Various child nutrition programs have been established to provide nutritionally balanced, low-cost or free meals and snacks to children throughout the United States. The school lunch and school breakfast programs are among the largest of these programs. The National School Lunch Program was established in 1946; a 1998 expansion added snacks served in after-school and enrichment programs. In fiscal year 2000, more than 27 million children at over 97,000 public and nonprofit private schools and residential child care institutions received lunches through this program. The School Breakfast Program began as a pilot project in 1966 and was made permanent in 1975. The program had an average daily participation of more than 7.5 million children in about 74,000 public and private schools and residential child care institutions in fiscal year 2000. According to program regulations, states can designate schools as severe need schools if 40 percent or more of lunches are served free or at a reduced price, and if reimbursement rates do not cover the costs of the school’s breakfast program. Severe need schools were generally reimbursed 21 cents more for free and reduced-price breakfasts in school year 2000-01. The National School Lunch and School Breakfast Programs provide federally subsidized meals for all children; with the size of the subsidy dependent on the income level of participating households. Any child at a participating school may purchase a meal through the school meals programs. However, children from households with incomes at or below 130 percent of the federal poverty level are eligible for free meals, and those from households with incomes between 130 percent and 185 percent of the poverty level are eligible for reduced-price meals. Similarly, children from households that participate in three federal programs— Food Stamps, Temporary Assistant for Needy Families, or Food Distribution Program on Indian Reservations—are eligible to receive free or reduced-price meals. School districts participating in the programs receive cash assistance and commodity foods from USDA for all reimbursable meals they serve. Meals are required to meet specific nutrition standards. For example, school lunches must provide one-third of the recommended dietary allowances of protein, vitamins A and C, iron, calcium, and calories. Schools have a great deal of flexibility in deciding which menu planning approach will enable them to comply with these standards. Schools receive different cash reimbursement amounts depending on the category of meals served. For example, a free lunch receives a higher cash reimbursement amount than a reduced-price lunch, and a lunch for which a child pays full price receives the smallest reimbursement. (See table 2.) Children can be charged no more than 40 cents for reduced-price meals, but there are no restrictions on the prices that schools can charge for full-price meals. Various agencies and entities at the federal, state, and local levels have administrative responsibilities under these programs. FNS administers the school meal programs at the federal level. In general, FNS headquarters staff carry out policy decisions, such as updating regulations, providing guidance and monitoring, and reporting program review results. Regional staff interact with state and school food authorities, and provide technical assistance and oversight. State agencies, usually departments of education, are responsible for the statewide administration of the program, including disbursing federal funds and monitoring the program. At the local level, two entities are involved—the individual school and organizations called school food authorities, which manage school food services for one or more schools. School food authorities have flexibility in how they carry out their administrative responsibilities and can decide whether to delegate some tasks to the schools. To receive program reimbursement, schools and school food authorities must follow federal guidelines for processing applications for free and reduced-price meals, verifying eligibility for free or reduced-price meals, and counting and reporting all reimbursable meals served, whether full- price, reduced-price, or free. This means processing an application for most participants in the free and reduced-price programs, verifying eligibility for at least a sample of approved applications, and keeping daily track of meals provided. These processes comprise only a small part of the federal school meal programs’ administrative requirements. According to a USDA report, school food authorities spend the majority of their time on other administrative processes, including daily meal production records and maintaining records documenting that the program is nonprofit as required by regulations. The data we were asked to obtain focus on the participant eligibility and meal counting and reimbursement processes and do not include estimates for other administrative tasks, which are outside the scope of the request. The federal budget provides funds separate from program dollars to pay for administrative processes at the federal and state level. In contrast, officials at the local level pay for administrative costs from program dollars that include federal and state funding and student meal payments. Districts and schools that participate in the school meal programs vary in terms of locale, size of enrollment, percent of children approved for free and reduced-price meals, and types of meal counting systems used. We selected 10 districts and 20 schools located in rural areas, small towns, mid-size central cities, urban fringe areas of mid-size and large cities, and large central cities. At the districts, enrollment ranged from 1,265 to 158,150 children, while at the 20 schools, it ranged from 291 to 2,661 children. The rate of children approved for free and reduced-price meals ranged from 16.7 to 74.5 percent at the districts and from 10.5 to 96.5 percent at the schools. Nine of these schools used electronic meal counting systems. Table 3 summarizes the characteristics of selected districts and schools. For school year 2000-01, the estimated application process costs at the federal and state levels were much less than 1 cent per program dollar, and the median cost at the local level was 1 cent per program dollar. (See table 4.) At the federal and state levels, costs