News: CJ Exclusives

Half of Sampled School Lunch Applicants Can’t Prove Eligibility

USDA threatens to cut off funds if district conducts comprehensive audit

A majority of sampled applicants enrolled in the free and reduced-price lunch program in North Carolina can’t prove eligibility to participate, according to verification summaries from the state’s 115 school districts.

An analysis of the summaries showed that 54 percent of a sample pool of applicants could not or would not provide income proof to justify their meal benefits. The entitlement, administered by the U.S. Department of Agriculture at an annual cost of $8 billion, is meant for families at or below 185 percent of the federal poverty level. But the summaries suggest that many ineligible families still participate.

As Carolina Journal first reported in July, school nutrition officials have opposed a comprehensive audit of local school lunch programs, citing USDA guidelines that prohibit over-verification. Some county leaders and school board members, however, have pushed for a more thorough review, especially since the program is used by school districts often as a funding allocation tool.

“I don’t think there is any doubt in anyone’s mind, even though we’re pussyfooting around, that there are thousands of students here that probably are not entitled to this government benefit,” said Larry Gauvreau, a school board member for Charlotte-Mecklenburg Schools.

Other elected officials call further verification efforts a “witch hunt” aimed at poor families. “Poor people don’t know how to steal from the federal government. They’re not smart enough,” said CMS school board member Vilma Leake.

The verification summaries are taken from about 3 percent of applicants considered “error prone,” meaning households whose annual earnings fall within $1,200 of the income eligibility limitation. About three dozen school districts qualified last year for an alternate sample size of 1 percent.

As part of the verification, school officials request income proof, such as a pay stub or W-2 form, from applicants. If applicants fail to respond, or respond with evidence that shows too high an income, officials reduce or terminate their benefits.

The summaries for the 2007-08 school year show that 76 out of 115 school districts had potential fraud rates at 50 percent or higher, and 19 districts had rates at 75 percent or higher. Only three districts — Currituck County Schools, Hyde County Schools, and Rutherford County Schools — had a perfect verification rate.

Less than 2 percent of applicants statewide had their benefits increased as a result of the verification, suggesting that families were more likely to understate than overstate their income on the forms.

Cumberland County Schools, New Hanover County Schools, and Northampton County Schools had the highest rates of reduced or repealed benefits at 89 percent each. The state’s three largest school districts had rates well over 50 percent — Charlotte-Mecklenburg Schools, at 68 percent; Wake County Schools, at 64 percent; and Guilford County Schools, at 77 percent.

Full audit outlawed

Child nutrition officials say the percentages do not indicate widespread fraud because the sample is targeted and not random. After CJ reported on the issue, CMS school board members pushed for a full audit to see whether cheating is common among all enrolled families. The USDA, however, has threatened to cut off the district’s $34 million school lunch subsidy if CMS proceeds with a comprehensive verification.

“It’s disheartening for me to think that the USDA would have us believe that the position of the U.S. government is to ignore and turn a blind eye to fraud, waste, and mismanagement,” said CMS board member Kaye McGarry. “I have an obligation to taxpayers, and I feel we need to go ahead with full disclosure.”

The federal law governing free and reduced-price lunch says that a verification sample size “shall be the lesser of 3,000, or 3 percent of, applications selected at random. …” The law does not address over-verification or penalties if a school district chooses to conduct a more extensive audit.

Elsewhere, however, the USDA interprets the law to disallow a comprehensive verification. The 2008 version of Eligibility Manual for School Meals, published by the USDA, says that school districts “must not verify more than or less than the standard sample size … and must not verify all (100% of) applications” (emphasis in original).

Asked to explain why the law limits verifications to 3 percent, USDA Food and Nutrition Service spokesperson Jean Daniel said the question should be addressed to the House and Senate committees that oversee the school lunch program.

CMS food fight

The CMS school board has been embroiled in a political tug of war since the question of school lunch cheating surfaced in August. The school board has twice rejected a motion to conduct a random or full audit of school lunch participants. At a meeting Oct. 14, board members approved, 5-3, a motion prohibiting Superintendent Peter Gorman from conducting an audit unless the USDA changes its rules.

Some school board members still say a comprehensive review is necessary to weed out cheating and protect the integrity of the system. “There are thousands of people who probably shouldn’t be in that program. We know that. Everybody up here knows that,” Gauvreau said.

Other members disagree. “We must not ever deny any child the right to have a lunch or a breakfast or a snack,” Leake said. “The problem I have is that we’re always digging for something that’s not there.”

Tom Tate, another school board member opposed to a comprehensive review, said the district should focus on education, not fraud. “I’m tired, really, of the board talking about fraud in this program when we need to be talking about educating these kids,” he said.

Supporters of a full audit have pointed to CMS’ use of free and reduced lunch as a funding indicator as another reason to take a closer look at the program. The district uses a 1.3 multiplier for every student in the entitlement, meaning each enrolled student generates 30 percent more funding for his or her school compared with a traditional student.

“We use the numbers from this free and reduced-lunch [program] to allocate millions of dollars of resources to our schools in Mecklenburg County, and this number has no integrity,” McGarry said.

The school board is expected to consider a motion in November that would direct Gorman to use a measurement other than free and reduced lunch for resource allocation.

The Mecklenburg Board of County Commissioners also has stepped into the fray. County commissioners voted Oct. 7 to write a letter with the CMS school board to the state congressional delegation about the USDA’s inability to clarify promptly whether a comprehensive audit is legal.

“The USDA staff essentially said to kiss off,” Commissioner Bill James said. “I wish I could say all of this is shocking, but they just seem content to ignore it because it’s a welfare issue and a sacrosanct program.”

The next level

Gauvreau has taken the issue of school lunch fraud beyond the local level. In September, he requested the state auditor look into the situation. Tim Hoegemeyer, general counsel for the auditor’s office, responded through e-mail that the auditor is “looking at the possibility of conducting such an audit and any decision one way or another will have to take into account our resources and current priorities.”

In mid-October, Gauvreau sent a letter to a special agent for the USDA’s inspector general’s office in Raleigh requesting similar action. “Your office’s involvement will help set the record straight. Millions of dollars in public money is at stake,” Gauvreau wrote.

Despite the USDA’s threat to pull CMS’ child nutrition funding, Gauvreau said he plans to continue pushing for a more thorough audit. “First you use sugar, then vinegar, and if that doesn’t work, a baseball bat,” he said.

David N. Bass is an associate editor of Carolina Journal.