After school districts certify household eligibility for school-meals program  benefits, they must annually verify a sample of household applications  approved for free or reduced-price school-meals benefits to determine  whether the household has been certified to receive the correct level of  benefits—we refer to this process as “standard verification.” As dictated  by statute, school districts are required to verify a random sample of  applicants. USDA Has Taken Steps to Help Identify and Prevent Ineligible Participants from Receiving Benefits

		USDA Has Increased the Use of Direct Certification

To address the high improper-payment rates in the school-meals  programs, among other actions, USDA worked with Congress to develop  the Child Nutrition and WIC Reauthorization Act of 2004 (CNR).required school districts to directly certify students that receive SNAP  benefits for free meals in all school districts by the 2008-2009 school  year. Hunger-Free Kids Act of 2010 increased the frequency of these reviews  from every 5 years to every 3 years. § 210.18, Prior to the 2013-2014 school year, these reviews were referred to as  Coordinated Review Efforts. Administrative review reports from 11 school districts cited some  incorrect eligibility determinations. In February 2012, USDA distributed guidance to state administrators to  clarify that school districts have the authority to review approved  applications for free or reduced-price meals for school-district employees  when known or available information indicates school-district employees  may have misrepresented their incomes on their applications. Standard Verification Limited to Small Portion of Beneficiaries

As described earlier in this report, with the exception of for-cause  verification, standard verification is generally limited to approved  applications considered “error-prone.” Error-prone is statutorily defined  as approved applications where stated income is within $100 of the  monthly or $1,200 of the annual applicable income-eligibility guideline. For fiscal year 2013, USDA reported NSLP and SBP certification errors of  approximately 8.8 percent and 9.5 percent as part of its improper  payment estimation. However, our review of a nongeneralizable sample  of 25 households found 9 applications that were ineligible for benefits, 7  of which would have been excluded from standard verification. Expanded Verification of Applications That Indicate Categorical Eligibility Could Enhance Program Integrity

We found that ineligible households may be receiving free school-meals  benefits by submitting applications that falsely state that a household  member is categorically eligible for the program due to participating in  certain public-assistance programs—such as SNAP or TANF—or meeting  an approved designation—such as foster child or homeless. For example, USDA could  have school districts select a sample of applications indicating categorical  eligibility and verify the information with the appropriate agency. Develop and assess a pilot program to explore the feasibility of  computer matching school meal participants with other sources of  household income, such as state income databases, to identify  potentially ineligible households—those with income exceeding  program-eligibility thresholds—for verification. Explore the feasibility of verifying the eligibility of a sample of  applications that indicate categorical eligibility for program benefits  and are thus not subject to standard verification. Appendix I: Objective, Scope, and Methodology

This report assesses (1) what steps, if any, has the U.S. Department of  Agriculture (USDA) taken to help identify and prevent ineligible  beneficiaries from receiving benefits in school-meals programs, and (2)  what opportunities, if any, exist to strengthen USDA’s oversight of the  school-meals programs? To  do this, we selected a nongeneralizable sample of 48 households  participating in the National School Lunch Program (NSLP) for further  review and investigation. We used federal-employee  payroll data to develop case studies due to the unavailability of other data  sources containing salary information for nonfederal employees. For the 25  households that submitted a school-meals application, we requested and  reviewed the available applications from the 2010-2011 school year to  see what the applicant listed as his or her household income and  household size.
Why GAO Did This Study

In fiscal year 2012, over 31.6 million children participated in USDA's National School Lunch Program (NSLP) at a cost of about $11.6 billion. In fiscal year 2013, USDA estimated NSLP certification errors of more than 8 percent, or $996 million. GAO was asked to review possible beneficiary fraud within the program.
This report assesses (1) steps taken to help identify and prevent ineligible beneficiaries from receiving benefits in school-meal programs and (2) what opportunities exist to strengthen USDA's oversight of the school-meals programs.
GAO reviewed NSLP policies, interviewed program officials, and randomly selected a nongeneralizable sample that included 25 of 7.7 million approved household applications from 25 of 1,520 school districts in the Dallas, Texas, and Washington, D.C., regions. GAO performed limited eligibility testing using civilian federal-employee payroll data from 2010 through 2013 due to the unavailability of other data sources containing nonfederal employee income. GAO also conducted interviews with households. Ineligible households were referred to the Inspector General.

What GAO Found

The U.S. Department of Agriculture (USDA) has taken several steps to implement or enhance controls to identify and prevent ineligible beneficiaries from receiving school-meals benefits. For example:
USDA worked with Congress to develop legislation to automatically enroll students who receive Supplemental Nutritional Assistance Program benefits for free school meals; this program has a more-detailed certification process than the school-meals program.
Starting in the 2013-2014 school year, USDA increased the frequency with which state agencies complete administrative reviews of school districts from every 5 years to every 3 years. As part of this process, state agencies review applications to determine if eligibility determinations were correctly made.
In 2012, USDA issued guidance to clarify that school districts have the authority to verify approved applications for school-district employees when information indicates that the applicant misrepresented his or her income.
GAO identified opportunities to strengthen oversight of the school-meals programs while ensuring legitimate access, such as the following:
Exploring the feasibility of computer matching external income data, such as state payroll data, with participant information to identify households whose income exceeds eligibility thresholds for verification could help identify ineligible participants. Currently, school districts verify a sample of approved applications deemed “error-prone”—statutorily defined as those with reported income within $1,200 of the annual income levels specified in program- eligibility guidelines—to determine whether the household is receiving the correct level of benefits (referred to as standard verification in this report). In a nongeneralizable review of 25 approved applications, GAO found that 9 of 19 households that self-reported household income and size information were ineligible and only 2 could have been subject to standard verification.
Verifying a sample of categorically eligible applications could help identify ineligible households. Currently, school-meal applicants who indicate categorical eligibility (by participating in certain public-assistance programs or meeting an approved designation, such as foster children) are eligible for free meals and are generally not subject to standard verification. In a nongeneralizable review of 25 approved applications, 6 households indicated categorical eligibility, 2 of which were ineligible, and another may have been eligible for reduced-price meals instead of free school meals.
Results of GAO's Analysis of a Nongeneralizable Sample of 25 Approved Household Applications from the 2010-2011 School Year

What GAO Recommends

Among other things, GAO recommends that the Secretary of Agriculture develop a pilot program to explore the feasibility of using computer matching to identify households with income that exceeds program-eligibility thresholds for verification, and explore the feasibility of verifying a sample of categorically eligible households. USDA generally agreed with the recommendations.