School Meal Programs: Revenue and Expense Information from
Selected States (09-MAY-03, GAO-03-569).
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.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-03-569
ACCNO: A06834
TITLE: School Meal Programs: Revenue and Expense Information
from Selected States
DATE: 05/09/2003
SUBJECT: Food programs for children
School districts
Nutrition research
Financial analysis
Financial management
Schools
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GAO-03-569
Report to Congressional Requesters
United States General Accounting Office
GAO
May 2003 SCHOOL MEAL PROGRAMS Revenue and Expense Information from
Selected States
GAO- 03- 569
Revenue from federal reimbursements and the sale of food were the
principal sources of revenue for school food services in the six states
GAO reviewed for school years 1996- 97 through 2000- 01. Federal
reimbursements decreased slightly in proportion to the total, while
revenues from food sales increased slightly. Funds from state governments
and other sources represented a relatively small portion of total revenues
and remained relatively stable as a share of total revenues.
Labor and food purchases were the principal expenses for the six states,
sharing nearly equal proportions and changing only slightly. Labor
expenses, which included salaries and benefits for food service employees,
grew slightly while food expenses decreased slightly. Other expenses, such
as contract services, made up a smaller portion of expenses, and this
portion remained constant.
The six states had a small though increasing shortfall in total revenue
compared to expenses over the 5- year period, as shown below. Their total
expenses increased by about 22 percent, while their total revenues
increased by about 20 percent. The portion of total school food service
expenses covered by federal reimbursements declined from 54 to 51 percent,
and the portion of expenses paid by state funds was small and declined
slightly. Changes in Total School Food Service Revenues and Expenses in
Six States
Dollars (in billions)
School year
Revenues Expenses Source: Florida, Missouri, New York, Ohio, Texas, and
Virginia Departments of Education.
3.0 3.2
3.4 3.6
3.8 4.0
4.2 2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97
To limit their expenses and maximize their revenues, local school food
authority officials reported buying food in bulk, hiring more part- time
staff, expanding a la carte food sales and catering programs, and other
strategies. The National School Lunch and Breakfast Programs provide
millions of children with low- cost
or free nutritious meals each school day. In school year 1996- 97, the
Department of Agriculture
instituted more stringent requirements for the nutritional content of
school meals. GAO was asked to study the school food service revenues and
expenses and how they have changed since the requirements went into
effect. This report includes information on the sources of revenues
available for providing meals, the expenses of producing meals, the
revenues
compared to expenses, and the approaches that local school food
authorities have adopted to manage their school food service finances. It
uses data from six selected states. This report does not provide specific
information on the expense of producing a reimbursable school lunch or
breakfast. www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 569. To view the full
report, including the scope
and methodology, click on the link above. For more information, contact
David D. Bellis at (415) 904- 2272. Highlights of GAO- 03- 569, a report
to
Congressional Requesters
May 2003
SCHOOL MEAL PROGRAMS
Revenue and Expense Information from Selected States
Page i GAO- 03- 569 School Meal Programs Letter 1 Results in Brief 3
Background 5 Federal Reimbursements and Food Sales Were the Principal
Sources of Revenue over the Period, with Slight Changes in Their
Proportionate Share of the Total 8 Labor and Food Were the Principal
School Food Service Expenses
over the 5- Year Period, with Slight Changes in Their Proportionate Share
of the Total 12 States Experienced a Small but Increasing Revenue
Shortfall 16 States Used a Variety of Expense- Containment and
RevenueProducing
Strategies to Manage School Food Service Finances 20 Conclusions 24 Agency
Comments and Our Evaluation 25 Appendix I Scope and Methodology 27
Appendix II Federal School Meal Cash Reimbursement Rates, School Years
1996- 97 through 2002- 03 30
Appendix III GAO Contact and Staff Acknowledgments 31 GAO Contact 31 Staff
Acknowledgments 31 Table
Table 1: Minimum School Meal Programs Reimbursement Rates, School Year
2002- 03 7 Figures
Figure 1: Sources of Revenues for School Food Services in Six States,
School Years 1996- 97 through 2000- 01 9 Figure 2: School Food Service
Revenue Components as a
Percentage of Total Revenues in Six States, School Years 1996- 97 through
2000- 01 10 Contents
Page ii GAO- 03- 569 School Meal Programs
Figure 3: School Food Service Revenue Components by State, School Year
2000- 01 12 Figure 4: School Food Service Expense Components in Six
States,
School Years 1996- 97 through 2000- 01 13 Figure 5: Changes in Proportion
of School Food Service Expense Components in Six States, School Years
1996- 97 through 2000- 01 14 Figure 6: School Food Service Expense
Components by State,
School Year 2000- 01 15 Figure 7: Changes in Total School Food Service
Revenues and Expenses in Six States, School Years 1996- 97 through 2000-
01 17 Figure 8: Proportion of Total School Food Service Expenses Paid by
Revenue Component in Six States, School Years 1996- 97 through 2000- 01 18
Figure 9: Federal Reimbursements as a Percentage of Total School
Food Service Expenses by State, School Years 1996- 97 and 2000- 01. 20
Abbreviations SFA school food authority
USDA U. S. Department of Agriculture
This is a work of the U. S. Government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. It may contain
copyrighted graphics, images or other materials. Permission from the
copyright holder may be necessary should you wish to reproduce copyrighted
materials separately from GAO*s product.
Page 1 GAO- 03- 569 School Meal Programs
May 9, 2003 The Honorable Tom Harkin Ranking Minority Member Committee on
Agriculture,
Nutrition, and Forestry United States Senate
The Honorable Tom Daschle The Honorable Tim Johnson The Honorable Jay
Rockefeller United States Senate
The National School Lunch and the School Breakfast Programs provide
millions of children with nutritious meals each school day. The U. S.
Department of Agriculture*s (USDA) Food and Nutrition Service provides
states with federal cash reimbursements for each meal served that meets
federal requirements. 1 USDA also provides states with donated commodities
for each school lunch served. Any child at a participating school may
purchase these meals, and children from certain low- income households may
receive the meals free or at a reduced price. A comprehensive study
conducted a decade ago concluded that the combined federal reimbursements
paid to states for the free breakfasts and lunches that students received
covered the expenses of producing them. 2 However, the study was conducted
before USDA established more stringent requirements for the nutritional
content of school meals, beginning in school year 1996- 97. The effect of
these revised requirements on school food service finances is not known.
