School Meal Programs
Revenue and Expense Information from Selected States
Gao ID: GAO-03-569 May 9, 2003
The National School Lunch and Breakfast Programs provide millions of children with low-cost or free nutritious meals each school day. In school year 1996-97, the Department of Agriculture instituted more stringent requirements for the nutritional content of school meals. GAO was asked to study the school food service revenues and expenses and how they have changed since the requirements went into effect. This report includes information on the sources of revenues available for providing meals, the expenses of producing meals, the revenues compared to expenses, and the approaches that local school food authorities have adopted to manage their school food service finances. It uses data from six selected states. This report does not provide specific information on the expense of producing a reimbursable school lunch or breakfast.
Revenue from federal reimbursements and the sale of food were the principal sources of revenue for school food services in the six states GAO reviewed for school years 1996-97 through 2000-01. Federal reimbursements decreased slightly in proportion to the total, while revenues from food sales increased slightly. Funds from state governments and other sources represented a relatively small portion of total revenues and remained relatively stable as a share of total revenues. Labor and food purchases were the principal expenses for the six states, sharing nearly equal proportions and changing only slightly. Labor expenses, which included salaries and benefits for food service employees, grew slightly while food expenses decreased slightly. Other expenses, such as contract services, made up a smaller portion of expenses, and this portion remained constant. The six states had a small though increasing shortfall in total revenue compared to expenses over the 5-year period, as shown below. Their total expenses increased by about 22 percent, while their total revenues increased by about 20 percent. The portion of total school food service expenses covered by federal reimbursements declined from 54 to 51 percent, and the portion of expenses paid by state funds was small and declined slightly. To limit their expenses and maximize their revenues, local school food authority officials reported buying food in bulk, hiring more part-time staff, expanding a la carte food sales and catering programs, and other strategies.
GAO-03-569, School Meal Programs: Revenue and Expense Information from Selected States
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On January 4, 2004, this document was revised to add various
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
May 2003:
School Meal Programs:
Revenue and Expense Information from Selected States:
GAO-03-569:
GAO Highlights:
Highlights of GAO-03-569, a report to Congressional Requesters
Why GAO Did This Study:
The National School Lunch and Breakfast Programs provide millions of
children with low-cost or free nutritious meals each school day. In
school year 1996-97, the Department of Agriculture instituted more
stringent requirements for the nutritional content of school meals.
GAO was asked to study the school food service revenues and expenses
and how they have changed since the requirements went into effect.
This report includes information on the sources of revenues available
for providing meals, the expenses of producing meals, the revenues
compared to expenses, and the approaches that local school food
authorities have adopted to manage their school food service finances.
It uses data from six selected states. This report does not provide
specific information on the expense of producing a reimbursable school
lunch or breakfast.
What GAO Found:
Revenue from federal reimbursements and the sale of food were the
principal sources of revenue for school food services in the six
states GAO reviewed for school years 1996-97 through 2000-01. Federal
reimbursements decreased slightly in proportion to the total, while
revenues from food sales increased slightly. Funds from state
governments and other sources represented a relatively small portion
of total revenues and remained relatively stable as a share of total
revenues.
Labor and food purchases were the principal expenses for the six
states, sharing nearly equal proportions and changing only slightly.
Labor expenses, which included salaries and benefits for food service
employees, grew slightly while food expenses decreased slightly. Other
expenses, such as contract services, made up a smaller portion of
expenses, and this portion remained constant.
The six states had a small though increasing shortfall in total
revenue compared to expenses over the 5-year period, as shown below.
Their total expenses increased by about 22 percent, while their total
revenues increased by about 20 percent. The portion of total school
food service expenses covered by federal reimbursements declined from
54 to 51 percent, and the portion of expenses paid by state funds was
small and declined slightly.
To limit their expenses and maximize their revenues, local school food
authority officials reported buying food in bulk, hiring more part-
time staff, expanding a la carte food sales and catering programs, and
other strategies.
www.gao.gov/cgi-bin/getrpt?GAO-03-569.
To view the full report, including the scope and methodology, click on
the link above. For more information, contact David D. Bellis at (415)
904-2272.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Federal Reimbursements and Food Sales Were the Principal Sources of
Revenue over the Period, with Slight Changes in Their Proportionate
Share of the Total:
Labor and Food Were the Principal School Food Service Expenses over the
5-Year Period, with Slight Changes in Their Proportionate Share of the
Total:
States Experienced a Small but Increasing Revenue Shortfall:
States Used a Variety of Expense-Containment and Revenue-Producing
Strategies to Manage School Food Service Finances:
Conclusions:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Federal School Meal Cash Reimbursement Rates, School Years
1996-97 through 2002-03:
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Staff Acknowledgments:
Table:
Table 1: Minimum School Meal Programs Reimbursement Rates, School Year
2002-03:
Figures:
Figure 1: Sources of Revenues for School Food Services in Six States,
School Years 1996-97 through 2000-01:
Figure 2: School Food Service Revenue Components as a Percentage of
Total Revenues in Six States, School Years 1996-97 through 2000-01:
Figure 3: School Food Service Revenue Components by State, School Year
2000-01:
Figure 4: School Food Service Expense Components in Six States, School
Years 1996-97 through 2000-01:
Figure 5: Changes in Proportion of School Food Service Expense
Components in Six States, School Years 1996-97 through 2000-01:
Figure 6: School Food Service Expense Components by State, School Year
2000-01:
Figure 7: Changes in Total School Food Service Revenues and Expenses in
Six States, School Years 1996-97 through 2000-01:
Figure 8: Proportion of Total School Food Service Expenses Paid by
Revenue Component in Six States, School Years 1996-97 through 2000-01:
Figure 9: Federal Reimbursements as a Percentage of Total School Food
Service Expenses by State, School Years 1996-97 and 2000-01.
Abbreviations:
SFA: school food authority:
USDA: U.S. Department of Agriculture:
United States General Accounting Office:
Washington, DC 20548:
May 9, 2003:
The Honorable Tom Harkin:
Ranking Minority Member:
Committee on Agriculture,
Nutrition, and Forestry:
United States Senate:
The Honorable Tom Daschle
The Honorable Tim Johnson
The Honorable Jay Rockefeller
United States Senate:
The National School Lunch and the School Breakfast Programs provide
millions of children with nutritious meals each school day. The U.S.
