in the NSLP during the 2004-2005 school year cited limitations  to having school districts directly verify income information with state  agencies. For example, because income data are reported for  individuals, not households, school districts would need to obtain Social  Security numbers for all income earners in the household in order to  verify household income. The study also found that computer-matching  results can be inaccurate and that income discrepancies between the  state database and the household application would require follow-up  with the household that is similar to the existing verification process.  However, technology and data-matching software and techniques have  improved significantly in the last decade and could hold promise in  efficiently identifying only potentially ineligible households for further  follow-up while not removing program beneficiaries whose incomes are  within the eligibility guidelines.
Electronic verification of a sample of applicants (beyond those that are  statutorily defined as error-prone) through computer matching by school  districts or state agencies with other sources of information—such as  state income databases or public-assistance databases—could help  effectively identify potentially ineligible applicants. However, it is not clear  whether such a process is cost-effective. Thus, developing a pilot to  explore the feasibility of implementing a cost-effective mechanism to  conduct electronic verification at the state or school-district level could  help inform the extent to which this alternative is feasible. Because  standard verification is dictated by statute, if the results of the pilot show  promise in identifying ineligible beneficiaries, developing a legislative  proposal to expand the verification process to include independent  electronic verification for a sample of all school-meals applications could  help USDA identify and prevent ineligible beneficiaries in the school- meals program.
section_title: Expanded Verification of Applications That Indicate Categorical Eligibility Could Enhance Program Integrity
paragraphs: We found that ineligible households may be receiving free school-meals  benefits by submitting applications that falsely state that a household  member is categorically eligible for the program due to participating in  certain public-assistance programs—such as SNAP or TANF—or meeting  an approved designation—such as foster child or homeless. Of the 25  household applications we reviewed, 6 were approved for free school- meals benefits based on categorical eligibility, and 3 of these were  potentially ineligible for the benefit.Specifically, we found the following:   Figure 3 illustrates these results.
One household applied for benefits during the 2010-2011 school  year—providing a public-assistance benefit number—and was  approved for free-meal benefits. However, when we verified the  information with the state, we learned that the number was for  medical-assistance benefits—a program that is not included in  categorical eligibility for the school-meals programs. When  interviewed, the parent said that he could not remember if the benefits  they received were SNAP or medical assistance. On the basis of our  review of payroll records, this household’s annualized income of at  least $59,000 during 2010 would not have qualified the household for  free or reduced-price-meal benefits. This household applied for  school-meals benefits during the 2011-2012 and 2012-2013 school  years, again indicating the same public-assistance benefit number— and was approved for free-meal benefits.
Another household applied for benefits during the 2010-2011 school  year—providing a public-assistance benefit number—and was  approved for free-meal benefits. When interviewed, the parent said  that the household received SNAP benefits. However, when we  verified the information with the state, officials told us the household  was not receiving public-assistance benefits at the time of  application.
In a 2010-2011 school year application, one household indicated that  the student was a foster child; however, when we interviewed the  applicant, she told us that she has never had foster children. This  household was not eligible for free meals, but may have been eligible  for reduced-price meals.household was directly certified for free-meal benefits during the  2011-2012 and 2012-2013 school years.
A school-district official told us that this  Because applications that indicate categorical eligibility are generally not  subject to standard verification, these ineligible households would likely  not be identified unless they were selected for for-cause verification or as  part of the administrative review process, even though they contained  inaccurate information. These cases underscore the potential benefits  that could be realized by verifying beneficiaries with categorical eligibility.  We will refer these potentially ineligible households to USDA and their  school district for appropriate action as warranted. Furthermore, the  administrative review report for one district we reviewed noted that  categorical-eligibility determinations were not always correct, including  migrant, homeless, runaway, Head Start, and Even Start programs.
