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. Household income levels determine whether children qualify for free or reduced-price meals. Children from families with incomes at or below 130 percent of the federal poverty level are eligible for free meals; the income threshold for a family of four was $28,665 in the 2010–2011 school year. 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. 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; or who are foster children) are eligible for free school meals regardless of income. In May 2014, we reported that USDA had taken several steps to implement or enhance controls to identify and prevent ineligible beneficiaries from receiving school-meals benefits. USDA worked with Congress to develop legislation to automatically enroll students who receive SNAP benefits for free school meals; SNAP has a more-detailed certification process than the school-meals program. For our May 2014 report, USDA officials told us that they were emphasizing the use of direct certification, because, in their opinion, it helps prevent certification errors without compromising access. Direct certification reduces 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. The number of school districts directly certifying SNAP-participant children increased from the 2008 through 2013 school years. 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. USDA was also conducting demonstration projects in selected states and school districts to explore the feasibility of directly certifying children that participate in the Medicaid program. USDA requires state agencies that administer school-meals programs to conduct regular, on-site reviews—referred to as “administrative reviews”—to evaluate school districts that participate in the school- meals programs. Starting in the 2013–2014 school year, USDA increased the frequency with which state agencies complete administrative reviews from every 5 years to every 3 years. As part of this process, state agencies are to conduct on-site reviews of school districts to help ensure that applications are complete and that the correct eligibility determinations were made based on applicant information. School districts that have adverse findings in their administrative reviews 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. 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. In our May 2014 report, we identified opportunities to strengthen oversight of the school-meals programs while ensuring legitimate access, including clarifying use of for-cause verification, studying the feasibility of electronic data matching to verify income, and verifying a sample of households that are categorically eligible for assistance. As described in USDA’s eligibility manual for school meals, school districts are obligated to verify applications if they deem them to be questionable, which is referred to as for-cause verification. We reported in May 2014 that officials from 11 of the 25 school districts we examined told us 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 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 we examined 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. 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 whether and under what conditions school districts conduct for-cause verifications. 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. However, the outcomes of those verifications would be grouped with the outcomes of applications that have undergone standard verification. As a result, we reported in May 2014 that USDA would 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. While USDA had 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 did not provide possible indicators or describe scenarios that could assist school districts in identifying questionable applications. Hence, in May 2014, we recommended that USDA evaluate the data collected on for-cause verifications for the 2013–2014 school year to determine whether 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. USDA concurred with this recommendation and in January 2015 told us that FNS would analyze the 2013–2014 school year data to determine whether capturing the results of for-cause verification separately from the results of standard verification would assist the agency’s efforts to improve integrity and oversight. USDA also said that FNS would consider developing and disseminating additional guidance, as we recommended. In addition to for-cause verification, school districts are required to 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.”limited to approved applications considered “error-prone.” Error-prone is statutorily defined as approved applications in which 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 process. In a nongeneralizable review of 25 approved civilian federal-employee household applications for our May 2014 report, we found that 9 of 19 households that self-reported household income and size information were not eligible for free or reduced-price-meal benefits they were receiving because their income exceeded eligibility guidelines. Two of these 9 households stated in their applications annualized incomes that were within $1,200 of the eligibility guidelines and, therefore, could have been selected for standard verification as part of the sample by the district; however, we determined that they were not selected or verified. The remaining 7 of 9 households stated annualized incomes that fell below $1,200 of the eligibility guidelines and thus would not have been subject to standard verification. 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, we reviewed payroll records and 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. One method to identify potentially ineligible applicants and effectively enforce program-eligibility requirements is by independently verifying 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 and follow up further. Such a risk-based approach would allow school districts to focus on potentially ineligible families while not interrupting program access to other participants.