related to the application process were primarily for tasks associated with providing oversight, issuing guidance, and training throughout the year. At the local level, the costs varied, the tasks were primarily done at the beginning of the school year by the school food authorities, and different staff performed the tasks. Our limited number of selected schools differed in many aspects, making it difficult to determine reasons for most cost differences, except in a few instances. The estimated federal costs for performing the duties associated with the application process were small in relation to the program dollars. FNS headquarters estimated its costs were about $358,000. When compared with the almost $8 billion in program dollars that FNS administered throughout the 2000-01 school year, these costs were much less than 1 cent per program dollar. However, these costs did not include costs for FNS’s seven regional offices. At the one region we reviewed, which administered about $881 million program dollars, estimated costs were about $72,000 for this time period. FNS’s costs were related to its overall program management and oversight duties. FNS officials said that they performed duties and tasks related to the application process throughout the year. The primary tasks and duties performed by FNS headquarters and/or regional staff included the following: Updating and implementing regulations related to the application process. Revising eligibility criteria. Reviewing state application materials and eligibility data. Providing training to states. Responding to questions from states. Conducting or assisting in reviews of the application process at the state and school food authority levels, and monitoring and reporting review results. Estimated costs incurred by the five selected states ranged from $53,000 to $798,000 for performing tasks related to the application process, while the total program dollars administered ranged from $122 million to $1.1 billion. For four of the five states we reviewed, total application costs were generally in proportion to the program dollars administered. However, the estimated application costs for one state were higher than for other selected states with significantly larger programs. Officials from this state attributed these higher costs to the large number of districts in that state compared with most other states. At the state level, costs were incurred primarily for providing guidance and training to school food authority staff and for monitoring the process. Just as at the federal level, state level officials said that they performed their application process duties throughout the year. These tasks included updating agreements with school food authorities to operate school meal programs, preparing prototype application forms and letters of instruction to households and providing these documents to the school food authorities, and training managers from the school food authorities. State officials also reviewed the application process as part of required reviews performed at each school food authority every 5 years. For the sites we reviewed, the estimated median cost at the local level to perform application process tasks was 1 cent per program dollar and ranged from less than half a cent to about 3 cents. The school food authorities incurred most of the application process costs—from about $3,000 to nearly $160,000, and administered program dollars ranging from about $315,000 to nearly $18 million. Not all schools incurred application process costs, but for those that did, these costs ranged from over $100 to as much as $3,735. The schools reviewed were responsible for $65,000 to $545,000 in program dollars. Table 5 lists the estimated application process costs, program dollars, and cost per program dollar for each of the school food authorities and schools included in our review. At the local level, the costs associated with conducting the application process for free and reduced-price meals were primarily related to the following tasks: Downloading the prototype application and household instruction letter from the state’s Web site and making copies of it before the school year begins. Sending the applications and household instruction letters home with children at the beginning of the school year or mailing them to the children’s homes. Collecting completed applications that were either returned to school or mailed to the district office. Reviewing applications and returning those with unclear or missing information, or calling applicants for the information. Making eligibility determinations for free or reduced-price meals. Sending letters to applicants with the results of eligibility determinations for free or reduced-price meals. Preparing rosters of eligible children. Most of the application process tasks were performed at the beginning of the school year because parents must complete a new application each year in order for their children to receive free or reduced-price meals.Some applications are submitted throughout the school year for newly enrolled or transferred children or children whose families have changes to their household financial status. Program regulations direct parents to notify school officials when there is a decrease in household size or an increase in household income of more than $50 per month or $600 per year. Staff at 8 of the 10 school food authorities performed most of the application tasks for all schools that they managed. For the 2 other school food authorities, the schools reviewed performed most of the application tasks. Sixteen of 20 schools distributed and collected the applications. However, 4 schools did not distribute applications because their school food authorities mailed applications to households instead. Various staff supported the application process at the school food authorities and the schools. Two school food authorities hired temporary workers to help process the applications at the start of the school year, and the costs at these locations were below the median. Several schools involved various nonfood service staff in the process. At one school guidance counselors and teachers helped distribute and collect applications. At another school, a bilingual community resource staff person made telephone calls to families to help them apply for free and reduced-price meals. Clerical workers copied and pre-approved