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Investigation finds USDA school lunch program wasted $1.7 million

By Phillip Swarts

Thursday - 2/7/2013, 10:16am  ET

The government is making a big push to make sure all children get a solid, healthy lunch at school, but the agency leading the campaign is wasting money and food that taxpayers subsidize.

An investigation by the Agriculture Department inspector general found the National School Lunch Program, which subsidizes breakfast and lunch for 31 million poor children, wasted at least $1.7 million that could have gone to buy more food.

The review only looked at 18 school programs, suggesting the problems could be much larger across the $11 billion nationwide program.

The USDA's internal watchdog found the program lost track of some of the food donated by the government, meaning it may never have reached the students, and overpaid for other food that was delivered to the students by failing to ensure required rebates were paid. 

USDA's Food and Nutrition Service "did not exercise sufficient management oversight to ensure" that school food programs "received the full benefits of purchase rebates and USDA-donated foods," the inspector general said.

The government's response to the investigation was a classic case of fingerpointing. USDA thought it was the states' responsibility to keep an eye on food prices, while the states thought it was the federal government's responsibility.

For wasting precious dollars that go to keeping American students healthy and well-fed, the Agriculture Department and its Food and Nutrition Service win this week's Golden Hammer, awarded by the Washington Guardian to an example of wasteful or mismanaged government spending.

During slow economic times, the government's various food programs in schools have seen significant growth in demand from poor families. In fact, the cost of the government's school food programs has grown from $10.9 billion in 2007, before the recession started, to nearly $15 billion last year, according to USDA

In addition, First Lady Michelle Obama's campaign to fight childhood obesity has focused strongly on making the choices at school lunches healthier. In fact, just last week, USDA announced first-ever rules requiring changes to the food schools serve in vending machines and a la carte lines to require more healthy provisions.

Under the school lunch program, state school food agencies (SFAs) contract with companies to provide the food, but the companies are required to refund to schools any rebates, savings or discounts they have gotten.  But investigators said the Food Nutrition Service (FNS) office never clearly communicated who should make sure the discounts were refunded.

"FNS officials stated that they believed the regulations implied that SFAs were responsible for periodically reviewing their cost reduction rebates" from the food companies, the IG report said.  "However, FNS neither clearly communicated this expectation either to the state agencies or to the SFAs, nor provided specific instructions to SFAs on how to most effectively monitor and track such rebates."

The lack of communication from FNS, investigators said, meant that states overpaid for food by $1.2 million that should have been refunded through rebates.

The Agriculture Department responded to the investigation that they have taken "significant actions" to provide guidance to schools and states on getting fair prices, but said they will work to improve.

"FNS sees merit in the continuous improvement of the management evaluation process for State agency oversight of SFA monitoring of [food company] contracts, identifying areas that can be strengthened," said a response from FNS.

Investigators also expressed concern that some of the food has gone missing.  The Agriculture Department donates some food to schools to help provide for the lunches.  The IG looked at five states and three contracting companies, and found that roughly $480,000 worth of food had gone missing - and no one could tell what had happened to it or where it had gone.

It's not the first time watchdogs have expressed concern about the school lunch program.  As far back as 2001, the inspector general criticized the program's oversight.  FNS took corrective action but "did not implement sufficient monitoring to ensure that the new rules and guidance were being followed," the report from a decade ago concluded.

The following year the IG listed risks states could face in contracting with private food companies.  FNS took action to lessen the risks, but "did not continue to assess these risks on an ongoing basis," the new investigation found.

In fact, investigators found that zero officials at 18 school food agencies that were reviewed had received proper training on how to handle food rebates.

Lack of training was a common thread throughout the IG's report.  In 2010, FNS started a web-based training kit to instruct states on rules and regulations.  But the training wasn't made mandatory because USDA employees didn't want to have to go through the approval process, the IG said.  As a result, most state school officials didn't attend.