Department of Agriculture's (USDA) Food and Nutrition Service provides
states with federal cash reimbursements for each meal served that meets
federal requirements.[Footnote 1] USDA also provides states with
donated commodities for each school lunch served. Any child at a
participating school may purchase these meals, and children from
certain low-income households may receive the meals free or at a
reduced price. A comprehensive study conducted a decade ago concluded
that the combined federal reimbursements paid to states for the free
breakfasts and lunches that students received covered the expenses of
producing them.[Footnote 2] However, the study was conducted before
USDA established more stringent requirements for the nutritional
content of school meals, beginning in school year 1996-97. The effect
of these revised requirements on school food service finances is not
known. Meanwhile, a recent rise in the percentage of children who are
overweight or obese underscores the importance of these programs, since
they are designed to provide children with nutritionally balanced meals
and to help them develop healthy eating habits.[Footnote 3]
To participate in these programs, states provide a partial match to the
federal reimbursements. They usually fund and operate the programs
through their departments of education, which in turn have agreements
with school food authorities (SFA). SFAs are local offices that are
responsible for the administration of school food services in one or
more schools. In addition to receiving federal cash reimbursements and
state funds, SFAs may also receive funds from student and adult food
sales and other sources, such as catering services, interest on
deposits, and revenues from the sale of used equipment.
In view of the revised nutritional requirements, you asked us to study
school food service revenues and expenses since the requirements went
into effect. The objective of this report is to provide detailed
information from school years 1996-97 through 2000-01 on the (1)
sources of revenues available for providing school meals and how they
have changed; (2) school food service expenses of producing meals and
how they have changed; (3) school food service revenues, and
particularly federal reimbursements, compared to the expenses of
producing meals over this period; and (4) approaches that SFAs have
adopted to manage their school food service finances. We are also
issuing two other school meal related reports, one addresses the safety
of the school meals and the other covers the efforts to serve
nutritious meals and promote healthy eating in schools.[Footnote 4]
To address each of these objectives, we collected and analyzed school
year 1996-97 through 2000-01 revenue and expense data as reported to
state agencies by all public school SFAs located in six states:
Florida, Missouri, New York, Ohio, Texas, and Virginia. We selected
these states because, of those states able to provide us with the
needed data, they had the highest school meal programs reimbursement
amounts in six of the Food and Nutrition Service's seven
regions.[Footnote 5] As a group, the six states received about 30
percent of the total federal school lunch and breakfast reimbursement
funds dispersed nationwide in fiscal year 2001. In addition, we
interviewed each of the six states' school food service directors, and
12 local SFA directors (2 in each state), to obtain information on
approaches they took to manage their school food service finances in
light of their overall revenue and expense picture.[Footnote 6] We did
not verify the information collected for this study. However, we
reviewed the data we collected for reasonableness and followed up where
appropriate. Moreover, the data we collected provided information on
SFA revenues and expenses but did not permit us to calculate the cost
of producing a reimbursable meal. A more detailed description of our
study methodology is provided in appendix I. The results of the
financial data in our study are reported in nominal dollars that can be
generalized only for those states included in our review. We conducted
our work between October 2002 and March 2003 in accordance with
generally accepted government auditing standards.
Results in Brief:
The principal sources of revenue for school food services in the six
states combined for school years 1996-97 through 2000-01 were federal
reimbursements and food sales; their proportionate share changed
slightly over the 5-year period, with federal revenues decreasing from
55 to 53 percent of total revenues and food sales increasing from 38 to
39 percent of total revenues. Specific to food sales, revenue from a la
carte foods, which are food items sold separately from the school meal
programs and therefore not eligible for federal reimbursement,
increased from about 40 percent of total food sales to about 43 percent
over the period. Funds from state governments and other sources
represented a relatively small portion of total revenues. Combined,
total revenues grew from about $3.4 billion to about $4 billion in the
six states over the period. While federal reimbursements and sales were
consistently the largest revenue sources in each of the six states,
their share of total revenues varied considerably by state.
Labor and food purchases were the principal expenses in the six states
combined, sharing nearly equal proportions and changing slightly over
the period. Labor expenses, which include salaries and benefits for
food service employees, grew from about 43 percent of total expenses to
44 percent. Food, which includes the value of USDA-donated commodities
as well as purchased food, decreased from about 42 to 41 percent of
total expenses during the period. Other expenses, such as contract
services and capital expenditures, remained constant at about 15
percent of total expenditures. Combined, total school food service
expenses increased from about $3.4 billion to about $4.1 billion over
the period. While labor and food represented the principal expenses of
school food services across the six states, their share of total
expenses varied somewhat by state. There were greater variations among
the states, however, in the proportion of their labor expenses made up
of salaries and benefits. For example, in New York salaries and
benefits ranged from about 90 and 10 percent respectively, while in
Florida they ranged from about 74 and 26 percent respectively.
The six states' SFAs had a small though increasing shortfall in their
total revenues compared to expenses over the 5-year period. Their total
expenditures increased by about 22 percent, while their total revenues
increased by about 20 percent. Although the federal reimbursements are
adjusted annually for inflation, the portion of total school food
service expenses they covered declined from 54 to 51 percent. The
portion of total expenses covered by state funds declined by less than
1 percentage point to less than 3 percent. At the same time, the
portion of expenses paid by other sources of revenue increased
slightly, and the portion of expenses paid by revenues from school food
service sales remained essentially unchanged over the period. We cannot
determine the reason for the decline in the portion of total expenses
covered by federal reimbursements because of data limitations. However,
the decline in the portion of total expenses covered by state funds is
likely a result of the federal method of calculating the state matching
contributions, which are based on school year 1980-81 data and are not
adjusted for inflation. Finally, the percentage of total expenses
covered by federal reimbursements varied by state.
Local SFA officials reported adopting a variety of measures to both
limit expenses and enhance revenues in order to manage their school
food service finances. To contain expenses, they focused primarily on
food and labor costs. To reduce food costs, for example, they purchased
food in bulk, found new ways to shop for lower-priced foods, and
planned menus around USDA-donated commodities. To contain labor costs,
they reduced staff numbers, replaced full-time staff with part-time
staff, and served more pre-packaged foods that required less
preparation. To increase revenues, they reported efforts to encourage
more students to purchase their meals at school, such as increasing the
number of food choices and enhancing the atmosphere of the school
cafeteria. Officials also reported expanding their a la carte sales and
catering. Raising school meal prices, another option for increasing
revenues, was viewed as a last resort by most officials. Despite these
strategies, many SFAs experienced year-end shortfalls, which were
covered by their school districts' general revenue funds. However, some
SFA officials expressed concern that their districts are also facing
tighter budgets and may not be able to absorb the shortfalls in the
future.
Background:
The National School Lunch Act and the Child Nutrition Act of 1966
authorized the school lunch and school breakfast programs,
respectively.[Footnote 7] These school meal programs provide federal
cash reimbursements to help states pay for nutritious lunches and
breakfasts for children in participating public and private schools and
residential child care institutions. The federal per meal cash
reimbursement is adjusted annually for inflation.[Footnote 8]
Administered by the USDA's Food and Nutrition Service, the school meal
programs are usually operated by state departments of education that
have agreements with about 20,000 SFAs to provide the meals. SFAs that
choose to take part in the school meal programs receive a federal cash
reimbursement for each qualifying school lunch and breakfast they serve
to children. SFAs participating in the school lunch program may also
receive a federal reimbursement for snacks served to children
participating in supervised after school educational or enrichment
activities. These school meal programs are available in the 50 states
and the District of Columbia, Guam, Puerto Rico, and the Virgin
Islands.[Footnote 9]
The amount that SFAs may charge for their school meals depends on the
family income of participating children.[Footnote 10] SFAs may charge
for school meals according to the following categories:
* Full price meals. Children from families with incomes above 185
percent of the poverty level pay the meal price set by their SFA. There
are no set limits on the amount that schools may charge students for a
full price meal; however, participating SFAs must agree to operate a
nonprofit school food service.
