oversight

School Meal Programs: Sharing Information on Best Practices May Improve Programs' Operations

Published by the Government Accountability Office on 1997-05-21.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                  United States General Accounting Office

GAO               Report to the Secretary of Agriculture




May 1997
                  SCHOOL MEAL
                  PROGRAMS
                  Sharing Information on
                  Best Practices May
                  Improve Programs’
                  Operations




GAO/RCED-97-126
      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Resources, Community, and
      Economic Development Division

      B-276623

      May 21, 1997

      The Honorable Dan Glickman
      The Secretary of Agriculture

      Dear Mr. Secretary:

      In fiscal year 1997, the U.S. Department of Agriculture (USDA) will provide
      over $6 billion in cash reimbursements and over $600 million in
      commodities to the National School Lunch Program and the School
      Breakfast Program—the two largest school meal programs. USDA’s Food
      and Consumer Service (FCS) is responsible for regulating and overseeing
      the school meal programs; however, the states and local school food
      authorities1 (SFA) have flexibility in purchasing, distributing, and preparing
      the food that is served to schoolchildren. Some states and SFAs have
      developed and implemented unique and innovative practices to manage
      and operate these programs more efficiently and effectively in their
      schools. Some of these practices have the potential, if replicated, to
      improve the management and operating processes and systems of other
      states and SFAs. These kinds of practices are commonly known as best
      practices.2

      To learn how best practices might be applied to the school meal programs,
      we (1) identified state and SFA management and operating practices that
      are generally recognized as best practices by USDA, state, and other
      officials; (2) determined whether some of these best practices could be
      replicated by other states and SFAs; and (3) reviewed the training and
      technical assistance USDA provides to the states and SFAs to help them
      better manage and operate the school meal programs. Specifically, to
      determine the replicability of best practices in other states and SFAs, we
      examined two best practices more closely—Pennsylvania’s computerized
      system for ordering commodities from USDA and Texas’ use of the
      Department of Defense’s (DOD) commodity purchasing infrastructure to
      purchase fresh fruits and vegetables.




      1
      A local school food authority is any local school district or other entity, such as a private school, that
      manages a school’s food service.
      2
       Best practices refer to the management processes, practices, and systems identified in public and
      private organizations that have performed exceptionally well and are widely recognized as having
      improved an organization’s performance and efficiency in specific areas. Identifying and applying best
      practices to other organizations can reduce their business expenses and improve their organizational
      efficiency.



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                   States and school food authorities have developed a number of best
Results in Brief   practices to improve the management and operation of the school meal
                   programs, including the use of (1) a computerized system to improve the
                   efficiency of the commodity-ordering process and (2) cooperative
                   purchasing programs to buy food and nonfood items at competitive prices.
                   In addition, USDA has implemented a pilot project that uses DOD’s
                   nationwide infrastructure to purchase fresh produce and improve the
                   nutritional content of school meals.

                   USDA  and other officials believe that the best practices identified could be
                   replicated by some states and school food authorities to help improve the
                   management and operation of the school meal programs nationwide.
                   However, some impediments would first have to be overcome before these
                   best practices could be adopted. For example, Pennsylvania’s use of a
                   computerized system for ordering commodities could help other states
                   better allocate USDA-donated food among participating school food
                   authorities and minimize the amount of USDA-donated meat that is sent
                   back to commercial processors for reformulation into other products and
                   then returned to the school food authority, a practice known as
                   backhauling. However, the successful implementation of such a system
                   would first require the establishment of an effective commodity-ordering
                   and -processing network—like Pennsylvania’s—that links commercial
                   brokers and processors, school food authorities, and the state’s
                   commodity-distributing agency. Similarly, if other states and school food
                   authorities wanted to purchase a wider variety of higher-quality fresh
                   fruits and vegetables at competitive prices by using DOD’s
                   commodity-purchasing infrastructure under a USDA pilot project—as Texas
                   has done—their participation might be limited—as Texas’ is—by the
                   $20 million cap on federal commodity funds available for this USDA project.
                   Moreover, not all best practices may be suitable for all states and school
                   food authorities because of such factors as the size and location of the
                   state or school food authority. For example, a best practice that has
                   worked well for school food authorities in rural areas may have limited
                   applicability and benefits for school food authorities in urban areas.