applications at two schools, and at another school, the school secretary collected the applications and made eligibility determinations. While the variation in the staff assigned to perform application duties may account for some cost differences, the limited number of selected schools and their related school food authorities differed in many aspects, making it difficult to determine reasons for most cost differences, except in a few instances. In one case, we were able to compare two schools and their related school food authorities because the two schools had some similar characteristics, including size of school enrollment, grade span, and percentage of children approved for free and reduced-price school meals. However, the school food authorities differed in size and locale. At these two schools, the combined costs—costs for the school and its share of the related school food authority’s costs for processing applications—differed. The combined costs at one school were almost 3 cents per program dollar, while the combined costs at the other school were less than 1 cent per program dollar. The school with the higher costs enlisted teachers and guidance counselors to help hand out and collect applications and was part of a smaller school food authority that used a manual process to prepare a roster of eligible children. The other school did not perform any application process tasks, since these tasks were done centrally at the school food authority. This school was part of a district that had a much higher enrollment and an electronic system to prepare a roster of eligible children. For the remaining 18 schools, we were generally not able to identify reasons for cost differences. For the 2000-01 school year, the estimated costs per program dollar for the verification process were much less than 1 cent at the federal, state, and local levels. (See table 6.) At the federal and state levels, the costs of verifying eligibility for free and reduced-price meals were primarily related to oversight tasks performed throughout the year. At the local level, duties associated with the verification process were done in the fall of the school year. Only one school food authority significantly involved its schools in the verification process. At the 10 selected school food authorities, the verification process resulted in some children being moved to other meal categories, because households did not confirm the information on the application or did not respond to the request for verification documentation. FNS has implemented several pilot projects for improving the application and verification processes and plans to complete these projects in 2003. For school year 2000-01, the estimated costs at the federal and state levels for performing duties associated with the verification process were much less than 1 cent per program dollar. The estimated costs at FNS headquarters of about $301,000 and the estimated costs at the selected FNS region of about $28,000 were small in relation to the program dollars administered—about $8 billion and $881 million, respectively. FNS performed a number of tasks to support the verification process. FNS officials said that during the year the primary tasks that staff at headquarters and/or regions performed included the following: Updating regulations and guidance related to the verification process. Holding training sessions. Responding to questions from states and parents. Clarifying verification issues. Reviewing state verification materials and data. Conducting or assisting in reviews of the process at the state and school food authority levels. Monitoring and reporting review results. Costs incurred by the selected states ranged from about $5,000 to $783,000 for performing tasks related to the verification process. During this period, these states administered $122 million to $1.1 billion program dollars. States incurred costs associated with overseeing and monitoring the verification process and performed many tasks throughout the year. The primary state task involved reviews of the verification process, where states determined whether the school food authorities appropriately selected and verified a sample of their approved free and reduced-price applications by the deadline, confirmed that the verification process was completed, and ensured that verification records were maintained. In addition to the review tasks, state officials provided guidance and training to school food authority staff. The selected school food authorities’ costs ranged from $429 to $14,950 for the verification process tasks, while costs at selected schools, if any, ranged from $23 to as much as $967. Schools reported few, if any, costs because they had little or no involvement in the verification process. During school year 2000-01, the school food authorities administered program dollars ranging from about $315,000 to over $28 million, and the schools were responsible for program dollars ranging from about $65,000 to $545,000. The estimated median cost at the local level—school food authorities and schools combined—was much less than 1 cent per program dollar. Table 7 lists the estimated verification process costs, program dollars, and cost per program dollar for each of the school food authorities and schools included in our review. At the local level, costs associated with verifying approved applications for free and reduced-price school meals were for duties performed primarily in the fall of the school year. Each year school food authority staff must select a sample from the approved applications on file as of October 31 and complete the verification process by December 15. According to USDA regulations, the sample may be either a random sample or a focused sample. Additionally, the school food authority has an obligation to verify all questionable applications, referred to as verification “for cause.” However, any verification that is done for cause is in addition to the required sample. Furthermore, instead of verifying a sample of applications, school food authorities may choose to verify all approved applications. Also, school food authorities can require households to provide information to verify eligibility for free and reduced-price meals at the time of application. This information is to be used to verify applications only after eligibility has been determined based on the completed