* Reduced price meals. Children from families with incomes between 130
percent and 185 percent of the poverty level may not be charged more
than 40 cents for lunch and 30 cents for breakfast.
* Free meals. Children from families with incomes at or below 130
percent of the poverty level receive their meals free.
To receive federal reimbursement, SFAs must process an individual
household application for most participants in the free and reduced
price programs,[Footnote 11] verify eligibility for at least a sample
of households that apply, and keep daily track of school meals provided
by eligibility category.
The levels of federal reimbursement per meal also vary according to the
three categories. According to USDA, the per meal federal cash
reimbursement is intended to cover the average expense of producing a
school meal nationwide. The reimbursement rates shown in table 1 are
the minimum amounts reimbursed to the contiguous states. Alaska and
Hawaii receive higher reimbursement rates. Higher reimbursement rates
are also established for SFAs in certain low-income areas and districts
identified by states as having critical needs.
Appendix II provides a more detailed listing of the school meal
programs reimbursement rates and how they varied for school years 1996-
97 through 2002-03.
Table 1: Minimum School Meal Programs Reimbursement Rates, School Year
2002-03:
Reimbursement category: Full price; Minimum reimbursement rates: Lunch:
$0.20; Minimum reimbursement rates: Breakfast: $0.22; Minimum
reimbursement rates: Snack: $0.05.
Reimbursement category: Reduced price; Minimum reimbursement rates:
Lunch: 1.74; Minimum reimbursement rates: Breakfast: 0.87; Minimum
reimbursement rates: Snack: 0.29.
Reimbursement category: Free; Minimum reimbursement rates: Lunch: 2.14;
Minimum reimbursement rates: Breakfast: 1.17; Minimum reimbursement
rates: Snack: 0.58.
Source: USDA.
[End of table]
SFAs also receive revenues from states for their school meal programs.
As a requirement of participation, states must provide annual revenues
for their school lunch program operations.[Footnote 12] SFAs may also
generate revenues by offering fee-based catering services and selling a
la carte foods, which are food items that are sold separately from the
school meal programs and therefore not eligible for federal
reimbursement, as other methods of increasing their school food service
revenues. Finally, SFAs may receive other cash revenues, such as the
interest on deposits, and revenues from the sale of used equipment. In
addition to cash reimbursements, SFAs may also receive donated
commodity foods[Footnote 13] from USDA, valued in school year 2002-03
at 15.5 cents for each lunch served in the previous school year.
Federal Reimbursements and Food Sales Were the Principal Sources of
Revenue over the Period, with Slight Changes in Their Proportionate
Share of the Total:
Federal reimbursements and sales revenues, which include student and
adult meal payments, were the largest sources of school food service
revenues in the six states during school years 1996-97 through 2000-01,
with the share of federal reimbursements declining slightly and sales
revenues increasing slightly. Funds from state governments and other
sources represented a small portion of total revenues during this
period. Specific to sales revenues, student payments for a la carte
sales increased as a percentage of total school food service sales
revenue. Finally, although federal reimbursements and revenues from
sales were consistently the most significant revenue sources in each of
the six states, their share of total revenues varied considerably by
state.
School Food Service Revenues Come Primarily from Two Sources:
Total school food service revenues reported by the six states increased
from about $3.3 billion in school year 1996-97 to almost $4 billion in
school year 2000-01. Federal reimbursements, including the value of
donated USDA commodities, accounted for the largest share of revenues.
Sales revenues, which include student and adult (e.g., schools
administrators, teachers, and parents) payments, were the second
largest source of revenues in these states. Revenues from state and
local governments and other sources, which include catering services,
interest on deposits, and the sale of used equipment, provided a
relatively small portion of total revenues.[Footnote 14] Figure 1 shows
the various sources of revenues for school years 1996-97 through 2000-
01.
Figure 1: Sources of Revenues for School Food Services in Six States,
School Years 1996-97 through 2000-01:
[See PDF for image]
[End of figure]
Federal Revenues Declined Slightly in Relation to Total Revenues, While
Sales Revenues Increased Slightly:
As figure 2 shows, federal reimbursements declined modestly in
proportion to total school food service revenues during school years
1996-97 through 2000-01. Federal reimbursements' share of total
revenues decreased from about 55 to 53 percent. Conversely, during this
period, revenues from food sales in relation to total revenues
increased slightly from about 38 to 39 percent. Moreover, there was a
less than 1 percentage point decrease in state funds to about 3 percent
over this period and a 1 percentage point increase in other revenues to
about 5 percent.
Figure 2: School Food Service Revenue Components as a Percentage of
Total Revenues in Six States, School Years 1996-97 through 2000-01:
[See PDF for image]
[End of figure]
Specifically regarding revenue from food sales, information from five
states that were able to separate the payments for a la carte foods
from other meal sales showed an increase in a la carte revenues from
about 40 percent of total sales revenues in school year 1996-97 to
about 43 percent of total sales revenues in school year 2000-01.
Because a la carte foods are not part of the school meal programs, they
are not covered by the programs' nutritional requirements. As a result,
some a la carte foods are nutritious, while others may have limited
nutritional value.[Footnote 15]
Share of Federal Reimbursements and Sales Revenues to Total Revenue
Varied Considerably among the States:
Although federal reimbursements and sales comprised the principal
source of revenues for the school food services in each of the six
states, their share of total revenues varied from state to state. As
shown in figure 3, during school year 2000-01, federal reimbursements
as a share of total revenue ranged from about 59 percent in Texas to
about 39 percent in Ohio. A number of factors may be responsible for
the variation in the share of federal reimbursements to total revenues
reported across the six states. For example, a state may have a high
proportion of low-income students that qualify for free or reduced
price meals that receive a higher federal reimbursement rate, thereby
increasing the relative share of its federal reimbursements. Another
reason may be higher a la carte food sales that could increase the
proportion of revenue from nonreimbursable food sales. Differences in
the extent to which states utilize available USDA commodities may also
account for some of the variation in federal reimbursements as a share
of total revenues between states. However, because of data limitations,
we cannot determine the reason for the variation. Sales revenues ranged
from about 30 percent of total revenues in New York to about 56 percent
in Ohio during the period. State revenues ranged from about 1 percent
of total revenues in Missouri to about 6 percent in New York. Other
revenues ranged from zero percent of total revenues in Missouri to
almost 12 percent of total revenues in New York during the period.