                   USDA’s recent training and technical assistance efforts for the school meal
                   programs have largely focused on providing information about the new
                   dietary guidelines to school food service personnel. Because USDA’s
                   training and technical assistance resources are limited, USDA has had few
                   resources available for training and assisting states in managing and
                   operating the school meal programs more efficiently and economically.
                   Past efforts to improve the management and operation of school meal



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             programs, such as the best practices awards program that operated during
             fiscal years 1992 through 1994, have either been eliminated or reduced
             because of other competing priorities for resources.


             The school meal programs are designed to provide nutritionally balanced
Background   and affordable meals to schoolchildren to safeguard their health and
             well-being. These programs are administered by FCS and are available in all
             50 states, the District of Columbia, and the U.S. territories. The School
             Breakfast Program provides about 6.4 million children with a nutritious
             breakfast each school day, and the National School Lunch Program serves
             nutritious lunches to about 24.6 million children every school day.

             SFAs participating in the school breakfast and lunch programs receive cash
             assistance and commodity foods from USDA for breakfasts and lunches
             served. In turn, the SFAs must serve breakfasts and lunches that meet
             federal nutritional requirements and must offer free or reduced-price
             meals to children from families whose incomes are at or below certain
             levels. According to an FCS official, about 80 cents of every dollar that SFAs
             spend on providing meals to schoolchildren comes from federal cash
             reimbursements and state and local funds and about 20 cents comes from
             commodity foods. The federal government is providing cash
             reimbursements to SFAs in school year 1996-97 of about $1.02 for each free
             breakfast, $0.72 for each reduced-price breakfast, and $0.20 for each
             full-price breakfast; and about $1.84 for each free lunch, $1.44 for each
             reduced-price lunch, and $0.18 for each full-price lunch.

             In addition to cash reimbursements, SFAs receive commodity foods, valued
             at $0.145 for each lunch served. States and SFAs select these foods from a
             list of more than 60 different kinds of food that USDA purchases. This list
             includes, for example, fresh, canned, and frozen fruits and vegetables;
             meat and poultry; peanut products; grain products; and dairy products.
             Commodity food purchases for meat, poultry, fruits, and vegetables are
             made by USDA’s Agricultural Marketing Service (AMS) and for wheat,
             peanuts, oils, and dairy products by USDA’s Farm Service Agency. FCS
             provides each state’s commodity-distributing agency with information on
             the types and amounts of commodity foods that are available throughout
             the school year. Each state agency is responsible for ordering and
             providing delivery instructions to FCS for commodity foods to be delivered
             to the processors, warehouses, or SFAs within the state.




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                       FCS provides training and technical assistance to the states and SFAs
                       through conferences and meetings for state employees and directors, and
                       through workshops held in conjunction with the American Commodity
                       Distribution Association, the American School Food Service Association,
                       and the National Food Service Management Institute (NFSMI). It also
                       provides information through the Food and Nutrition Information Center
                       (FNIC). These meetings and conferences provide the states with an
                       opportunity to share ideas and/or new practices applicable to the school
                       meal programs. NFSMI is a national information center established to
                       provide training and technical assistance to the states and SFAs and to
                       assist FCS by developing guidelines and materials for promoting healthy
                       eating behaviors and providing nutritious meals through the school meal
                       programs. FNIC is part of the National Agricultural Library and provides
                       information support services for FCS and state agency staff, as well as
                       information to the public through the Internet.

                       While the states and SFAs have flexibility in managing their school meal
                       programs, FCS, as part of its oversight function, conducts regular
                       management evaluations, reviews state-performed administrative reviews
                       of SFAs, and asks USDA’s Office of Inspector General to conduct reviews of
                       certain school meal program activities. For example, in fiscal year 1996,
                       FCS’ regional offices conducted management evaluations of the operations
                       of school meal programs for 15 state agencies. Through this process, the
                       regional offices provide ongoing, comprehensive assessments of state
                       agencies’ operations while offering technical assistance to achieve
                       regulatory compliance and improve program management. The results of
                       these efforts help FCS identify areas in program performance that need
                       improvement.