Meanwhile, a recent rise in 1 School lunches, for example, must meet the
applicable recommendations of the Dietary
Guidelines for Americans, which recommend that no more than 30 percent of
an individual*s calories come from fat and less than 10 percent from
saturated fat. Regulations also establish a standard for school lunches to
provide one- third of the Recommended Dietary Allowances of protein,
Vitamin A, Vitamin C, iron, calcium, and calories. When
schools serve meals that do not comply with federal nutrition
requirements, program regulations allow the states to withhold federal
reimbursements if the schools have not been acting in good faith to meet
the requirements. However, USDA officials questioned whether holding back
federal reimbursements offers a practical or realistic solution because of
the possibility of program cutbacks or closure and the effect on the
students, especially those receiving free or reduced price lunches.
2 Abt. Associates, Inc., School Lunch and Breakfast Cost Study - Final
Report, a special report prepared at the request of USDA, Oct. 1994.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 03- 569 School Meal Programs
the percentage of children who are overweight or obese underscores the
importance of these programs, since they are designed to provide children
with nutritionally balanced meals and to help them develop healthy eating
habits. 3 To participate in these programs, states provide a partial match
to the federal reimbursements. They usually fund and operate the programs
through their departments of education, which in turn have agreements with
school food authorities (SFA). SFAs are local offices that are responsible
for the administration of school food services in one or more schools. In
addition to receiving federal cash reimbursements and state funds, SFAs
may also receive funds from student and adult food sales and other
sources, such as catering services, interest on deposits, and
revenues from the sale of used equipment. In view of the revised
nutritional requirements, you asked us to study school food service
revenues and expenses since the requirements went into effect. The
objective of this report is to provide detailed information from school
years 1996- 97 through 2000- 01 on the (1) sources of revenues available
for providing school meals and how they have changed; (2) school food
service expenses of producing meals and how they have changed; (3) school
food service revenues, and particularly federal reimbursements, compared
to the expenses of producing meals over this period; and (4) approaches
that SFAs have adopted to manage their school food service finances. We
are also issuing two other school meal related reports, one addresses the
safety of the school meals and the other covers the efforts to serve
nutritious meals and promote healthy eating in
schools. 4 To address each of these objectives, we collected and analyzed
school year 1996- 97 through 2000- 01 revenue and expense data as reported
to state agencies by all public school SFAs located in six states:
Florida, Missouri, New York, Ohio, Texas, and Virginia. We selected these
states
3 The percentage of children ages 6 to 11 who are overweight has more than
doubled, from about 7 percent in 1980 to about 14 percent in 1999, and the
incidence of Type II diabetes* closely associated with obesity* has
increased from 4 to 20 percent over the last decade. 4 U. S. General
Accounting Office, School Meal Programs: Few Instances of Foodborne
Outbreaks Reported, but Opportunities Exist to Enhance Outbreak Data and
Food Safety Practices, GAO* 03- 530 (Washington, D. C.: May 9, 2003) and
School Lunch Program: Efforts Needed to Improve Nutrition and Encourage
Healthy Eating, GAO- 03- 506 (Washington, D. C.: May 9, 2003).
Page 3 GAO- 03- 569 School Meal Programs
because, of those states able to provide us with the needed data, they had
the highest school meal programs reimbursement amounts in six of the Food
and Nutrition Service*s seven regions. 5 As a group, the six states
received about 30 percent of the total federal school lunch and breakfast
reimbursement funds dispersed nationwide in fiscal year 2001. In addition,
we interviewed each of the six states* school food service directors, and
12 local SFA directors (2 in each state), to obtain information on
approaches they took to manage their school food service finances in light
of their overall revenue and expense picture. 6 We did not verify the
information collected for this study. However, we reviewed the data we
collected for reasonableness and followed up where appropriate. Moreover,
the data we collected provided information on SFA revenues and expenses
but did not permit us to calculate the cost of producing a reimbursable
meal. A more detailed description of our study methodology is provided in
appendix I. The results of the financial data in our study are reported in
nominal
dollars that can be generalized only for those states included in our
review. We conducted our work between October 2002 and March 2003 in
accordance with generally accepted government auditing standards.
The principal sources of revenue for school food services in the six
states combined for school years 1996- 97 through 2000- 01 were federal
reimbursements and food sales; their proportionate share changed slightly
over the 5- year period, with federal revenues decreasing from 55 to 53
percent of total revenues and food sales increasing from 38 to 39 percent
of total revenues. Specific to food sales, revenue from a la carte foods,
which are food items sold separately from the school meal programs and
therefore not eligible for federal reimbursement, increased from about 40
percent of total food sales to about 43 percent over the period. Funds
from state governments and other sources represented a relatively small
portion of total revenues. Combined, total revenues grew from about $3.4
billion to about $4 billion in the six states over the period. While
federal reimbursements and sales were consistently the largest revenue
sources in
5 We also requested the same data from California, the state in the
seventh Food and Nutrition Service region with the highest school meal
reimbursement amount; however, state officials were not able to provide us
with the needed data. USDA does not require these data, and not all states
collect them.
6 We were also able to interview the California state director and 2 local
SFA directors, and we include their responses in objective 4. Results in
Brief
Page 4 GAO- 03- 569 School Meal Programs
each of the six states, their share of total revenues varied considerably
by state.
Labor and food purchases were the principal expenses in the six states
combined, sharing nearly equal proportions and changing slightly over the
period. Labor expenses, which include salaries and benefits for food
service employees, grew from about 43 percent of total expenses to 44
percent. Food, which includes the value of USDA- donated commodities as
well as purchased food, decreased from about 42 to 41 percent of total
expenses during the period. Other expenses, such as contract services and
capital expenditures, remained constant at about 15 percent of total
expenditures. Combined, total school food service expenses increased from
about $3.4 billion to about $4.1 billion over the period. While labor and
food represented the principal expenses of school food services across the
six states, their share of total expenses varied somewhat by state. There
were greater variations among the states, however, in the proportion of
their labor expenses made up of salaries and benefits. For example, in New
York salaries and benefits ranged from about 90 and 10 percent
respectively, while in Florida they ranged from about 74 and 26 percent
respectively.