application alone. In this way, eligible children can receive free or reduced-price school meals without being delayed by the verification process. Of the 10 selected school food authorities, 7 used a random sample method and 3 used a focused sample method. At the local level, the costs associated with verifying approved applications for free and reduced-price meals were primarily related to the following tasks: Selecting a sample from the approved applications on file as of October 31. Providing the selected households with written notice that their applications have been selected for verification and that they are required to submit written evidence of eligibility within a specified period of time. Sending follow-up letters to households that do not respond. Comparing documentation provided by the household, such as pay stubs, with information on the application to determine whether the school food authority’s original eligibility determination is correct. Locating the files of all the siblings of a child whose eligibility status has changed if a school district uses individual applications instead of family applications. Notifying the households of any changes in eligibility status. Generally, the selected school food authorities performed most of the verification tasks, while the schools had little or no involvement in the process. However, the schools in one school food authority did most of the verification tasks, and the tasks performed by the school food authority were limited to selecting the applications to be verified and sending copies of parent notification letters and verification forms to the schools for the schools to distribute. The costs at these two schools were less than 1 cent per program dollar. The verification process is intended to help ensure that only eligible children receive the benefit of free or reduced-price meals, and at the locations we visited, the verification process resulted in changes to the eligibility status for a number of children. During the verification process, generally, household income information on the application is compared with related documents, such as pay stubs or social security payment information. When the income information in the application cannot be confirmed or when households do not respond to the request for verification documentation, the eligibility status of children in the program is changed. That is, children are switched to other meal categories, such as from free to full price. Children can also be determined to be eligible for higher benefits, such as for free meals, rather than reduced-price meals. At the locations we visited, the verification process resulted in changes to the eligibility status for a number of children. For example, at one school food authority in a small town with about half of its children approved for free and reduced-price school meals, 65 of 2,728 approved applications were selected for verification, and 24 children were moved from the free meals category to either the reduced-price or full-priced meals categories, while 1 child was moved to the free category. At another school food authority in the urban fringe of a large city, with about 40 percent of its children approved for free and reduced-price school meals, 40 of about 1,100 approved applications were selected for verification and 8 children were moved to higher-priced meal categories. According to program officials, some children initially determined to be ineligible for free or reduced-price meals are later found to be eligible when they reapply and provide the needed documents. We did not determine whether any of the children were subsequently reinstated to their pre-verification status. The accuracy of the numbers of children who are approved for free and reduced-price meals affects not only the school meals program but also other federal and state programs. A USDA report, based on the agency’s data on the number of children approved for free meals and data from the U. S. Bureau of Census, indicates that about 27 percent more children are approved for free meals than are income-eligible. As such, the federal reimbursements for the school meals program may not be proper. Furthermore, some other programs that serve children in poverty distribute funds or resources based on the number of children approved to receive free or reduced-price meals. For example, in school year 1999-2000 nine states used free and reduced-price meals data to distribute Title I funds to their small districts (those serving areas with fewer than 20,000 total residents). In addition, districts typically use free and reduced- price meals data to distribute Title I funds among schools. At the state level, some state programs also rely on free and reduced-price lunch data. For example, Minnesota distributed about $7 million in 2002 for a first grade preparedness program based on these data. As of July 2002, FNS had three pilot projects underway for improving the application and verification processes. These projects are designed to assess the value of (1) requesting income documentation and performing verification at the time of application, (2) verifying additional sampled applications if a specified rate of ineligible children are identified in the original verification sample, and (3) verifying the eligibility of children who were approved for free school meals based on information provided by program officials on household participation in the Food Stamp, Temporary Assistance for Needy Families, or Food Distribution on Indian Reservations programs, a process known as direct certification. FNS plans to report on these projects in 2003. According to officials from three organizations that track food and nutrition issues, the American School Food Service Association, the Center on Budget and Policy Priorities, and the Food Research and Action Center, requesting income documentation at the time of application would likely add to application process costs and may create a barrier for eligible households. Having to provide such additional information can complicate the school meals application process and may cause some eligible households not to apply. In 1986, we reported this method as an option for reducing participation of ineligible children in free and reduced-price meal programs, but recognized that it could increase schools’ administrative costs, place an