School Lunch Program to be Investigated

USDA OIG will begin looking at claims food service companies are violating law.

Published on: May 6, 2011

This August, officials at the Agriculture Department's Office of Inspector General are expected to begin auditing the national school-lunch program. They will be investigating claims that food-service companies are violating the law by failing to pass on rebate savings to school districts. This comes on the heels of an agreement between New York state and Sodexo.

According to the New York attorney general's office, in 2010, it was revealed that Sodexo was routinely overcharging 21 public school districts across New York and agreed to pay a $20 million settlement with New York Attorney General Andrew M. Cuomo. Less than six months later in Ohio, the USDA told Sodexo that it owed the Columbus City Schools almost $400,000 because the company had charged the district for some government food commodities that Sodexo had received for free.

The investigation hopes to identify and evaluate the corrective actions taken by USDA to make sure food-service companies adhere to their contracts with local school districts and to assess the effectiveness of prior controls implemented by the department to stop waste and fraud.

Food service management companies currently provide school meals to nearly one fifth of all U.S. school children. These contracted out school meal programs receive more than $2.3 billion each year in federal funding, and given the consolidation of the industry the largest players have access to discounts through their high volume purchasing power.

USDA regulations require school food service programs to run on a non-profit basis. When a food service provider receives discounts, rebates or allowances from a food manufacturer, regulations stipulate that these funds be disclosed and/or reimbursed to the school district.

A USDA spokesman says that since learning of the settlement, the Department's Food and Nutrition Service has taken a number of steps to educate and help our partners at the state and local levels learn about their rights and responsibilities in procurement matters.