USDA’s eligibility manual states that school districts should be aware of  the characteristics of a valid SNAP or TANF number and are allowed to  verify this information with the appropriate agency. However, these  numbers can vary in terms of length. An official from one state told us that  because the length of SNAP and TANF numbers varies, it is difficult to  determine whether a number is valid simply by looking at it. A household  could also provide an old case number—which appears valid—and the  school district would not know that the household is not receiving public- assistance benefits unless the school district verifies the information with  the appropriate state agency.
Standards for Internal Control in the Federal Government state that  control activities should be effective and efficient in enforcing program  requirements and help in detecting errors and fraud. Since applications  that indicate categorical eligibility are generally not selected for standard  verification, there is limited oversight over these beneficiaries.
Individuals with knowledge of the program-eligibility guidelines could  indicate categorical eligibility to avoid scrutiny, as this would prevent the  application from ever being verified unless the school-district official  certifying the household had specific knowledge that the information was  not accurate. Verifying a sample of applications that indicate categorical  eligibility could assist in identifying ineligible households that are receiving  benefits and help improve program integrity. For example, USDA could  have school districts select a sample of applications indicating categorical  eligibility and verify the information with the appropriate agency. With the  increase in the number of school districts that directly certify SNAP- participant children, school districts may already have mechanisms to  match students with SNAP data provided by the state agency.  Alternatively, USDA could consider having the state agency perform this  verification as part of its periodic administrative review of the school  district.
section_title: Conclusions
paragraphs: OMB’s designation of the school-meals program as a “high-error”  program with significant estimated improper payments makes it important  that internal controls and oversight for the school-meals programs be  strengthened while simultaneously ensuring that students who qualify for  benefits are not adversely affected. USDA has taken steps to strengthen  controls and to increase access to eligible individuals by working with  Congress, school districts, and other public-assistance programs to find  new ways to provide benefits to those requiring assistance. However, the  cases we identified in which households received school-meals benefits  that they were not eligible for highlight the deficiencies with current  controls and the need for additional corrective actions. Evaluating the  data collected on completed for-cause verifications for the 2013-2014  school year could help USDA determine whether specific data on for- cause verification outcomes should be reported separately from standard  verification results and whether additional guidance for conducting for- cause verification—including criteria and examples of possible indicators  of questionable or ineligible applications—would be beneficial. Moreover,  a cost-effective mechanism to electronically verify applicant information  with income or other data sources such as public-sector wage records  could help enhance the current verification process and strengthen  program integrity. While challenges may exist in verifying beneficiary  income through computer matching, 9 years have passed since USDA  conducted a pilot to determine the feasibility of electronic verification. The  cost of the school-meals programs, continued high improper payments,  and advances in technology support the need to revisit the feasibility of  conducting computer matching in the school-meals programs to enhance  current verification efforts. If appropriate, developing a legislative proposal  to expand the statutorily defined verification process to include additional  independent electronic verification for a sample of all school-meals  applications could help USDA identify and prevent ineligible applicants  from participating in the school-meals program. In addition, verifying a  sample of applications that indicate categorical eligibility could assist in  identifying ineligible households that are receiving benefits and help  improve program integrity.
section_title: Recommendations for Executive Action
paragraphs: To improve integrity and oversight of the school-meals programs, we  recommend that the Secretary of Agriculture take the following four  actions:
Evaluate the data collected on for-cause verifications for the 2013- 2014 school year to determine if for-cause verification outcomes  should be reported separately, and if appropriate, develop and  disseminate additional guidance for conducting for-cause verification  that includes criteria for identifying possible indicators of questionable  or ineligible applications.
Develop and assess a pilot program to explore the feasibility of  computer matching school meal participants with other sources of  household income, such as state income databases, to identify  potentially ineligible households—those with income exceeding  program-eligibility thresholds—for verification.
If the pilot program shows promise in identifying ineligible households,  develop a legislative proposal to expand the statutorily-defined  verification process to include this independent electronic verification  for a sample of all school-meals applications.