administrative burden on some applicants, or pose a barrier to potential applicants. For the 2000-01 school year, costs for meal counting and claiming reimbursement at the federal and state levels were much less than 1 cent per program dollar. The median cost was nearly 7 cents at the local level and was the highest cost. (See table 8.) The federal and state level costs were incurred for providing oversight and administering funds for reimbursement throughout the school year. Similarly, costs at the local level were incurred throughout the school year because the related duties, which apply to all reimbursable meals, were performed regularly. A number of factors come into play at the local level that could affect costs; however, except in a few instances, we could not identify any clear pattern as to how these factors affected meal counting and reimbursement claiming costs. At the federal and state levels, the costs associated with the meal counting and reimbursement claiming processes were much less than 1 cent per program dollar. FNS headquarters estimated that the costs associated with its meal counting and reimbursement claiming tasks were $254,000, and the costs of one FNS region were estimated at $93,000 in school year 2000-01. In comparison, FNS administered $8 billion and the region administered $881 million in the school meals program. FNS’s costs for meal counting and claiming reimbursement were less than their costs for application processing and verification tasks. FNS’s meal counting and reimbursement costs were primarily incurred for providing technical assistance, guidance, monitoring, and distributing federal funds to state agencies that administer school food programs. FNS distributes these funds through the regional offices, with the regions overseeing state and local agencies and providing guidance and training. Prior to the beginning of the fiscal year, FNS reviewed meal reimbursement requests from the prior year to project funding needs for each state. FNS awarded grants and provided letters of credit to states. Each month, states obtained reimbursement payments via the letters-of- credit, and FNS reviewed reports from states showing the claims submitted. At the end of the year, FNS closed out the grants and reconciled claims submitted with letter-of-credit payments. In addition to these tasks, FNS issued guidance, provided training, and responded to inquiries. Also, FNS regional staff conducted financial reviews of state agencies, such as reviews of reimbursement claim management, and assisted state agencies during reviews of school food authorities. For the five states, the cost per program dollar was also considerably less than 1 cent for the 2000-01 school year. The state agencies’ cost estimates ranged from $51,000 to $1 million, with the size of their programs ranging from $122 million to $1.1 billion. In all five states, the costs for meal counting and reimbursement tasks exceeded the costs for verification activities. In four of the five states, these costs were less than the costs for application activities. State agencies are responsible for operating a system to reimburse school food authorities for the meals served to children. Of the five state agencies in our sample, four had systems that allowed school food authorities to submit their monthly claims electronically, although one state agency’s system began operating in the middle of the 2000-01 school year. The other state agency received claims from its school food authorities through conventional mail services. The state agencies reviewed claims and approved payments as appropriate and conducted periodic reviews of school food authority meal counting and reimbursement activities. The median cost for meal counting and reimbursement claiming at the local level—school food authorities and schools—was about 7 cents per program dollar and ranged from 2 cents to 14 cents. The estimated meal counting and reimbursement claiming costs at the 10 selected school food authorities ranged from $2,461 to $318,436, and ranged from $1,892 to $36,986 for the 20 schools. Schools usually had a higher share of the cost per program dollar than their respective school food authorities; 18 of the 20 schools reviewed incurred more than half the cost per program dollar, with 14 schools incurring more than 75 percent. For example, one school’s costs were $19,000--about 90 percent of the combined school and school food authority costs. Table 9 lists the estimated costs for meal counting and obtaining reimbursement, program dollars, and cost per program dollar for each of the school food authorities and schools included in our review. The local level costs were much higher than the costs for application processing and verification because the duties were performed frequently throughout the school year, and costs were incurred for all reimbursable meals served under the program. As such, these costs do not reflect separate costs by type of meal served. At the schools, each meal was counted when served, the number of meals served were tallied each day, and a summary of the meals served was sent periodically to the school food authority. The school food authorities received and reviewed reports from its schools at regular intervals, including ensuring that meal counts were within limits based on enrollment, attendance, and the number of children eligible for free, reduced price and paid lunches. On the basis of these data, the school food authorities submitted claims for reimbursement to the state agency each month of the school year. Program officials noted that even without the federal requirement for meal counting by reimbursement category, schools would still incur some meal counting costs in order to account for the meals served. Most of the costs at the local level were for the labor to complete meal counting and claiming tasks. Those school food authorities with electronic meal counting systems reported substantial costs related to purchasing, maintaining, and operating meal counting computer systems and software. In addition to the frequency, another reason for the higher cost is that, unlike application and verification, meal counting and claiming reimbursement pertains to all reimbursable meals served—free, reduced- price and full price. For example, during school year 2000-01, FNS provided reimbursement for over 2 billion free lunches, about 