Figure 3: School Food Service Revenue Components by State, School Year
2000-01:
[See PDF for image]
[End of figure]
Labor and Food Were the Principal School Food Service Expenses over the
5-Year Period, with Slight Changes in Their Proportionate Share of the
Total:
Labor and food purchases accounted for most of the expenses of
operating the school food services, with nearly equal shares of the
expenditures and slight changes in their relative shares during school
years 1996-97 through 2000-01. Other school food service expenses
represented a smaller, but significant, portion of total expenditures.
During this period, labor expenses slightly increased as a portion of
total expenses, while food expenses slightly decreased. While labor and
food were consistently the most significant expenses of operating the
school food services in each of the six states, their share of total
expenses varied somewhat by state.
Labor and Food Accounted for a Significant Portion of Expenses:
Total school food service expenses reported by the six states have
increased from about $3.4 billion to about $4.1 billion between school
years 1996-97 and 2000-01. Labor and food purchases accounted for
significant and nearly equal portions of the total expenses during the
period. Labor expenses include the cost of salary and benefits of food
service staff. Food expenses include the cost of purchased food and the
value of USDA commodities used by schools in all food service
activities. Finally, other school food service expenses, such as
supplies, contract services, and capital expenditures, account for the
remaining portion. Figure 4 shows the various expense components for
school years 1996-97 through 2000-01.
Figure 4: School Food Service Expense Components in Six States, School
Years 1996-97 through 2000-01:
[See PDF for image]
[End of figure]
Labor Expenses Increased Slightly in Proportion to Total Expenses,
While Food Expenses Decreased Slightly:
As shown in figure 5, as a percentage of total school food service
expenses, labor costs increased slightly--from about 43 to about 44
percent--during school years 1996-97 through 2000-01. Food expenses as
a percentage of total expenses modestly decreased--from about 42 to
about 41 percent--during this period. Other expenses remained at about
15 percent of the total throughout the period.
Figure 5: Changes in Proportion of School Food Service Expense
Components in Six States, School Years 1996-97 through 2000-01:
[See PDF for image]
[End of figure]
Specifically regarding labor expenses, salaries and benefits changed
less than 1 percentage point during this period, with salary expenses
comprising about four-fifths of total labor expenses and benefit
expenses comprising about one-fifth of the total across the states.
Share of School Food Service Expense Components to Total Expenses
Varied Somewhat among the States:
While labor and food represented the principal school food service
expenses across the six states, their share of total expenses varied by
state as shown in figure 6. Labor expenses ranged from about 45 percent
of total expenses in Missouri, Texas, and Virginia to about 42 percent
of total expenses in Florida and New York. Food expenses ranged from
about 45 percent of total expenses in Missouri and Ohio to about 39
percent of total expenses in Florida in school year 2000-01. Other
expenses ranged from 10 percent of total revenues in Missouri to about
19 percent of total revenues in Florida during that school year.
Figure 6: School Food Service Expense Components by State, School Year
2000-01:
[See PDF for image]
[End of figure]
Variations in the portion of labor expenses representing either
benefits (e.g., health insurance and pensions) or salaries were more
significant among the states. As a portion of total labor expenses,
school year 2000-01 salaries ranged from about 90 percent in New York
to 74 percent in Florida; conversely, benefits ranged from about 26
percent in Florida to 10 percent in New York. Over this period, the
salary increases in two states--Florida and New York--grew more quickly
relative to their benefit increases, whereas benefits grew more quickly
than salaries in the other four states. The salary increases in Florida
and New York were responsible for the overall increase in salaries
outpacing the overall increase in benefits across the six states.
States Experienced a Small but Increasing Revenue Shortfall:
Total school food service expenses were greater than total revenues in
school years 1996-97 through 2000-01, and the gap between expenses and
revenues grew slightly over this period for the six states combined.
Moreover, federal reimbursements paid a smaller portion of school food
service expenses during the period, as did state revenues. Conversely,
the portion of expenses paid by other sources of revenues slightly
increased, while the portion of expenses paid by revenues from school
food service sales remained essentially unchanged during the period.
Finally, federal reimbursements as a percentage of total expenses
varied considerably by state.
School Food Service Expenses Have Slightly Outpaced Increases in
Revenues:
During school years 1996-97 through 2000-01, total SFA expenses
increased from about $3.4 billion to about $4.1 billion, or about 22
percent across the six states, while total SFA revenues increased from
about $3.3 billion to about $4.0 billion, or about 20 percent. As
figure 7 indicates, the shortfall grew slightly over the 5-year period.
Figure 7: Changes in Total School Food Service Revenues and Expenses in
Six States, School Years 1996-97 through 2000-01:
[See PDF for image]
[End of figure]
Total School Food Service Expenses Covered by Federal Reimbursements
and State Funds Have Declined:
As figure 8 shows, the proportion of total school food service expenses
paid by federal reimbursements and state funds declined slightly during
school years 1996-97 through 2000-01 for the six states combined.
Federal reimbursements paid a smaller portion of total expenses,
declining from about 54 to 51 percent. The proportion of total expenses
paid by state funds also declined by less than 1 percentage point to
less than 3 percent during the same period. Conversely, the proportion
of total expenses paid from other funds grew by about 1 percentage
point to almost 5 percent, while revenues from meal sales as a
proportion of total expenses were essentially unchanged at about 38
percent during the period.
Figure 8: Proportion of Total School Food Service Expenses Paid by
Revenue Component in Six States, School Years 1996-97 through 2000-01:
[See PDF for image]
[End of figure]
The proportionate decline in federal reimbursement overall reflects the
fact that total school food service expenses grew more quickly than
federal reimbursement revenue. This may have occurred because the
federal per meal reimbursement rate may not have risen as quickly as
the cost per meal. However, without data on the average cost of
reimbursable meals, we cannot determine if this is a reason for the
decline. There are other possible reasons. For example, the growth in
expenses may have exceeded the growth in federal reimbursement because
schools are serving more a la carte foods, which could increase both
expenses for nonreimbursable meals and revenue from nonreimbursable
food sales, potentially decreasing the federal share. As another
reason, a smaller proportion of students in an SFA may be eligible for
or receiving free or reduced price school meals.
The decrease in the share of expenses paid by state revenues is the
result of the federal funding requirement for states. To participate in
the school lunch program, states must provide annual matching cash
contributions for program operations that equal 30 percent of the full
price reimbursement for each eligible lunch they served in school year
1980-81.[Footnote 16] Because each state's contribution is calculated
on the fixed 1980-81 school year dollar amount, the contribution
continues to decline each year as a share of the total school food
service revenues and expenses.