Explore the feasibility of verifying the eligibility of a sample of  applications that indicate categorical eligibility for program benefits  and are thus not subject to standard verification.
section_title: Agency Comments
paragraphs: We provided a draft of this report to USDA for its review and comment.  Written comments from the Administrator for FNS are reprinted in  appendix VI. In its written comments, FNS indicated that it has long  recognized the importance of addressing improper payments and  program integrity problems to meet the mission of its programs and that it  will carefully consider our specific recommendations as it moves forward  in its efforts to improve integrity in the school-meals programs. The letter  also describes several steps FNS is taking to strengthen program  integrity, many of which are highlighted in this report. An e-mail dated  May 2, 2014, from the FNS GAO Liaison/Coordinator stated that FNS  generally agreed with our recommendations. FNS also provided technical  comments, which we incorporated as appropriate. In its technical  comments, FNS outlined potential challenges in implementing computer  matching of school meal participants with data on other sources of  income, such as challenges in working with state data or with incomplete  Social Security numbers, and the potential costs of verifying income data  and following up with households. We noted potential challenges in our  report and acknowledge them in our recommendation that USDA develop  and assess a pilot program to explore the feasibility of this process. We  believe that the continued high improper payments rate and advances in  technology support the need to conduct this pilot and, if it shows promise,  to develop a legislative proposal to expand its use.
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If you or your staff have questions about this report, please contact me at  (202) 512-6722 or lords@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. GAO staff who made major contributions to this report are  listed in appendix VII.
section_title: Appendix I: Objective, Scope, and Methodology
paragraphs: This report assesses (1) what steps, if any, has the U.S. Department of  Agriculture (USDA) taken to help identify and prevent ineligible  beneficiaries from receiving benefits in school-meals programs, and (2)  what opportunities, if any, exist to strengthen USDA’s oversight of the  school-meals programs? We also report case-study examples of  households that may have improperly received program benefits.  Because of limited salary and income data available for all U.S.  households, our case-study examples are limited to civilian executive- branch employees and United States Postal Service (USPS) employees.
The Washington, D.C and Dallas, Texas metropolitan regions ranked 1st and 18th,  respectively, among the 50 metropolitan regions with the largest executive-branch federal  employees during fiscal year 2012. The Washington, D.C. metropolitan region includes  Washington, D.C., Maryland, and Virginia. districts—1 located in the Dallas, Texas metropolitan region and 2 located  in the Washington, D.C., metropolitan region—because the data were not  reliable for our purposes. During the 2010-2011 school year there were  57 school districts in Washington, D.C.; 49 in Maryland; 1,260 in Texas;  and 154 in Virginia for a total of 1,520. This selection is not representative  of all states, school districts, or school-meal participants. We assessed  controls related to the identification and prevention of ineligible  beneficiaries in accordance with internal control standards.
To further identify opportunities, if any, that exist to strengthen USDA’s  oversight of the school-meals programs we tested controls that are  designed to identify and prevent ineligible school-meals beneficiaries. To  do this, we selected a nongeneralizable sample of 48 households  participating in the National School Lunch Program (NSLP) for further  review and investigation. To select the sample, we matched school-meals  eligibility data for the 2010-2011 school year from the 25 school districts  to civilian executive-branch federal-employee payroll data. The 2010- 2011 school year was the last year in which the school-meals applications  requested that the adult applicant provide his or her complete Social  Security number. While we do not expect federal employees to be any  more or less likely to commit fraud than employees in other sectors, we  completed case-study work based on the availability of centralized salary,  address, Social Security number, and employment data for federal  employees—these data were used to identify participants in NSLP,  regardless of income. The results of our work cannot be generalized to all  participants because it does not include private-sector employees.  Additional information comparing federal and private-sector employee  wages can be found in appendix V.