400 million reduced-price lunches and about 2 billion full-price lunches. Costs for meal counting and reimbursement claiming varied considerably at the local level—school food authorities and schools combined. The costs per program dollar ranged from 2 cents to 14 cents, compared with the costs per program dollar for the other processes, which were much more consistent—from about half a cent to 3 cents for the application process and from less than 1 cent to 1 cent for the verification process. Various factors may contribute to this range of costs at the local level. For example, larger enrollments may allow economies of scale that lower the cost of food service operations. Use of an electronic meal counting system, as opposed to a manual system, has the potential to affect meal counting costs, since electronic systems require the purchase of equipment, software, and ongoing maintenance. Food service procedures may also have a bearing on costs, such as the number and pay levels of cashiers and other staff performing meal counting and reimbursement claiming tasks. The interaction of these factors and our limited number of selected sites prevents a clear explanation for the differences in estimated costs per program dollar incurred at the selected locations reviewed, except in a few instances. For example, at the local level, the school with the highest combined meal counting cost per program dollar for the school and its share of the school food authority costs (14 cents) had an enrollment of 636 children, relatively few of its children approved for free and reduced- price meals (14 percent), and a manual meal counting system. The school with the lowest combined meal counting cost (2 cents per program dollar) had about twice the enrollment, 96 percent of its children approved for free and reduced-price meals, and an electronic meal counting system. Both schools were elementary schools in mid-size city locales. For the remaining 18 schools in the sample, we saw no distinct relationship between cost and these factors. We provided a draft of this report to USDA’s Food and Nutrition Service for review and comment. We met with agency officials to discuss the report. These officials stated that written comments would not be provided. However, they provided technical comments that we incorporated where appropriate. We are sending copies of this report to the Secretary of Agriculture, appropriate congressional committees, and other interested parties. We will also make copies available to others upon request. 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 (202) 512-7215. Key contacts and staff acknowledgments are listed in appendix III. This appendix discusses cost estimates for the application, verification, and meal counting and reimbursement claiming processes. The scope of our review included the National School Lunch Program and the School Breakfast Program as they relate to public schools. To the extent that we could, we excluded from our analyses other federal child nutrition programs and nonprofit private schools and residential child care institutions, which also participate in the school meals programs. Our review included the paper application process and did not include the direct certification of children for free and reduced-price school meals. Our focus was school year 2000-01, the most recent year for which data were available. The data we collected relate to that year. National data on the costs of the application, verification, and meal counting and reimbursement claiming processes are not available for the federal, state, or local levels, since these costs are not tracked separately. Therefore, we developed estimates of these costs on the basis of cost information provided by program managers and staff. To obtain data on the costs related to applying for free and reduced-price school meals, verifying approved applications, and counting meals and claiming reimbursements, we visited selected locations, including 5 state agencies, 10 school food authorities in public school districts, and 2 schools at each district. We chose sites that would provide a range of characteristics, such as geographical location, the size of student enrollment, the rate of children approved for free and reduced-price meals, and the type of meal counting system. We selected districts with schools that were located in rural areas, small towns, mid-size central cities, urban fringe areas of mid-size and large cities, and large central cities based on locale categories assigned to their respective districts by the National Center for Education Statistics. To include districts of various sizes in our study, we selected 2 districts in each selected state—1 with enrollment over 10,000 and 1 with enrollment under 10,000, except in Ohio. In Ohio, we selected 2 districts with enrollments of less than 5,000, since almost 90 percent of the public school districts nationwide have enrollments under that amount. We also selected districts with rates of children approved for free and reduced-price meals that ranged from 16.7 to 74.5 percent and schools with rates that ranged from 10.5 to 96.5 percent. We worked with state and school food authority officials at our selected districts to select a mix of schools that had either manual or electronic meal counting systems. Electronic meal counting systems were used at 9 selected schools. We also obtained information from officials at the Food and Nutrition Service’s (FNS) headquarters and one regional office. We selected one regional office that, according to FNS officials, had the best data available to develop estimates for the application, verification, and meal counting processes. We developed interview guides to use at selected sites. We also met with FNS and professional association officials to obtain their comments on these interview guides, and we revised them where appropriate. Using these guides, we interviewed program managers and staff at the selected locations to obtain information on tasks associated with the application, verification, and meal counting and reimbursement claiming processes for the 2000-01 school year. We obtained estimated labor and benefit costs associated with these tasks. We also obtained other estimated nonlabor costs such as those for translating, copying, printing, mailing, data processing, travel, hardware, software, and automated systems