Federal Reimbursements as a Percentage of Total Expenses Varied by
State:
The proportion of expenses covered by federal reimbursements varied
among the six states. As figure 9 shows, during school year 2000-01,
federal reimbursements covered about 37 percent of total expenses in
Ohio and about 59 percent of total expenses in Texas. There are several
potential explanations for this difference. For example, suppose that
the sale of a la carte foods as a percentage of total revenues is
higher in one state than another. This means that the proportion of
expenses covered by a la carte revenues is also higher for that state,
and therefore the proportion of expenses covered by federal
reimbursements is lower. Further, improvements in a state's economic
situation could result in fewer children eligible for free or reduced
price meals. This change in eligibility category would result in
schools receiving less federal reimbursement as a percentage of
expenses. However, because of data limitations, we cannot determine
specifically why the difference exists. Despite the variation among the
states, the proportion of federal reimbursements as a percentage of
total expenses was lower in school year 2000-01 than in school year
1996-97, ranging from less than 1 percentage point in Texas to about 6
percentage points in Florida.
Figure 9: Federal Reimbursements as a Percentage of Total School Food
Service Expenses by State, School Years 1996-97 and 2000-01.
[See PDF for image]
[End of figure]
States Used a Variety of Expense-Containment and Revenue-Producing
Strategies to Manage School Food Service Finances:
In an effort to minimize their revenue shortfalls, local SFAs employed
two overall approaches to manage school food service finances--
containing expenses and enhancing revenues. Efforts to contain school
food service expenses focused primarily on food and labor--which
comprised the largest share of all expenses. In order to contain these
expenses, SFAs reduced expenditures, changed the way they purchased
foods and the types of foods they purchased, reduced labor hours, and
took steps to operate more efficient programs. SFAs further managed
school food service finances by augmenting their food service revenues
through increased sales from a la carte food items and catering;
increased participation in the school meal programs; and in some cases,
raising meal prices.
To Contain Expenses, Officials Focused on Food and Labor:
Although fewer than half of the 14 local officials we interviewed said
that their overall food expenses had increased in recent years because
of USDA's revised school meal nutritional requirements, most of these
officials said they saw the need to control food expenses. The
approaches used to contain food expenses varied by SFA. Many officials,
for example, said they participated in food cooperative arrangements
with other SFAs that allowed them to purchase bulk food items at lower
cost. Some small SFAs reported that this arrangement was particularly
useful for them because it provided them with greater purchasing power
than they would have individually. Other officials attended local food
shows that allowed them to shop competitively for lower-priced food
items. To offset the costs of buying fresh fruits and vegetables, one
SFA located in a state that participates in a "farm-to-school" pilot
program with the USDA, obtained this produce from small farmers at low
cost.[Footnote 17] Taking another approach, one SFA reduced the number
of school menu offerings and purchased fewer fresh fruits and
vegetables for the school meal programs. Other officials planned their
school meal menus around the donated food commodities from the USDA,
which reduced the amount of additional food that needed to be
purchased.
SFAs attempted to contain labor expenses by reducing the amount of
labor and sought ways to increase the efficiency of the staff.
According to most state and local officials, certain aspects of labor
expenses have been rising, particularly salary scales and benefits.
However, both are usually determined at the school district level and
are therefore beyond the control of the SFA. In addition, a few local
officials noted that many food service employees who are a part of the
"baby boom generation" have begun to retire, and SFAs have, in some
cases, found it necessary to offer higher salaries and more benefits to
replace them.
Many local officials reduced their overall labor expenses by modifying
staff numbers and hours--factors over which they did have control. For
example, many local officials did not replace food service staff that
retired, and they also reduced the number of hours worked by existing
food service staff. According to three state directors we interviewed,
SFAs were replacing full-time staff with part-time staff in order to
reduce salary and benefit expenses. In addition, 10 SFAs reduced labor
hours, and therefore labor expenses, by altering the type of foods they
purchased. Officials of these SFAs said they reduced labor expenses by
purchasing more prepared or prepackaged food items--such as chicken
nuggets and frozen pizza--that required very little staff time to
prepare. In addition, one SFA no longer offered sandwiches at lunch,
because preparing them was too labor-intensive, and only provided
fruits such as apples and bananas that did not need to be sliced. While
some SFA officials noted that prepared food items tended to be more
costly to purchase than "scratch" food items, many officials felt that
these food cost increases were more than offset by the decrease in
labor expenses.
In addition to reducing food and labor expenses, a small number of SFAs
reported that they reduced overall school food service expenses by
delaying or eliminating expensive kitchen equipment purchases. For
example, when a dishwasher broke down in one SFA, officials there opted
to use paper plates and plastic utensils rather than purchase a new
machine.
A few SFA officials said that they undertook a variety of additional
strategies that improved efficiency. In fact, five state directors told
us that SFAs must operate meal programs as business-like operations
with special focus on cutting costs wherever possible. One state agency
reported that it sponsored seminars on increasing staff productivity
and controlling costs for local directors. In another state, officials
reported that an electronic point-of-sale system for the payment of
food purchases improved staff productivity by increasing the number of
students each staff member can serve by shortening the amount of time
needed to pay for each meal.[Footnote 18] A few SFAs sought to reduce
costs by consolidating food production and storage to a few sites. In
addition, some SFAs increased the use of self-serve meal lines to
reduce the number of staff needed in the cafeteria. In one local SFA,
the director reduced the number of staff breaks as a way to increase
staff efficiency. In another SFA, staff reduced food waste by
monitoring food items discarded by students and eliminating those items
from the school menu.
To Enhance Revenues, SFAs Promoted the School Meal Programs and Also
Increased a la Carte Sales:
SFAs employed a variety of strategies to increase the amount of
revenues available for their school food services. Almost all of the 14
SFAs we spoke with enhanced revenues for their food services by
encouraging all students to purchase meals at school rather than bring
lunch from home or buy it off campus. SFAs engaged in various
activities to promote participation, including increasing food choices
for the reimbursable school meal programs, enhancing the atmosphere of
the eating environment, and seeking input from students on food
options. For example, 1 SFA offered students their choice of 10
different entrée options each day, while a national study has shown
that most schools offer students 3 or fewer entrée options each
day.[Footnote 19] At another SFA, students were surveyed regarding
which food items they preferred in the school cafeteria. Using yet
another strategy, 1 SFA sought to increase the participation of
students eligible for free or reduced price lunches by sending letters
home to parents notifying them that although their children were
approved to receive these meals, they were not participating.
For many SFAs, a la carte food items generated additional revenues for
their school food services that allowed them to make ends meet
financially. According to five state directors, a la carte sales have
become an increasingly important source of revenue for SFAs. Unlike
reimbursable school meals, a la carte food items are generally not
subject to USDA's nutritional requirements.[Footnote 20] A la carte
offerings vary greatly by SFA--from snack and dessert items such as ice
cream and potato chips in some SFAs to lunch items such as pizzas,
hamburgers, and chicken nuggets in others. Some officials noted that a
la carte programs might actually reduce participation in the
reimbursable school meal programs, by drawing students away from a
reimbursable school lunch. Moreover, a couple of officials noted that
the growth in a la carte programs might be "at odds" with the goal of
providing a nutritious meal to students.