The six states* SFAs had a small though increasing shortfall in their
total revenues compared to expenses over the 5- year period. Their total
expenditures increased by about 22 percent, while their total revenues
increased by about 20 percent. Although the federal reimbursements are
adjusted annually for inflation, the portion of total school food service
expenses they covered declined from 54 to 51 percent. The portion of total
expenses covered by state funds declined by less than 1 percentage point
to less than 3 percent. At the same time, the portion of expenses paid by
other sources of revenue increased slightly, and the portion of expenses
paid by revenues from school food service sales remained essentially
unchanged over the period. We cannot determine the reason for the decline
in the portion of total expenses covered by federal reimbursements because
of data limitations. However, the decline in the portion of total expenses
covered by state funds is likely a result of the
federal method of calculating the state matching contributions, which are
based on school year 1980- 81 data and are not adjusted for inflation.
Finally, the percentage of total expenses covered by federal
reimbursements varied by state.
Local SFA officials reported adopting a variety of measures to both limit
expenses and enhance revenues in order to manage their school food service
finances. To contain expenses, they focused primarily on food and
Page 5 GAO- 03- 569 School Meal Programs
labor costs. To reduce food costs, for example, they purchased food in
bulk, found new ways to shop for lower- priced foods, and planned menus
around USDA- donated commodities. To contain labor costs, they reduced
staff numbers, replaced full- time staff with part- time staff, and served
more pre- packaged foods that required less preparation. To increase
revenues, they reported efforts to encourage more students to purchase
their meals at school, such as increasing the number of food choices and
enhancing the atmosphere of the school cafeteria. Officials also reported
expanding their a la carte sales and catering. Raising school meal prices,
another option for increasing revenues, was viewed as a last resort by
most officials. Despite these strategies, many SFAs experienced year- end
shortfalls, which were covered by their school districts* general revenue
funds. However, some SFA officials expressed concern that their districts
are also facing tighter budgets and may not be able to absorb the
shortfalls in the future.
The National School Lunch Act and the Child Nutrition Act of 1966
authorized the school lunch and school breakfast programs, respectively. 7
These school meal programs provide federal cash reimbursements to help
states pay for nutritious lunches and breakfasts for children in
participating public and private schools and residential child care
institutions. The federal per meal cash reimbursement is adjusted annually
for inflation. 8 Administered by the USDA*s Food and Nutrition Service,
the school meal programs are usually operated by state departments of
education that have agreements with about 20,000 SFAs to provide the
meals. SFAs that choose to take part in the school meal programs receive a
federal cash reimbursement for each qualifying school lunch and breakfast
they serve to children. SFAs participating in the school lunch program may
also receive a federal reimbursement for snacks served to children
participating in supervised after school educational or enrichment
activities. These school meal programs are available in the 50
7 The National School Lunch Act, as amended (42 U. S. C. 1751- 1769), and
the Child Nutrition Act of 1966, as amended (42 U. S. C. 1773). 8 School
lunch and breakfast reimbursement rates are adjusted annually by law to
reflect the programs* operating expenses as indicated by the change in the
series for food away from home of the Consumer Price Index for all Urban
Consumers, published by the Bureau of Labor Statistics of the U. S.
Department of Labor. Background
Page 6 GAO- 03- 569 School Meal Programs
states and the District of Columbia, Guam, Puerto Rico, and the Virgin
Islands. 9 The amount that SFAs may charge for their school meals depends
on the
family income of participating children. 10 SFAs may charge for school
meals according to the following categories:
Full price meals. Children from families with incomes above 185 percent
of the poverty level pay the meal price set by their SFA. There are no set
limits on the amount that schools may charge students for a full price
meal; however, participating SFAs must agree to operate a nonprofit school
food service.
Reduced price meals. Children from families with incomes between 130
percent and 185 percent of the poverty level may not be charged more than
40 cents for lunch and 30 cents for breakfast.
Free meals. Children from families with incomes at or below 130 percent
of the poverty level receive their meals free.
To receive federal reimbursement, SFAs must process an individual
household application for most participants in the free and reduced price
programs, 11 verify eligibility for at least a sample of households that
apply, and keep daily track of school meals provided by eligibility
category.
The levels of federal reimbursement per meal also vary according to the
three categories. According to USDA, the per meal federal cash
reimbursement is intended to cover the average expense of producing a
school meal nationwide. The reimbursement rates shown in table 1 are the
minimum amounts reimbursed to the contiguous states. Alaska and Hawaii
receive higher reimbursement rates. Higher reimbursement rates are also 9
The programs are also available to the children of armed forces personnel
who attend schools overseas operated by the U. S. Department of Defense.
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.
Page 7 GAO- 03- 569 School Meal Programs
established for SFAs in certain low- income areas and districts identified
by states as having critical needs.
Appendix II provides a more detailed listing of the school meal programs
reimbursement rates and how they varied for school years 1996- 97 through
2002- 03.
Table 1: Minimum School Meal Programs Reimbursement Rates, School Year
2002- 03
Minimum reimbursement rates Reimbursement category Lunch Breakfast Snack
Full price $0.20 $0.22 $0.05 Reduced price 1.74 0.87 0.29 Free 2.14 1.17
0.58 Source: USDA.
SFAs also receive revenues from states for their school meal programs. As
a requirement of participation, states must provide annual revenues for
their school lunch program operations. 12 SFAs may also generate revenues
by offering fee- based catering services and selling a la carte foods,
which
are food items that are sold separately from the school meal programs and
therefore not eligible for federal reimbursement, as other methods of
increasing their school food service revenues. Finally, SFAs may receive
other cash revenues, such as the interest on deposits, and revenues from
the sale of used equipment. In addition to cash reimbursements, SFAs may
also receive donated commodity foods 13 from USDA, valued in school year
2002- 03 at 15.5 cents for each lunch served in the previous school year.
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.
Page 8 GAO- 03- 569 School Meal Programs
Federal reimbursements and sales revenues, which include student and adult
meal payments, were the largest sources of school food service revenues in
the six states during school years 1996- 97 through 2000- 01, with the
share of federal reimbursements declining slightly and sales
revenues increasing slightly. Funds from state governments and other
sources represented a small portion of total revenues during this period.
Specific to sales revenues, student payments for a la carte sales
increased as a percentage of total school food service sales revenue.
Finally, although federal reimbursements and revenues from sales were
consistently the most significant revenue sources in each of the six
states, their share of total revenues varied considerably by state.
Total school food service revenues reported by the six states increased
from about $3.3 billion in school year 1996- 97 to almost $4 billion in
school year 2000- 01. Federal reimbursements, including the value of
donated USDA commodities, accounted for the largest share of revenues.
Sales revenues, which include student and adult (e. g., schools
administrators, teachers, and parents) payments, were the second largest
source of revenues in these states. Revenues from state and local
governments and other sources, which include catering services, interest
on deposits, and the sale of used equipment, provided a relatively small
portion of total revenues. 14 Figure 1 shows the various sources of
revenues for school years 1996- 97 through 2000- 01.