                       Several states and SFAs have developed practices for better managing and
States and SFAs Have   operating the school meal programs. These practices cover a wide range of
Developed Best         activities, including purchasing, preparing, and serving food, as well as
Practices              methods to improve administrative functions and provide technical
                       support to other states and SFAs. With the implementation of certain
                       practices, according to some regional USDA officials and state officials,
                       programs are operating more economically and efficiently and
                       schoolchildren are being served more nutritious meals. According to these
                       officials, some practices are generally recognized as best practices and
                       sharing information on them could benefit other states and SFAs. Of the
                       best practices we identified during the course of this review, USDA officials




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agreed that those discussed below are likely to have the greatest potential
benefit for other states and SFAs if they are replicated.

Pennsylvania’s computerized commodity ordering system. Pennsylvania
has developed a computerized commodity-ordering system to better
manage the commodity-ordering process for its over 900 SFAs.
Pennsylvania’s system ensures that each SFA obtains its fair share of all
federally donated commodity foods. Moreover, the system has improved
the inventory control of commodity foods and has been particularly
beneficial in reducing the amounts of commodities, such as meat and
poultry, that SFAs have to backhaul. For the 1995-96 school year alone,
Pennsylvania estimated cost savings of $460,000. Furthermore, these
officials told us that the reduction in backhauled commodities has resulted
in higher-quality products that more schoolchildren are likely to accept.
(See app. I for a more detailed discussion of Pennsylvania’s computerized
commodity-ordering system.)

Cooperative purchasing programs. Some SFAs have entered into
cooperative purchasing programs in which two or more SFAs agree to
purchase food and nonfood items jointly for their school meal programs.
Small rural school systems that have used these programs have been able
to purchase a wider selection of food and nonfood items competitively and
at lower prices. For example, a 1993 study of the benefits of implementing
a cooperative purchasing program in Mississippi found that this approach,
among other things, reduced the burden associated with the bidding
process, increased vendors’ reliability, saved time, decreased paperwork,
made ordering easier, and decreased the number of deliveries.3 On the
basis of this study, Mississippi’s Department of Education established a
cooperative purchasing program for 35 rural SFAs; this program now
includes over 100 SFAs.

States’ use of DOD’s infrastructure to purchase fresh produce. To improve
the availability of fresh fruits and vegetables and the nutritional content of
school meals, USDA started a pilot project with DOD in 1994 to purchase
high-quality fresh fruits and vegetables for the school meal programs. USDA
chose DOD for the pilot project because, unlike AMS, which purchases
commodities centrally through the federal bid solicitation process, DOD
uses a nationwide, decentralized commodity-purchasing system to
purchase fresh produce from local vendors for its customers. During the
project’s first year, eight states, including Texas, participated in and

3
 J. Oldenquist, Analysis of the Effectiveness of the Mississippi State Department of Education
Purchasing Program for Child Nutrition Programs (Dec. 1993).



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reported a high level of satisfaction with DOD’s service and with the quality
and variety of the fresh produce available to the SFAs at competitive prices.
The pilot project was expanded to include SFAs from 32 states. A recent
study4 of the project’s performance in Colorado found that schoolchildren
in the SFAs that participated in the project increased their consumption of
fresh fruits and vegetables during school meals and wasted less.5 (See app.
II for a more detailed discussion on the operation of the USDA/DOD pilot
project in Texas.)

Model contract for food service management companies. In 1996, we
reported that SFAs had increased their use of food service management
companies to operate the school meal programs from 4 percent in school
year 1987-88 to about 8 percent in school year 1994-95.6 FCS requires that
the meal services provided by food service management companies are
governed by contracts developed by the SFAs. However, we found that
food service contracts varied greatly and at least 50 percent did not
contain the necessary provisions to ensure (1) SFAs’ retention of financial
and administrative control over the school meal programs and
(2) compliance with federal requirements. To overcome these problems,
some states have developed a model food service contract.