Catering for school functions such as banquets and teacher training
days was another important source of revenue for a few SFAs. Some SFAs
also provided catering services to private schools, senior citizens,
and others. For example, 1 SFA catered lunch a few days a week for a
nearby senior citizen center as a way to raise additional revenue.
While a small number of officials we interviewed indicated that
increasing the price of a full price meal was a viable option for
increasing revenue for the school food services, most officials viewed
raising the meal price as a last resort. Although the local director
can in most cases request or recommend a meal price increase to the
local school board or superintendent, some state and local officials
indicated that such proposals were likely to be met with resistance
from board members and parents. In addition, officials noted that
increases in meal prices often resulted, at least initially, in fewer
students purchasing a school meal.
Revenue Shortfall Sometimes Covered by Carryover Funds and Local
Revenues:
Many state and local SFA officials noted that, despite using strategies
to enhance revenues and contain school food service expenses, SFAs
often have difficulty breaking even financially in a given school year.
SFAs sometimes maintain a limited fund balance containing excess money
carried over from year to year for the school food service, and this
funding can be used to cover a revenue shortfall in a given year.
However, when SFAs were unable to cover their school food service
expenses, many officials told us that local school districts, using
general revenue funds, normally covered any shortage of funds. Since
local school districts are facing tighter budgets than in years past,
many officials noted that it was unclear whether school districts would
continue to provide funding for school food services if they had a
revenue shortfall. In fact, several state officials told us that school
food service-related expenses that were previously paid by local school
districts were being transferred to SFAs. Although the costs of these
services--such as trash removal, pest control, linen services, and
utilities--were attributable to the school food services, school
districts had provided these services at no cost to the SFAs in better
financial times.
Conclusions:
According to our data, SFA revenues have not kept pace with expenses
during school years 1996-97 through 2000-01; however, the extent of the
shortfall could be considered modest to date. To cope with these
shortfalls and to minimize the gap between revenues and expenses, some
options are within the control of SFAs, while others are not. On the
revenue side, federal law establishes the per meal reimbursement rates,
the minimum state contribution, and the maximum rates SFAs can charge
for reduced price meals. Options available to SFAs include increasing
the number of students who obtain their meals at the school, expanding
a la carte and catering sales, and increasing charges for full price
meals. However, SFAs sometimes face resistance from parents and local
officials to meal price increases. On the expense side, because SFAs
usually do not set the salaries and benefits of food service personnel,
available options to reduce their labor expenses include limiting the
hours of their employees, cutting the number of employees, altering the
types and costs of foods they purchase for the programs, and enhancing
other efficiencies related to labor and food expenses.
All of the SFA officials we spoke with had implemented some combination
of these options, and without such measures the gap between revenue and
expenses would likely have been greater. It is not clear from our work
whether or not the SFAs could take additional measures to improve
efficiency and further close the gap. Nor is it clear whether the gap
will remain, decrease, or continue to grow. Nevertheless, the
strategies SFAs have chosen for limiting expenses and enhancing
revenues can have varying effects on achieving the goal of the school
meal programs to ensure that the nation's youth consume nutritional and
affordable meals while they are in school. Serving reimbursable meals
that are more appealing to the student population could well encourage
more students to eat a nutritious meal. On the other hand, relying more
heavily on proceeds from the sale of a la carte items, which are not
covered by the school meal programs' nutritional standards, could
undermine that goal or at least offer less assurance that students are
eating balanced meals. Such choices can, therefore, have critical
consequences, especially given the current health and nutritional
trends among the nation's children.
Agency Comments and Our Evaluation:
We requested comments on a draft of this report from the Secretary of
Agriculture or her designee. On April 21, 2003, officials from the
Department's Food and Nutrition Service, Child Nutrition Division, and
Office of Analysis and Nutrition Evaluation, and the Department's
Economic Research Service, provided us with the following oral comments
on the draft. The officials said they were in general agreement with
the findings as presented in the report. However, they said that
recipients of our report should be aware that the report does not
identify the cost of preparing a reimbursable school meal. They also
noted that there are many factors that can contribute to the revenue
and cost differences that we found between states, such as school meal
program participation levels, changes in the household income of
students, and the extent to which states use donated USDA commodities.
In addition, the officials provided data on the proportion of free,
reduced price, and full price meals served for 4 of the 5 years in our
study. The number of full price lunches served increased modestly in
proportion to the number of free and reduced price lunches in five of
our six states. This change may help explain the slight decline in
federal reimbursement relative to other revenues and the declining
share of total food service expenses covered by federal reimbursements.
However, without additional information, such as the increase in the
number of a la carte foods sold, we are unable to determine the extent
to which these changes in school meal participation played a role in
the declining share of federal reimbursement. Finally, in addition to
these observations, USDA provided technical comments that we have
incorporated as appropriate.
We are sending copies of this report to the Secretary of USDA,
appropriate congressional committees, and other interested parties. In
addition, the report will be available at no charge on the GAO Web site
at http://www.gao.gov.
If you or your staff have questions concerning this report, please call
me on (415) 904-2272 or Kay E. Brown on (202) 512-3674. Key contact and
staff acknowledgments are listed in appendix III.
David D. Bellis
Director, Education, Workforce, and Income Security Issues:
Signed by David D. Bellis:
[End of section]
Appendix I: Scope and Methodology:
This appendix discusses in more detail the scope and methodology for
developing the revenue and expense information presented and for
identifying the actions taken by school food authority (SFA) officials
to manage their school food service finances. The scope of our review
included the National School Lunch Program and the School Breakfast
Program as they relate to public SFAs in selected states.
From the Food and Nutrition Service we obtained nationwide school meal
programs information, including the (1) applicable federal
reimbursement rates, (2) student participation, (3) number of school
meals and snacks served, (4) cash reimbursements, and (5) commodity
values.
To obtain statewide data on the revenues available to SFAs for
providing school food services and the expenses of operating school
food services, we selected seven states--one state from each of the
Food and Nutrition Service's seven regions. We selected states that (1)
were able to provide both school food service revenue and expense
information for all of their SFAs and (2) received the highest amount
of federal reimbursements in their respective region during fiscal year
2001. Five of the seven states selected--California, Florida, Missouri,
New York, and Texas--received the largest federal cash reimbursements
in their respective regions during fiscal year 2001. The two remaining
states, Ohio and Virginia, received the second and third largest amount
of federal reimbursements to the states in their respective regions.