We began by examining databases containing students deemed eligible  for free or reduced-price school meals for the 2010-2011 school year from  the 25 school districts. These data generally contained personally  identifiable information for the child and an adult household member, as  well as household income and size. The data also contained information  about whether a household was directly certified into the program or  approved through a household application. We also obtained civilian  federal-employee payroll data for approximately 2.5 million individuals  from five federal-payroll processors. These data contained personally  identifiable information for the federal employee, as well as wages by pay  period for some or all of calendar year 2010. We used federal-employee  payroll data to develop case studies due to the unavailability of other data  sources containing salary information for nonfederal employees. To  assess the reliability of the school-meals eligibility and payroll data, we  reviewed relevant documentation, interviewed knowledgeable agency  officials, and examined the data for obvious errors and inconsistencies.  We concluded that the school-meals eligibility data and payroll data were  sufficiently reliable for purposes of this report.
Next, we narrowed the civilian federal-employee payroll data to those with  income during the July 2010 to December 2010 period—to coincide with  the start of the school year when most school-meals eligibility  determinations are made. We matched the school district and federal  payroll data using the Social Security number of the adult household  member, an address key composed of the address and zip code, and  name fields, to the extent they were available. Our matches included  households that, based on income, appeared both eligible and ineligible  to participate in the school-meals programs. A household member  earning income does not preclude children in the household from being  eligible for school-meals benefits. From our matches, we generated  randomly sorted lists of free and reduced-price school-meals participants  who submitted an application and randomly sorted lists of students who  were directly certified for free school meals in each of the 25 school  districts.
We then randomly selected up to two households in each of the 25 school  districts for an in-depth review, for a total of 48 cases. Specifically, for  each of the school districts, we reviewed one household that submitted an  application that was used for benefit determination (25 cases), as well as  one household that was directly certified (23 cases). Two of the 25  school districts did not have any directly certified students who matched  with the payroll data. We applied a minimum threshold of $6,000 to the  amount of federal salary earned during July 2010 to December 2010 in  order to identify active employees for our sample. In the event an adult  applicant was deceased or could not be located, we selected the next  participant from the randomly sorted list. The specific findings from the  selected cases cannot be generalized to other, or all, school-meals  beneficiaries or federal-employee households that received school-meals  benefits. Because our data were limited to federal-employee households  in 25 school districts that were selected on a nonrandom basis, the  results of our cases cannot be generalized to a larger population of  school-meals participants or to the entire federal workforce.
Once we identified the sample, we contacted the school districts and the  states in our sample to obtain supporting documentation. For the 25  households that submitted a school-meals application, we requested and  reviewed the available applications from the 2010-2011 school year to  see what the applicant listed as his or her household income and  household size. We used the school-meals income-eligibility guidelines to  determine whether school districts correctly determined eligibility based  upon the information stated on the application. We also reviewed school- meals applications from the 2011-2012 and 2012-2013 school years, if  submitted. For the 23 directly certified households, we obtained and  reviewed the public-assistance application associated with the household  from state agencies in the District of Columbia, Maryland, Texas, and  Virginia to see what the applicant listed as the household income and  composition.
We then reviewed the payroll records of the applicant or other household  member to obtain information on their actual minimum income during the  period the application was signed and to determine whether the federal  employee’s income stated on the school-meals or public-assistance  application was accurate. If the applicant’s income, along with the income  of other household members listed on the application, exceeded the  eligibility guideline based on the number of household members stated on  the application, we considered these households to be potentially  ineligible for school-meals benefits.
To conduct our investigative work, we interviewed individuals from the 48  households in our nongeneralizable sample—23 households that were  directly certified and 25 that applied for benefits. We interviewed these  individuals to determine whether the information entered on the  applications was accurate, to confirm their income, and to determine the  composition of their households. Investigators also conducted a review of  the associated payroll records and school-meals application or public- assistance application to inform the interviews.