According to FCS officials, the use of a model food service contract can
ensure that certain core business principles, required by federal
regulations, are contained in the contract. For example, the model
contract developed by Pennsylvania contains provisions that cover
specific federal requirements for the school meal programs, such as
(1) ensuring that appropriate financial controls are in place, (2) using
USDA-donated foods in accordance with guidelines, (3) outlining how SFAs
will receive credit from the food service management company for the
value of the donated commodities used for school meals, and (4) ensuring
that adequate procedures for monitoring and evaluation are established.
This model contract also contains terms covering the duration and
renewal of the contract and language to ensure that SFAs adequately
oversee the programs as required. Moreover, according to a regional FCS
official, using a model contract often eases the complex and tedious

4
J. Anderson, and L. Ryan, Evaluating the Fresh Fruit and Vegetable Pilot Project in Colorado-Final
Report. Department of Food Science and Human Nutrition of Colorado State University (Fort Collins,
Colorado: 1996).
5
 However, the study did not address the extent to which other factors, such as the SFA’s demographics
or the quantity of other foods served during the meal, may have affected the observed differences.
Thus, it is unknown to what extent, if any, factors other than the availability of fresh fruits and
vegetables through the pilot project may have played in the observed differences.
6
School Lunch Program: Role and Impacts of Private Food Service Companies (GAO/RCED-96-217,
Aug. 26, 1996).


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                        bidding and contracting processes that SFAs are otherwise required to
                        handle by themselves. However, in commenting on a draft of this report,
                        FCS officials told us that model contracts cannot cover all state and local
                        requirements for each SFA. Therefore, SFAs that use model contracts must
                        ensure that they include adequate provisions to cover all state and local
                        requirements in order to protect their best interests.

                        Training cadre. Some states have identified individuals in various SFAs
                        throughout the state who are experts in different aspects of the operation
                        and management of the school meal programs, such as nutrition
                        education, and have trained them to assist other SFAs in the state. These
                        individuals together form a training cadre that is available to provide
                        assistance to all the SFAs within the state as necessary. According to a
                        regional FCS official, the hands-on training provided by members of
                        Pennsylvania’s and West Virginia’s training cadres furnishes real-time
                        solutions to the problems these states’ SFAs face.


                        Although replicating best practices in states and SFAs nationwide may
Best Practices Can Be   result in operating efficiencies, cost savings, and better tasting and more
Replicated, but Some    nutritious meals for schoolchildren, there are some impediments to
Impediments Have to     sharing best practices. Two best practices we reviewed in
                        detail—Pennsylvania’s computerized commodity-ordering system and
Be Overcome             Texas’ use of DOD’s infrastructure for purchasing fresh fruits and
                        vegetables—illustrate the advantages of applying best practices to other
                        states and SFAs and the difficulties that have to be overcome in doing so.
                        Moreover, not all best practices are equally applicable to or beneficial for
                        every state or SFA because of such factors as the size and/or location of the
                        SFAs.



Pennsylvania’s          In 1996,7 we reported that many states backhauled large quantities of
Computerized            federally donated meat, creating lower-quality products and increasing
                        SFAs’ program costs. This problem was caused, in part, by the inefficient
Commodity-Ordering
                        commodity-ordering processes used by some states and SFAs and the fact
System                  that some states ordered only fine-ground beef. These states and SFAs were
                        ordering large quantities of fine-ground beef without taking into
                        consideration the type of products needed to fulfill their menu plans for
                        the school meal programs.



                        7
                         Federally Donated Meat and Poultry: Information on Extent and Impact of States’ Restrictions on
                        Processors (GAO/RCED-96-220, Aug. 29, 1996).



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Some of the states and SFAs that are backhauling large quantities of
federally donated meat could benefit from the use of a computerized
commodity-ordering system like Pennsylvania’s. Even though these states
may have computerized systems or other manual systems for placing
orders for commodities, these states may not use an approach like
Pennsylvania’s to optimize the ordering process. Pennsylvania’s
commodity-ordering process ensures that the state orders commodities
that accurately match the SFAs’ actual needs. This process relies on the
state-developed network of commercial processors and food brokers that
work with the SFAs to determine how best to use donated commodities to
meet the requirements of the school meal menus. The information
developed by the SFAs and commercial vendors is used by Pennsylvania to
order donated commodities from USDA in the form and quantity that best
meets the needs of the school meal programs in the state. Because of this
improved ordering process, Pennsylvania’s SFAs decreased the amount of
beef that they had to backhaul from about 152,000 pounds for the 1993-94
school year to about 26,604 pounds for the 1995-96 school year. For the
3-year period (school years 1993-94 through 1995-96) Pennsylvania
backhauled a total of 238,236 pounds of beef, about 1.6 percent of the total
amount of beef it received from USDA for the period.