We requested that each state provide annual school food service expense
and revenue data as reported to state agencies by all of the public
SFAs for school years 1994-95 through 2001-02, or for the years that
were available during the period. We requested information on the (1)
total annual amounts of revenues provided by federal, state, and other
sources, and the value of USDA donated commodities and (2) expenses
associated with producing school meals, including food service staff
salaries and benefits, and food purchases. Six of the seven states were
able to provide the requested data for school years 1996-97 through
2000-01. We were unable to obtain sufficient data to report on school
years 1994-95 and 1995-96. In addition, during the course of our study,
California notified us that it was unable to provide all of the data
needed. For this reason, the revenue and expense information contained
in this report does not include California.
We did not verify the data collected for this study. However, we
reviewed the data for reasonableness and requested additional
information when appropriate. First, we compared annual totals of
certain data fields from year to year. If there were unusual jumps in
these totals from year to year, we asked the responsible agency to
offer an explanation. Second, for the states that provided SFA-level
data, we compared the number of SFAs in the data with the number of
SFAs reported by the responsible agency. Third, we examined the
relationship of data elements to identify any illogical associations.
Fourth, we conducted interviews related to data reliability with the
state food service directors. In our interviews with the responsible
agency, we presented graphs that were created using the data provided
us. We asked why certain patterns occurred in the graphs. Finally, in
addition to the steps that we took to assess the reliability of the
data, federal regulations require that each SFA participating in the
school meal programs be routinely reviewed to determine its compliance
with performance and regulatory standards. As a part of these reviews,
SFAs must meet minimum reporting and record-keeping requirements.
Reviews are generally conducted by appropriate state agencies and
include evaluation of financial reporting systems.
To the extent possible, we excluded from our analyses other federal
child nutrition programs, private schools, and residential child care
institutions, which also participate in the school meals programs.
While we collected only public SFA information for our study, the
Missouri expense and revenue information includes both public and
private SFA data because they were not tracked separately; however, the
dollar amounts attributed to private schools are relatively small.
Also, SFAs without full information for school years 1996-97 through
2000-01 were excluded from the analysis.
To identify actions taken by SFA officials to manage their school food
service finances, we conducted phone interviews with the appropriate
manager at each of the seven state agencies administering the school
meals programs and with two local SFA managers within each state. We
selected SFAs that both (1) experienced expenses that were larger than
revenues during the past few years and (2) had large increases in
expenses related to either food or labor.[Footnote 21] We gathered
information from these managers on the sources and amounts of funds
available for school food service operations, the cost of producing
meals, and what approaches SFAs were using to manage their food service
finances. We also obtained their insights regarding revenue and expense
changes and their observations regarding how these changes may have
affected the school food services that they manage.
The results of the financial data described in our study are not
generalizable beyond the six states that provided the required data. In
addition, we cannot determine whether the changes we identified are
statistically significant because we do not know the standard errors of
our estimates. We conducted our work between October 2002 and March
2003 in accordance with generally accepted government auditing
standards.
[End of section]
Appendix II: Federal School Meal Cash Reimbursement Rates, School Years
1996-97 through 2002-03:
School year: 1996-97:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: $0.1775; Lunch: 60% or more of lunches served free
or at reduced price: $0.1975; Breakfast: Nonsevere need:
$0.1975; Breakfast: Severe need: $0.1975; Snacks: $0.0450.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.4375; Lunch: 60% or more of lunches served
free or at reduced price: 1.4575; Breakfast: Nonsevere
need: 0.7175; Breakfast: Severe need: 0.9125; Snacks: 0.2525.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: 1997-98: 1.8375; Lunch: 60% or more of lunches
served free or at reduced price: 1997-98: 1.8575; 1997-98
Breakfast: Nonsevere need: 1997-98: 1.0175; Breakfast: Severe need:
1997-98: 1.2125; Snacks: 1997-98: 0.5050.
School year: 1997-98:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: 0.1800; Lunch: 60% or more of lunches served free
or at reduced price: 0.2000; Breakfast: Nonsevere need:
0.2000; Breakfast: Severe need: 0.2000; Snacks: 0.0400.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.4900; Lunch: 60% or more of lunches served
free or at reduced price: 1.5100; Breakfast: Nonsevere
need: 0.7450; Breakfast: Severe need: 0.9450; Snacks: 0.2600.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: 1.8900; Lunch: 60% or more of lunches
served free or at reduced price: 1.9100; 1998-99
Breakfast: Nonsevere need: 1.0450; Breakfast: Severe need:
1.2450; Snacks: 0.5175.
School year: 1998-99:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: 0.1800; Lunch: 60% or more of lunches served free
or at reduced price: 0.2000; Breakfast: Nonsevere need:
0.2000; Breakfast: Severe need: 0.2000; Snacks: 0.0400.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.5425; Lunch: 60% or more of lunches served
free or at reduced price: 1.5625; Breakfast: Nonsevere
need: 0.7725; Breakfast: Severe need: 0.9775; Snacks: 0.2675.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: 1.9425; Lunch: 60% or more of lunches
served free or at reduced price: 1.9625; [Empty];
Breakfast: Nonsevere need: 1.0725; Breakfast: Severe need:
1.2775; Snacks: 0.5325.
School year: 1999-2000:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: 0.19; Lunch: 60% or more of lunches served free or
at reduced price: 0.21; Breakfast: Nonsevere need: 0.21;
Breakfast: Severe need: 0.21; Snacks: 0.05.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.58; Lunch: 60% or more of lunches served free
or at reduced price: 1.60; Breakfast: Nonsevere need:
0.79; Breakfast: Severe need: 1.00; Snacks: 0.27.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: 1.98; Lunch: 60% or more of lunches
served free or at reduced price: 2000-01: 2.00;
Breakfast: Nonsevere need: 1.09; Breakfast: Severe need: 2000-
01: 1.30; Snacks: 0.54.
School year: 2000-01:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: 0.19; Lunch: 60% or more of lunches served free or
at reduced price: 0.21; Breakfast: Nonsevere need: 0.21;
Breakfast: Severe need: 0.21; Snacks: 0.05.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.62; Lunch: 60% or more of lunches served free
or at reduced price: 1.64; Breakfast: Nonsevere need:
0.82; Breakfast: Severe need: 1.03; Snacks: 0.27.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: 2.02; Lunch: 60% or more of lunches
served free or at reduced price: 2.04; [Empty];
Breakfast: Nonsevere need: 1.12; Breakfast: Severe need: 2001-
02: 1.33; Snacks: 0.55.
School year: 2001-02:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: 0.20; Lunch: 60% or more of lunches served free or
at reduced price: 0.22; Breakfast: Nonsevere need: 0.21;
Breakfast: Severe need: 0.21; Snacks: 0.05.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.69; Lunch: 60% or more of lunches served free
or at reduced price: 1.71; Breakfast: Nonsevere need:
0.85; Breakfast: Severe need: 1.07; Snacks: 0.28.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: 2002-03: 2.09; Lunch: 60% or more of lunches
served free or at reduced price: 2002-03: 2.11; 2002-03
Breakfast: Nonsevere need: 2002-03: 1.15; Breakfast: Severe need: 2002-
03: 1.37; Snacks: 2002-03: 0.57.