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. Federal Reimbursements and
Food Sales Were the Principal Sources of Revenue over the Period, with
Slight Changes in Their Proportionate Share of the Total
School Food Service Revenues Come Primarily from Two Sources
Page 9 GAO- 03- 569 School Meal Programs
Figure 1: Sources of Revenues for School Food Services in Six States,
School Years 1996- 97 through 2000- 01
As figure 2 shows, federal reimbursements declined modestly in proportion
to total school food service revenues during school years 1996- 97 through
2000- 01. Federal reimbursements* share of total revenues decreased from
about 55 to 53 percent. Conversely, during this period, revenues from food
sales in relation to total revenues increased slightly from about 38 to 39
percent. Moreover, there was a less than 1 percentage point decrease in
state funds to about 3 percent over this period and a 1 percentage point
increase in other revenues to about 5 percent. Federal Revenues
Declined Slightly in Relation to Total Revenues, While Sales Revenues
Increased Slightly
0 0.5
1.0 1.5
2.0 2.5
2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97 Dollars (in billions)
School year
Federal reimbursements Sales revenues State funds Other funds Source:
Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of
Education.
Page 10 GAO- 03- 569 School Meal Programs
Figure 2: School Food Service Revenue Components as a Percentage of Total
Revenues in Six States, School Years 1996- 97 through 2000- 01
Specifically regarding revenue from food sales, information from five
states that were able to separate the payments for a la carte foods from
other meal sales showed an increase in a la carte revenues from about 40
percent of total sales revenues in school year 1996- 97 to about 43
percent of total sales revenues in school year 2000- 01. Because a la
carte foods are not part of the school meal programs, they are not covered
by the programs* nutritional requirements. As a result, some a la carte
foods are nutritious, while others may have limited nutritional value. 15
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.
Percentage School year
Federal reimbursements Sales revenues State funds Other funds Source:
Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of
Education.
0 5
10 2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97 30
40 50
60
Page 11 GAO- 03- 569 School Meal Programs
Although federal reimbursements and sales comprised the principal source
of revenues for the school food services in each of the six states, their
share of total revenues varied from state to state. As shown in figure 3,
during school year 2000- 01, federal reimbursements as a share of total
revenue ranged from about 59 percent in Texas to about 39 percent in
Ohio. A number of factors may be responsible for the variation in the
share of federal reimbursements to total revenues reported across the six
states. For example, a state may have a high proportion of low- income
students that qualify for free or reduced price meals that receive a
higher
federal reimbursement rate, thereby increasing the relative share of its
federal reimbursements. Another reason may be higher a la carte food sales
that could increase the proportion of revenue from nonreimbursable food
sales. Differences in the extent to which states utilize available USDA
commodities may also account for some of the variation in federal
reimbursements as a share of total revenues between states. However,
because of data limitations, we cannot determine the reason for the
variation. Sales revenues ranged from about 30 percent of total revenues
in New York to about 56 percent in Ohio during the period. State revenues
ranged from about 1 percent of total revenues in Missouri to about 6
percent in New York. Other revenues ranged from zero percent of total
revenues in Missouri to almost 12 percent of total revenues in New York
during the period. Share of Federal
Reimbursements and Sales Revenues to Total Revenue Varied Considerably
among the States
Page 12 GAO- 03- 569 School Meal Programs
Figure 3: School Food Service Revenue Components by State, School Year
2000- 01
Labor and food purchases accounted for most of the expenses of operating
the school food services, with nearly equal shares of the expenditures and
slight changes in their relative shares during school years 1996- 97
through 2000- 01. Other school food service expenses represented a
smaller, but significant, portion of total expenditures. During this
period, labor expenses slightly increased as a portion of total expenses,
while food expenses slightly decreased. While labor and food
were consistently the most significant expenses of operating the school
food services in each of the six states, their share of total expenses
varied somewhat by state. Labor and Food Were
the Principal School Food Service Expenses over the 5- Year Period, with
Slight Changes in Their Proportionate Share of the Total
0 10
20 30
40 50
60 Virginia Texas Ohio New York Missouri Florida Percentage
Federal reimbursements Sales revenues State funds Other funds Source:
Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of
Education.
Page 13 GAO- 03- 569 School Meal Programs
Total school food service expenses reported by the six states have
increased from about $3.4 billion to about $4.1 billion between school
years 1996- 97 and 2000- 01. Labor and food purchases accounted for
significant and nearly equal portions of the total expenses during the
period. Labor expenses include the cost of salary and benefits of food
service staff. Food expenses include the cost of purchased food and the
value of USDA commodities used by schools in all food service activities.
Finally, other school food service expenses, such as supplies, contract
services, and capital expenditures, account for the remaining portion.
Figure 4 shows the various expense components for school years 1996- 97
through 2000- 01.
Figure 4: School Food Service Expense Components in Six States, School
Years 1996- 97 through 2000- 01
Labor and Food Accounted for a Significant Portion of Expenses
0 0.5
1.0 1.5
2.0 2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97 Dollars (in billions)
School year
Labor Food Other Source: Florida, Missouri, New York, Ohio, Texas, and
Virginia Departments of Education.
Page 14 GAO- 03- 569 School Meal Programs
As shown in figure 5, as a percentage of total school food service
expenses, labor costs increased slightly* from about 43 to about 44
percent* during school years 1996- 97 through 2000- 01. Food expenses as a
percentage of total expenses modestly decreased* from about 42 to about 41
percent* during this period. Other expenses remained at about 15
percent of the total throughout the period.
Figure 5: Changes in Proportion of School Food Service Expense Components
in Six States, School Years 1996- 97 through 2000- 01
Specifically regarding labor expenses, salaries and benefits changed less
than 1 percentage point during this period, with salary expenses
comprising about four- fifths of total labor expenses and benefit expenses
comprising about one- fifth of the total across the states. Labor Expenses
Increased
Slightly in Proportion to Total Expenses, While Food Expenses Decreased
Slightly
Percentage
Labor Food Other Source: Florida, Missouri, New York, Ohio, Texas, and
Virginia Departments of Education.