development costs. On the basis of this information, we calculated estimated costs associated with each process, that is, application, verification, and meal counting and reimbursement claiming. Using our cost estimates, we calculated costs relative to program dollars. Program dollars at the federal level for both FNS headquarters and the one region included the value of reimbursements for school meals and commodities, both entitlement and bonus, for public and nonprofit private schools and residential child care institutions because FNS was not able to provide program dollars specific to public schools. However, according to FNS officials, reimbursements and commodities provided to public schools make up the vast majority of these dollars. Program dollars at the state level included this federal funding specific to public school districts for school meals and state school meal funding. Information specific to public school districts is available at the state level because claims are made separately by each school food authority. At the local level, program dollars included the amounts children paid for the meals as well as federal and state funding. Since some school food authorities could not provide the dollar value of commodities used at selected schools, we assigned a dollar value of commodities to each of these schools based on their proportion of federal reimbursements. We included federal and state program funding and the amounts children paid for the meals because these are the revenues related to the sale of reimbursable meals. Because the definition of program dollars differed by level, we were unable to total the costs for the three levels—federal, state, and local. However, since the definition of program dollars was the same for school food authorities and schools, we were able to calculate the cost per program dollar at the local level for each school. To calculate these costs we: (1) divided the school program dollars by the school food authority program dollars; (2) multiplied the resulting amount by the total school food authority costs for each process—application, verification, and meal counting and reimbursement claiming—to determine the portion of the costs for each process at the school food authority that was attributable to each selected school; (3) added these costs to the total costs for each of the schools; and (4) divided the resulting total amount by the program dollars for each selected school to arrive at the cost per program dollar at the local level for each school. We calculated a median cost per program dollar for school food authorities and schools separately for each process—application, verification, and meal counting and reimbursement claiming. We also calculated a median cost for each process for school food authorities and schools combined to arrive at local level medians for each process. The cost estimates do not include indirect costs. For 2 of the 10 school food authorities, indirect rates were not available and in other cases, the rates varied significantly due to differing financial management and accounting policies. Also, for 2 of the 10 school food authorities, including indirect rate calculations could have resulted in some costs being double counted because during our interviews with staff, they provided estimates for many of the tasks that would have been included in the indirect rates. Depreciation costs for equipment, such as computer hardware and software, were generally not calculated nor maintained by states and school food authorities. Therefore, we obtained the costs for equipment purchased in the year under review. We did not obtain costs for equipment at the federal level because these costs could not be reasonably estimated, since equipment was used for purposes beyond the processes under review. We obtained information on the verification pilot projects from FNS officials. We also obtained information from the American School Food Service Association, the Center on Budget and Policy Priorities, and the Food Research and Action Center on several options related to the program, one of which was the same as one of the pilot projects. We did not verify the information collected for this study. However, we made follow-up calls in cases where data were missing or appeared unusual. The results of our study cannot be generalized to schools, school food authorities, or states nationwide. Program dollars include cash reimbursements and commodities (bonus and entitlement) at the federal level, the amounts provided to school food authorities for these programs at the state level, and the amounts students paid for their meals at the local level. In addition to the individuals named above, Peter M. Bramble, Robert Miller, Sheila Nicholson, Thomas E. Slomba, Luann Moy, and Stanley G. Stenersen made key contributions to this report.

Summary: Each school day, millions of children receive meals and snacks provided through the National School Lunch and National School Breakfast Programs. Any child at a participating school may purchase a meal through these school meal programs, and children from households that apply and meet established income guidelines can receive these meals free or at a reduced price. The federal government reimburses the states, which in turn reimburse school food authorities for each meal served. During fiscal year 2001, the federal government spent $8 billion in reimbursements for school meals. The Department of Agriculture's Food and Nutrition Service, state agencies, and school food authorities all play a role in these school meal programs. GAO reported that costs for the application, verification, and meal counting and reimbursement processes for the school meal programs were incurred mainly at the local level. Estimated federal and state-level costs during school year 2000-2001 for these three processes were generally much less than 1 cent per program dollar administered. At the local level--selected schools and the related school food authorities--the median estimated cost for these processes was 8 cents per program dollar and ranged from 3 cents to 16 cents per program dollar. The largest costs at the local level were for counting meals and submitting claims for reimbursement. Estimated costs related to the application process were the next largest, and estimated verification process costs were the lowest of the three.