School year: 2002-03:
Meal type: Full price; Lunch: Less than 60% of lunches served free or
at reduced price: 0.20; Lunch: 60% or more of lunches served free or
at reduced price: 0.22; Breakfast: Nonsevere need: 0.22;
Breakfast: Severe need: 0.22; Snacks: 0.05.
Meal type: Reduced price; Lunch: Less than 60% of lunches served free
or at reduced price: 1.74; Lunch: 60% or more of lunches served free
or at reduced price: 1.76; Breakfast: Nonsevere need:
0.87; Breakfast: Severe need: 1.10; Snacks: 0.29.
Meal type: Free; Lunch: Less than 60% of lunches served free
or at reduced price: Less than 60% of lunches served free or at reduced
price: 2.14; Lunch: 60% or more of lunches served free or at reduced
price: 60% or more of lunches served free or at reduced price: 2.16;
2.16Breakfast: Nonsevere need: Nonsevere need: 1.17;
Breakfast: Severe need: Severe need: 1.40; Snacks: Snacks: 0.58.
Source: Federal Registers and USDA.
Note: Higher reimbursements are provided to SFAs in which 60 percent or
more of the lunches were served at a free or reduced price. Higher
breakfast reimbursement rates are established for "severe need" SFAs in
which 40 percent or more of the lunches were served free or at a
reduced price and the nonsevere need rate is insufficient to cover the
costs of the breakfast program. USDA provides higher school meal and
snack reimbursement amounts in Alaska and Hawaii.
[End of section]
[End of table]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Kay E. Brown (202) 512-3674 (Brownke@gao.gov):
Staff Acknowledgments:
In addition to the individual named above, Peter M. Bramble, Jr.,
Cynthia G. Decker, and Michelle C. Verbrugge made key contributions to
this report.
FOOTNOTES
[1] School lunches, for example, must meet the applicable
recommendations of the Dietary Guidelines for Americans, which
recommend that no more than 30 percent of an individual's calories come
from fat and less than 10 percent from saturated fat. Regulations also
establish a standard for school lunches to provide one-third of the
Recommended Dietary Allowances of protein, Vitamin A, Vitamin C, iron,
calcium, and calories. When schools serve meals that do not comply with
federal nutrition requirements, program regulations allow the states to
withhold federal reimbursements if the schools have not been acting in
good faith to meet the requirements. However, USDA officials questioned
whether holding back federal reimbursements offers a practical or
realistic solution because of the possibility of program cutbacks or
closure and the effect on the students, especially those receiving free
or reduced price lunches.
[2] Abt. Associates, Inc., School Lunch and Breakfast Cost Study -
Final Report, a special report prepared at the request of USDA, Oct.
1994.
[3] The percentage of children ages 6 to 11 who are overweight has more
than doubled, from about 7 percent in 1980 to about 14 percent in 1999,
and the incidence of Type II diabetes--closely associated with obesity-
-has increased from 4 to 20 percent over the last decade.
[4] U.S. General Accounting Office, School Meal Programs: Few Instances
of Foodborne Outbreaks Reported, but Opportunities Exist to Enhance
Outbreak Data and Food Safety Practices, GAO-03-530 (Washington, D.C.:
May 9, 2003) and School Lunch Program: Efforts Needed to Improve
Nutrition and Encourage Healthy Eating, GAO-03-506 (Washington, D.C.:
May 9, 2003).
[5] We also requested the same data from California, the state in the
seventh Food and Nutrition Service region with the highest school meal
reimbursement amount; however, state officials were not able to provide
us with the needed data. USDA does not require these data, and not all
states collect them.
[6] We were also able to interview the California state director and 2
local SFA directors, and we include their responses in objective 4.
[7] The National School Lunch Act, as amended (42 U.S.C. 1751-1769),
and the Child Nutrition Act of 1966, as amended (42 U.S.C. 1773).
[8] School lunch and breakfast reimbursement rates are adjusted
annually by law to reflect the programs' operating expenses as
indicated by the change in the series for food away from home of the
Consumer Price Index for all Urban Consumers, published by the Bureau
of Labor Statistics of the U.S. Department of Labor.
[9] The programs are also available to the children of armed forces
personnel who attend schools overseas operated by the U.S. Department
of Defense.
[10] After school snack reimbursements are provided to SFAs on the same
basis as the income eligibility categories for school meals.
[11] In some cases, SFAs are not required to process an application.
For example, children from households that participate in the Food
Stamp Program, Temporary Assistance for Needy Families, or Food
Distribution Program on Indian Reservations, are categorically eligible
to receive free school meals and their families may not have to
complete an application.
[12] 42 U.S.C. 1756 requires, generally, that states annually provide
revenues for the operation of the School Lunch Program of not less than
30 percent of a portion of the federal reimbursements they received for
the school year beginning July 1, 1980.
[13] One of the 50 states receives cash in lieu of USDA commodities.
Schools may also receive "bonus" commodities, as they are available
from surplus agricultural stock.
[14] Available school meal program funds may also include unused
program revenues, referred to as carryover, from prior school years,
and unreported contributions from local governments, individuals, and
other sources.
[15] For more information on the use of a la carte foods in schools and
their implications for children's food choices, see GAO-03-506.
[16] The required contribution is reduced to less than 30 percent if a
state's average per capita personal income is lower than the national
average. Of the six states, New York and Virginia had personal per
capita incomes above the national average; Florida, Missouri, Ohio, and
Texas had personal per capita incomes below the national average in
2001 (Annual State Personal Income, Bureau of Economic Analysis, U.S.
Department of Commerce: Feb. 6, 2003).
[17] The Small Farms/School Meals Initiative is a partnership program
among USDA's Food and Nutrition Service and Agricultural Marketing
Service, and the Department of Defense that encourages small farmers to
sell fresh produce to schools and schools to buy this produce from
small farmers. This is a cooperative program among federal, state, and
local governments, as well as local farm and educational organizations.
[18] This state's electronic point-of-sale system used a credit-card-
like device to conduct a cashless payment transaction.
[19] U.S. Department of Agriculture, Food and Nutrition Service, School
Nutrition Dietary Assessment Study-II Final Report, Report No. CN-01-
SNDAIIFR (Alexandria, VA: 2001). According to this study, 68 percent of
all schools offered students 3 or fewer different entrée options for
lunch each day.
[20] School meal regulations prohibit the sale of foods of minimum
nutritional value, which includes carbonated beverages, certain
candies, chewing gum, and water ices, in the school cafeteria during
meal periods.
[21] Since the available data from California and Missouri did not
allow us to identify the local SFAs that met our criteria, the state
managers for the meal programs provided us with the names of SFAs they
felt met our criteria.
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