0 10
20 30
40 50
2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97 School year
Page 15 GAO- 03- 569 School Meal Programs
While labor and food represented the principal school food service
expenses across the six states, their share of total expenses varied by
state as shown in figure 6. Labor expenses ranged from about 45 percent of
total expenses in Missouri, Texas, and Virginia to about 42 percent of
total expenses in Florida and New York. Food expenses ranged from about 45
percent of total expenses in Missouri and Ohio to about 39 percent of
total expenses in Florida in school year 2000- 01. Other expenses ranged
from 10 percent of total revenues in Missouri to about 19 percent of total
revenues in Florida during that school year.
Figure 6: School Food Service Expense Components by State, School Year
2000- 01
Variations in the portion of labor expenses representing either benefits
(e. g., health insurance and pensions) or salaries were more significant
among the states. As a portion of total labor expenses, school year 2000-
01 salaries ranged from about 90 percent in New York to 74 percent in
Florida; conversely, benefits ranged from about 26 percent in Florida to
10 percent in New York. Over this period, the salary increases in two
states* Florida and New York* grew more quickly relative to their benefit
increases, whereas benefits grew more quickly than salaries in the other
Share of School Food
Service Expense Components to Total Expenses Varied Somewhat among the
States
0 10
20 30
40 50
Virginia Texas Ohio New York Missouri Florida Percentage
Labor Food Other Source: Florida, Missouri, New York, Ohio, Texas, and
Virginia Departments of Education.
Page 16 GAO- 03- 569 School Meal Programs
four states. The salary increases in Florida and New York were responsible
for the overall increase in salaries outpacing the overall increase in
benefits across the six states.
Total school food service expenses were greater than total revenues in
school years 1996- 97 through 2000- 01, and the gap between expenses and
revenues grew slightly over this period for the six states combined.
Moreover, federal reimbursements paid a smaller portion of school food
service expenses during the period, as did state revenues. Conversely, the
portion of expenses paid by other sources of revenues slightly increased,
while the portion of expenses paid by revenues from school food service
sales remained essentially unchanged during the period. Finally, federal
reimbursements as a percentage of total expenses varied considerably by
state. During school years 1996- 97 through 2000- 01, total SFA expenses
increased from about $3.4 billion to about $4.1 billion, or about 22
percent across the six states, while total SFA revenues increased from
about $3.3 billion to about $4.0 billion, or about 20 percent. As figure 7
indicates, the shortfall grew slightly over the 5- year period. States
Experienced a
Small but Increasing Revenue Shortfall
School Food Service Expenses Have Slightly Outpaced Increases in Revenues
Page 17 GAO- 03- 569 School Meal Programs
Figure 7: Changes in Total School Food Service Revenues and Expenses in
Six States, School Years 1996- 97 through 2000- 01
As figure 8 shows, the proportion of total school food service expenses
paid by federal reimbursements and state funds declined slightly during
school years 1996- 97 through 2000- 01 for the six states combined.
Federal reimbursements paid a smaller portion of total expenses, declining
from
about 54 to 51 percent. The proportion of total expenses paid by state
funds also declined by less than 1 percentage point to less than 3 percent
during the same period. Conversely, the proportion of total expenses paid
from other funds grew by about 1 percentage point to almost 5 percent,
while revenues from meal sales as a proportion of total expenses were
essentially unchanged at about 38 percent during the period. Total School
Food Service
Expenses Covered by Federal Reimbursements and State Funds Have Declined
Dollars (in billions)
School year
Expenses Revenues Source: Florida, Missouri, New York, Ohio, Texas, and
Virginia Departments of Education.
3.0 3.2
3.4 3.6
3.8 4.0
4.2 2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97
Page 18 GAO- 03- 569 School Meal Programs
Figure 8: Proportion of Total School Food Service Expenses Paid by Revenue
Component in Six States, School Years 1996- 97 through 2000- 01
The proportionate decline in federal reimbursement overall reflects the
fact that total school food service expenses grew more quickly than
federal reimbursement revenue. This may have occurred because the federal
per meal reimbursement rate may not have risen as quickly as the cost per
meal. However, without data on the average cost of reimbursable
meals, we cannot determine if this is a reason for the decline. There are
other possible reasons. For example, the growth in expenses may have
exceeded the growth in federal reimbursement because schools are serving
more a la carte foods, which could increase both expenses for
nonreimbursable meals and revenue from nonreimbursable food sales,
potentially decreasing the federal share. As another reason, a smaller
proportion of students in an SFA may be eligible for or receiving free or
reduced price school meals.
The decrease in the share of expenses paid by state revenues is the result
of the federal funding requirement for states. To participate in the
school lunch program, states must provide annual matching cash
contributions
Percentage 0 10
20 30
40 50
60 2000- 01 1999- 2000 1998- 99 1997- 98 1996- 97 School year
Federal reimbursements Sales revenues State funds Other funds Source:
Florida, Missouri, New York, Ohio, Texas, and Virginia Departments of
Education.
Page 19 GAO- 03- 569 School Meal Programs
for program operations that equal 30 percent of the full price
reimbursement for each eligible lunch they served in school year 1980- 81.
16 Because each state*s contribution is calculated on the fixed 1980- 81
school year dollar amount, the contribution continues to decline each year
as a
share of the total school food service revenues and expenses. The
proportion of expenses covered by federal reimbursements varied among the
six states. As figure 9 shows, during school year 2000- 01, federal
reimbursements covered about 37 percent of total expenses in Ohio and
about 59 percent of total expenses in Texas. There are several potential
explanations for this difference. For example, suppose that the sale of a
la carte foods as a percentage of total revenues is higher in one state
than another. This means that the proportion of expenses covered by a la
carte revenues is also higher for that state, and therefore the
proportion of expenses covered by federal reimbursements is lower.
Further, improvements in a state*s economic situation could result in
fewer children eligible for free or reduced price meals. This change in
eligibility category would result in schools receiving less federal
reimbursement as a percentage of expenses. However, because of data
limitations, we cannot determine specifically why the difference exists.
Despite the variation among the states, the proportion of federal
reimbursements as a percentage of total expenses was lower in school year
2000- 01 than in school year 1996- 97, ranging from less than 1 percentage
point in Texas to about 6 percentage points in Florida.
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). Federal Reimbursements
as a Percentage of Total Expenses Varied by State
Page 20 GAO- 03- 569 School Meal Programs
Figure 9: Federal Reimbursements as a Percentage of Total School Food
Service Expenses by State, School Years 1996- 97 and 2000- 01. In an
effort to minimize their revenue shortfalls, local SFAs employed two
overall approaches to manage school food service finances* containing
expenses and enhancing revenues. Efforts to contain school food service
expenses focused primarily on food and labor* which comprised the largest
share of all expenses. In order to contain these expenses, SFAs reduced
expenditures, changed the way they purchased foods and the types of foods
they purchased, reduced labor hours, and took steps to operate more
efficient programs. SFAs further managed school food service finances by
augmenting their food service revenues through increased sales from a la
carte food items and catering; increased participation in the school meal
programs; and in some cases, raising meal prices.