We conducted this performance audit from February 2012 to May 2014 in accordance with generally accepted government auditing standards.Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives. We conducted our related  investigative work from June 2013 to May 2014 in accordance with  standards prescribed by the Council of the Inspectors General on Integrity  and Efficiency.
section_title: Appendix II: Additional Benefits Based on Eligibility in the School-Meals Programs
paragraphs: Schools and households that enroll students in free or reduced-price  school meals may be eligible for additional federal and state benefits. For  example, the U.S. Department of Education, through Title I of the  Elementary and Secondary Education Act, provided approximately $13.8  billion in funds to schools with high concentrations of low-income families  during fiscal year 2013. The distribution of federal Title I funds within  schools and school districts can be based, in part, on the number of  students eligible for free and reduced-price meals. In addition, separate  state funding for schools can also be tied to the percentage of students  eligible for free or reduced-price school meals. Further, the Universal  Service Program for Schools and Libraries, also known as the E-rate  program—created by the Telecommunications Act of 1996—provides  schools with discounts on eligible telecommunications services, Internet  access, and internal connections (such as network wiring). Discounts  can range from 20 to 90 percent, and the primary measure for  determining the discount is the percentage of students eligible under the  National School Lunch Program (NSLP) for free or reduced-price meals.
Households can also receive additional benefits by participating in the  school-meals programs. For example, the Lifeline Program, administered  by the Universal Service Administration Company on behalf of the  Federal Communications Commission, provides phone service discounts  for households that participate in the NSLP or other qualifying assistance  programs. We reviewed guidance from one school district that provides  other benefits to households qualifying for free or reduced-price meals,  including textbook assistance, and waiving college application fees and  athletic fees.
section_title: Appendix III: Responsibilities of the Food and Nutrition Service, State Agencies, and School Districts
section_title: Appendix IV: Sample School-Meals Household Application
section_title: Appendix V: Comparison between Federal and Private-Sector Employees
paragraphs: According to a January 2012 Congressional Budget Office (CBO) Report,  in 2010, 1.7 percent of the U.S. workforce was made up of federal civilian  employees—approximately 2.3 million compared to 111 million that were  employed by the private sector and 20 million employed by state and  local governments. Another 800,000 are employed by government  enterprises that typically pay for employee compensation through the sale  of services rather than through tax revenue, the United States Postal  Service (USPS) being the largest such employer. Further, federal  employees can be both part-time and intermittent, such as census  enumerators, whose jobs last from 2 to 8 weeks.
According to CBO’s study, employees of the federal government have  varying levels of educational attainment. For example, about 50 percent  of federal employees have either a high-school diploma or less or, at  most, some college, compared to about 70 percent of the private-sector  workforce. In the federal government, about 50 percent of employees  have a bachelor’s degree or higher education attainment, while in the  private sector about 30 percent of the workforce has comparable  education. The wages of federal versus private-sector employees vary  when considering level of education attained. In addition, CBO found that  federal civilian workers with no more than a high-school education earned  about 21 percent more, on average, than similar workers in the private  sector, while those with some college earned 15 percent more, on  average than similar workers in the private sector. Employees whose  highest level of education is a bachelor’s degree earned roughly the same  hourly wage, on average, in the federal government as in the private  sector. Federal workers with a doctorate or professional degree earned  23 percent less per hour, on average than similar workers in the private  sector.
While this CBO report does provide a point of comparison between  civilian federal workers and the private sector, the data analyzed do not  mirror the federal-employee population used in this report. For example,  the CBO report does not include workers in government enterprises,  including USPS, seasonal, or part-time civilian federal employees, while  our analysis does. Therefore, while the results of the CBO report are   presented for informational purposes, they should not be used to draw  conclusions about civilian federal-employee and USPS pay used in our  analysis.
section_title: Appendix VI: Comments from the U.S. Department of Agriculture Food and Nutrition Service
section_title: Appendix VII: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Heather Dunahoo (Assistant  Director), John W. Cooney, Heather Cowles, Ranya Elias, Erika Lang,  Kathryn Larin, Maria McMullen, Dan Meyer, Linda Miller, Sandra Moore,  Robert Ridley, and Daniel Silva made key contributions to this report.