Although fewer than half of the 14 local officials we interviewed said
that their overall food expenses had increased in recent years because of
USDA*s revised school meal nutritional requirements, most of these
officials said they saw the need to control food expenses. The approaches
States Used a Variety
of ExpenseContainment and Revenue- Producing Strategies to Manage School
Food Service Finances
To Contain Expenses, Officials Focused on Food and Labor
0 10
20 30
40 50
60 70
Virginia Texas Ohio New York Missouri Florida Percentage
1996- 97 2000- 01 Source: Florida, Missouri, New York, Ohio, Texas, and
Virginia Departments of Education.
Page 21 GAO- 03- 569 School Meal Programs
used to contain food expenses varied by SFA. Many officials, for example,
said they participated in food cooperative arrangements with other SFAs
that allowed them to purchase bulk food items at lower cost. Some small
SFAs reported that this arrangement was particularly useful for them
because it provided them with greater purchasing power than they would
have individually. Other officials attended local food shows that allowed
them to shop competitively for lower- priced food items. To offset the
costs of buying fresh fruits and vegetables, one SFA located in a state
that participates in a *farm- to- school* pilot program with the USDA,
obtained this produce from small farmers at low cost. 17 Taking another
approach, one SFA reduced the number of school menu offerings and
purchased fewer fresh fruits and vegetables for the school meal programs.
Other officials planned their school meal menus around the donated food
commodities from the USDA, which reduced the amount of additional food
that needed to be purchased.
SFAs attempted to contain labor expenses by reducing the amount of labor
and sought ways to increase the efficiency of the staff. According to most
state and local officials, certain aspects of labor expenses have been
rising, particularly salary scales and benefits. However, both are usually
determined at the school district level and are therefore beyond the
control of the SFA. In addition, a few local officials noted that many
food service employees who are a part of the *baby boom generation* have
begun to retire, and SFAs have, in some cases, found it necessary to offer
higher salaries and more benefits to replace them.
Many local officials reduced their overall labor expenses by modifying
staff numbers and hours* factors over which they did have control. For
example, many local officials did not replace food service staff that
retired, and they also reduced the number of hours worked by existing food
service staff. According to three state directors we interviewed, SFAs
were replacing full- time staff with part- time staff in order to reduce
salary
and benefit expenses. In addition, 10 SFAs reduced labor hours, and
therefore labor expenses, by altering the type of foods they purchased.
Officials of these SFAs said they reduced labor expenses by purchasing
more prepared or prepackaged food items* such as chicken nuggets and
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.
Page 22 GAO- 03- 569 School Meal Programs
frozen pizza* that required very little staff time to prepare. In
addition, one SFA no longer offered sandwiches at lunch, because preparing
them was too labor- intensive, and only provided fruits such as apples and
bananas that did not need to be sliced. While some SFA officials noted
that prepared food items tended to be more costly to purchase than
*scratch* food items, many officials felt that these food cost increases
were more than offset by the decrease in labor expenses.
In addition to reducing food and labor expenses, a small number of SFAs
reported that they reduced overall school food service expenses by
delaying or eliminating expensive kitchen equipment purchases. For
example, when a dishwasher broke down in one SFA, officials there opted to
use paper plates and plastic utensils rather than purchase a new machine.
A few SFA officials said that they undertook a variety of additional
strategies that improved efficiency. In fact, five state directors told us
that SFAs must operate meal programs as business- like operations with
special focus on cutting costs wherever possible. One state agency
reported that it
sponsored seminars on increasing staff productivity and controlling costs
for local directors. In another state, officials reported that an
electronic point- of- sale system for the payment of food purchases
improved staff
productivity by increasing the number of students each staff member can
serve by shortening the amount of time needed to pay for each meal. 18 A
few SFAs sought to reduce costs by consolidating food production and
storage to a few sites. In addition, some SFAs increased the use of
selfserve meal lines to reduce the number of staff needed in the
cafeteria. In one local SFA, the director reduced the number of staff
breaks as a way to increase staff efficiency. In another SFA, staff
reduced food waste by
monitoring food items discarded by students and eliminating those items
from the school menu.
SFAs employed a variety of strategies to increase the amount of revenues
available for their school food services. Almost all of the 14 SFAs we
spoke with enhanced revenues for their food services by encouraging all
students to purchase meals at school rather than bring lunch from home
or buy it off campus. SFAs engaged in various activities to promote 18
This state*s electronic point- of- sale system used a credit- card- like
device to conduct a cashless payment transaction. To Enhance Revenues,
SFAs Promoted the School
Meal Programs and Also Increased a la Carte Sales
Page 23 GAO- 03- 569 School Meal Programs
participation, including increasing food choices for the reimbursable
school meal programs, enhancing the atmosphere of the eating environment,
and seeking input from students on food options. For example, 1 SFA
offered students their choice of 10 different entree options each day,
while a national study has shown that most schools offer
students 3 or fewer entree options each day. 19 At another SFA, students
were surveyed regarding which food items they preferred in the school
cafeteria. Using yet another strategy, 1 SFA sought to increase the
participation of students eligible for free or reduced price lunches by
sending letters home to parents notifying them that although their
children were approved to receive these meals, they were not
participating.
For many SFAs, a la carte food items generated additional revenues for
their school food services that allowed them to make ends meet
financially. According to five state directors, a la carte sales have
become an increasingly important source of revenue for SFAs. Unlike
reimbursable school meals, a la carte food items are generally not subject
to USDA*s nutritional requirements. 20 A la carte offerings vary greatly
by SFA* from snack and dessert items such as ice cream and potato chips in
some SFAs to lunch items such as pizzas, hamburgers, and chicken
nuggets in others. Some officials noted that a la carte programs might
actually reduce participation in the reimbursable school meal programs, by
drawing students away from a reimbursable school lunch. Moreover, a couple
of officials noted that the growth in a la carte programs might be *at
odds* with the goal of providing a nutritious meal to students.
Catering for school functions such as banquets and teacher training days
was another important source of revenue for a few SFAs. Some SFAs also
provided catering services to private schools, senior citizens, and
others. For example, 1 SFA catered lunch a few days a week for a nearby
senior
citizen center as a way to raise additional revenue. While a small number
of officials we interviewed indicated that increasing the price of a full
price meal was a viable option for increasing revenue for
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 entree 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.
Page 24 GAO- 03- 569 School Meal Programs
the school food services, most officials viewed raising the meal price as
a last resort. Although the local director can in most cases request or
recommend a meal price increase to the local school board or
superintendent, some state and local officials indicated that such
proposals were likely to be met with resistance from board members and
parents. In addition, officials noted that increases in meal prices often
resulted, at least initially, in fewer students purchasing a school meal.
Many state and local SFA officials noted that, despite using strategies to
enhance revenues and contain school food service expenses, SFAs often have
difficulty breaking even financially in a given school year. SFAs
sometimes maintain a limited fund balance containing excess money carried
over from year to year for the school food service, and this funding can
be used to cover a revenue shortfall in a given year. However, when SFAs
were unable to cover their school food service expenses, many officials
told us that local school districts, using general revenue funds, normally
covered any shortage of funds. Since local school districts are facing
tighter budgets than in years past, many officials noted that it was
unclear whether school districts would continue to provide funding for
school food services if they had a revenue shortfall. In fact, several
state officials told us that school food service- related expenses that
were previously paid by local school districts were being transferred to
SFAs. Although the costs of these services* such as trash removal, pest
control, linen services, and utilities* were attributable to the school
food services,
school districts had provided these services at no cost to the SFAs in
better financial times.
According to our data, SFA revenues have not kept pace with expenses
during school years 1996- 97 through 2000- 01; however, the extent of the
shortfall could be considered modest to date. To cope with these
shortfalls and to minimize the gap between revenues and expenses, some
options are within the control of SFAs, while others are not. On the
revenue side, federal law establishes the per meal reimbursement rates,
the minimum state contribution, and the maximum rates SFAs can charge for
reduced price meals. Options available to SFAs include increasing the
number of students who obtain their meals at the school, expanding a la
carte and catering sales, and increasing charges for full price meals.
However, SFAs sometimes face resistance from parents and local officials
to meal price increases. On the expense side, because SFAs usually do not
set the salaries and benefits of food service personnel, available options
to reduce their labor expenses include limiting the hours of their
employees, cutting Revenue Shortfall
Sometimes Covered by Carryover Funds and Local Revenues Conclusions
Page 25 GAO- 03- 569 School Meal Programs
the number of employees, altering the types and costs of foods they
purchase for the programs, and enhancing other efficiencies related to
labor and food expenses.
All of the SFA officials we spoke with had implemented some combination of
these options, and without such measures the gap between revenue and
expenses would likely have been greater. It is not clear from our work
whether or not the SFAs could take additional measures to improve
efficiency and further close the gap. Nor is it clear whether the gap will
remain, decrease, or continue to grow. Nevertheless, the strategies SFAs
have chosen for limiting expenses and enhancing revenues can have varying
effects on achieving the goal of the school meal programs to ensure that
the nation*s youth consume nutritional and affordable meals while they are
in school. Serving reimbursable meals that are more appealing to the
student population could well encourage more students to eat a nutritious
meal. On the other hand, relying more heavily on proceeds from the sale of
a la carte items, which are not covered by the school meal programs*
nutritional standards, could undermine that goal or at least offer less
assurance that students are eating balanced meals. Such choices can,
therefore, have critical consequences, especially given the current health
and nutritional trends among the nation*s children.
We requested comments on a draft of this report from the Secretary of
Agriculture or her designee. On April 21, 2003, officials from the
Department*s Food and Nutrition Service, Child Nutrition Division, and
Office of Analysis and Nutrition Evaluation, and the Department*s Economic
Research Service, provided us with the following oral comments on the
draft. The officials said they were in general agreement with the findings
as presented in the report. However, they said that recipients of our
report should be aware that the report does not identify the cost of
preparing a reimbursable school meal. They also noted that there are many
factors that can contribute to the revenue and cost differences that we
found between states, such as school meal program participation levels,
changes in the household income of students, and the extent to which
states use donated USDA commodities.
In addition, the officials provided data on the proportion of free,
reduced price, and full price meals served for 4 of the 5 years in our
study. The number of full price lunches served increased modestly in
proportion to the number of free and reduced price lunches in five of our
six states. This change may help explain the slight decline in federal
reimbursement relative to other revenues and the declining share of total
food service Agency Comments
and Our Evaluation
Page 26 GAO- 03- 569 School Meal Programs
expenses covered by federal reimbursements. However, without additional
information, such as the increase in the number of a la carte foods sold,
we are unable to determine the extent to which these changes in school
meal participation played a role in the declining share of federal
reimbursement. Finally, in addition to these observations, USDA provided
technical comments that we have incorporated as appropriate. We are
sending copies of this report to the Secretary of USDA, appropriate
congressional committees, and other interested parties. In addition, the
report will be available at no charge on the GAO Web site at http:// www.
gao. gov.
If you or your staff have questions concerning this report, please call me
on (415) 904- 2272 or Kay E. Brown on (202) 512- 3674. Key contact and
staff acknowledgments are listed in appendix III.
David D. Bellis Director, Education, Workforce,
and Income Security Issues
Appendix I: Scope and Methodology Page 27 GAO- 03- 569 School Meal
Programs
This appendix discusses in more detail the scope and methodology for
developing the revenue and expense information presented and for
identifying the actions taken by school food authority (SFA) officials to
manage their school food service finances. The scope of our review
included the National School Lunch Program and the School Breakfast
Program as they relate to public SFAs in selected states.
From the Food and Nutrition Service we obtained nationwide school meal
programs information, including the (1) applicable federal reimbursement
rates, (2) student participation, (3) number of school meals and snacks
served, (4) cash reimbursements, and (5) commodity values. To obtain
statewide data on the revenues available to SFAs for providing
school food services and the expenses of operating school food services,
we selected seven states* one state from each of the Food and Nutrition
Service*s seven regions. We selected states that (1) were able to provide
both school food service revenue and expense information for all of their
SFAs and (2) received the highest amount of federal reimbursements in
their respective region during fiscal year 2001. Five of the seven states
selected* California, Florida, Missouri, New York, and Texas* received the
largest federal cash reimbursements in their respective regions during
fiscal year 2001. The two remaining states, Ohio and Virginia, received
the second and third largest amount of federal reimbursements to the
states in their respective regions. We requested that each state provide
annual school food service expense
and revenue data as reported to state agencies by all of the public SFAs
for school years 1994- 95 through 2001- 02, or for the years that were
available during the period. We requested information on the (1) total
annual amounts of revenues provided by federal, state, and other sources,
and the value of USDA donated commodities and (2) expenses associated with
producing school meals, including food service staff salaries and
benefits, and food purchases. Six of the seven states were able to provide
the requested data for school years 1996- 97 through 2000- 01. We were
unable to obtain sufficient data to report on school years 1994- 95 and
1995- 96. In addition, during the course of our study, California notified
us that it was unable to provide all of the data needed. For this reason,
the revenue and expense information contained in this report does not
include California. We did not verify the data collected for this study.
However, we reviewed
the data for reasonableness and requested additional information when
appropriate. First, we compared annual totals of certain data fields from
year to year. If there were unusual jumps in these totals from year to
year, Appendix I: Scope and Methodology
Appendix I: Scope and Methodology Page 28 GAO- 03- 569 School Meal
Programs
we asked the responsible agency to offer an explanation. Second, for the
states that provided SFA- level data, we compared the number of SFAs in
the data with the number of SFAs reported by the responsible agency.
Third, we examined the relationship of data elements to identify any
illogical associations. Fourth, we conducted interviews related to data
reliability with the state food service directors. In our interviews with
the responsible agency, we presented graphs that were created using the
data provided us. We asked why certain patterns occurred in the graphs.
Finally, in addition to the steps that we took to assess the reliability
of the data, federal regulations require that each SFA participating in
the school meal programs be routinely reviewed to determine its compliance
with
performance and regulatory standards. As a part of these reviews, SFAs
must meet minimum reporting and record- keeping requirements. Reviews are
generally conducted by appropriate state agencies and include evaluation
of financial reporting systems.
To the extent possible, we excluded from our analyses other federal child
nutrition programs, private schools, and residential child care
institutions, which also participate in the school meals programs. While
we collected only public SFA information for our study, the Missouri
expense and
revenue information includes both public and private SFA data because they
were not tracked separately; however, the dollar amounts attributed to
private schools are relatively small. Also, SFAs without full information
for school years 1996- 97 through 2000- 01 were excluded from the
analysis.
To identify actions taken by SFA officials to manage their school food
service finances, we conducted phone interviews with the appropriate
manager at each of the seven state agencies administering the school meals
programs and with two local SFA managers within each state. We selected
SFAs that both (1) experienced expenses that were larger than
revenues during the past few years and (2) had large increases in expenses
related to either food or labor. 1 We gathered information from these
managers on the sources and amounts of funds available for school food
service operations, the cost of producing meals, and what approaches SFAs
were using to manage their food service finances. We also obtained their
insights regarding revenue and expense changes and their
1 Since the available data from California and Missouri did not allow us
to identify the local SFAs that met our criteria, the state managers for
the meal programs provided us with the names of SFAs they felt met our
criteria.
Appendix I: Scope and Methodology Page 29 GAO- 03- 569 School Meal
Programs
observations regarding how these changes may have affected the school food
services that they manage. The results of the financial data described in
our study are not generalizable beyond the six states that provided the
required data. In addition, we cannot determine whether the changes we
identified are statistically significant because we do not know the
standard errors of our estimates. We conducted our work between October
2002 and March 2003 in accordance with generally accepted government
auditing standards.
Appendix II: Federal School Meal Cash Reimbursement Rates, School Years
1996- 97 through 2002- 03
Page 30 GAO- 03- 569 School Meal Programs
Lunch Breakfast School year Meal type
Less than 60% of lunches served free or at reduced price
60% or more of lunches served free
or at reduced price Nonsevere need Severe need Snacks 1996- 97 Full price
$0.1775 $0.1975 $0.1975 $0.1975 $0.0450
Reduced price 1.4375 1. 4575 0. 7175 0.9125 0. 2525 Free 1.8375 1. 8575 1.
0175 1.2125 0. 5050
1997- 98 Full price 0.1800 0. 2000 0. 2000 0.2000 0. 0400 Reduced price
1.4900 1. 5100 0. 7450 0.9450 0. 2600 Free 1.8900 1. 9100 1. 0450 1.2450
0. 5175
1998- 99 Full price 0.1800 0. 2000 0. 2000 0.2000 0. 0400 Reduced price
1.5425 1. 5625 0. 7725 0.9775 0. 2675 Free 1.9425 1. 9625 1. 0725 1.2775
0. 5325
1999- 2000 Full price 0.19 0.21 0.21 0.21 0.05 Reduced price 1.58 1.60
0.79 1.00 0.27 Free 1.98 2.00 1.09 1.30 0.54
2000- 01 Full price 0.19 0.21 0.21 0.21 0.05 Reduced price 1.62 1.64 0.82
1.03 0.27 Free 2.02 2.04 1.12 1.33 0.55
2001- 02 Full price 0.20 0.22 0.21 0.21 0.05 Reduced price 1.69 1.71 0.85
1.07 0.28 Free 2.09 2.11 1.15 1.37 0.57
2002- 03 Full price 0.20 0.22 0.22 0.22 0.05 Reduced price 1.74 1.76 0.87
1.10 0.29 Free 2.14 2.16 1.17 1.40 0.58 Source: Federal Registers and
USDA.
Note: Higher reimbursements are provided to SFAs in which 60 percent or
more of the lunches were served at a free or reduced price. Higher
breakfast reimbursement rates are established for *severe need* SFAs in
which 40 percent or more of the lunches were served free or at a reduced
price and the nonsevere need rate is insufficient to cover the costs of
the breakfast program. USDA provides
higher school meal and snack reimbursement amounts in Alaska and Hawaii.
Appendix II: Federal School Meal Cash Reimbursement Rates, School Years
1996- 97 through 2002- 03
Appendix III: GAO Contact and Staff Acknowledgments
Page 31 GAO- 03- 569 School Meal Programs
Kay E. Brown (202) 512- 3674 (Brownke@ gao. gov) In addition to the
individual named above, Peter M. Bramble, Jr., Cynthia G. Decker, and
Michelle C. Verbrugge made key contributions to this report. Appendix III:
GAO Contact and Staff
Acknowledgments GAO Contact Staff Acknowledgments
(130188)
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4800
U. S. General Accounting Office, 441 G Street NW, Room 7149 Washington, D.
C. 20548 GAO*s Mission Obtaining Copies of
GAO Reports and Testimony
Order by Mail or Phone To Report Fraud, Waste, and Abuse in Federal
Programs Public Affairs
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