In contrast, we found that other states that receive large amounts of beef
from USDA, such as Texas and Washington, continue to backhaul
significant amounts every year. For the 3-year period we examined, these
states backhauled a total of 2,656,171 and 798,804 pounds, or 6.9 and 12.9
percent of the total amount of beef they received from USDA, respectively.
Although we could not obtain complete data for California—also a large
recipient of USDA-donated beef—we found that SFAs using only the state’s
warehouse system backhauled about 750,000 of the about 2.6 million
pounds of beef that they had received during 2 school years, 1994-95 and
1995-96.

Pennsylvania officials told us that they have provided information about
their system to a number of states exploring the idea of setting up similar
commodity-ordering systems. However, Pennsylvania officials also told us
that their system has certain requirements that, if not met, could impede
replication in other states. These requirements include (1) a network of
commercial food brokers and processors that are willing to work with the
SFAs and the state’s commodity-distributing agency to develop and place
orders for donated commodity foods; (2) a stipulation that SFAs identify as
accurately as possible their plans for using their share of donated
commodities, including the percentages they want delivered to the SFA, the



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                             processor, or the warehouse; and (3) adequate computer support,
                             including hardware and software. In commenting on a draft of this report,
                             USDA officials concurred that states’ commodity-distributing agencies
                             should develop more efficient and comprehensive computerized ordering
                             systems. However, they told us that using a commodity-ordering system
                             like Pennsylvania’s would not eliminate the requirement that SFAs use the
                             competitive bid process when procuring food-processing services valued
                             at over $10,000. (For a more detailed discussion of Pennsylvania’s
                             computerized commodity-ordering system, see app. I.)


Texas’ Use of DOD’s          In 1994, FCS gave the states the opportunity to participate in a USDA pilot
Infrastructure to Purchase   project to purchase fresh fruits and vegetables through DOD for the school
Fresh Fruits and             meal programs. Texas, along with seven other states, volunteered to
                             participate in the pilot project. Initially, 85 of Texas’ over 1,100 SFAs agreed
Vegetables                   to participate, and this number has grown to more than 200 SFAs for the
                             1996-97 school year. Similarly, the amount of commodity funds dedicated
                             to the project in Texas has grown from $340,000 for school year 1994-95 to
                             $2 million for school year 1996-97. The number of participating states and
                             the level of funding available for the project nationwide have also
                             expanded. Currently, selected SFAs in 32 states are participating in the pilot
                             project and are authorized to purchase about $20 million in fresh fruits
                             and vegetables with commodity funds—an amount that has increased
                             from $3 million in 1994. SFAs participating in Texas have generally reported
                             a high level of satisfaction with the quality of the produce and service
                             provided by DOD. FCS officials told us that most SFAs participating in other
                             states have been similarly satisfied.

                             However, efforts to expand the pilot project to all 50 states and every SFA
                             within each state have been restricted because of limits on the amount of
                             commodity funds that can be used for this project. Funding constraints
                             arise primarily because of the cap on the amount of commodity funds that
                             states can use to purchase fresh fruits and vegetables through the pilot
                             project. USDA set the national cap for commodity funds available for the
                             project at $20 million for school year 1996-97. Texas’ share of this national
                             cap is $2 million.8 According to the Texas official responsible for food
                             distribution in the school meal programs, this level of funding cannot
                             support all the SFAs in Texas that have asked to participate in the project.
                             This official also told us that during the third year of the project, the limit
                             on commodity funds was the most significant impediment to expanding

                             8
                              Each participating state is allocated a portion of the $20 million cap. This portion is based on the
                             number of reimbursable meals served in the state.



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                          the project to other SFAs in Texas. Moreover, an official of a Texas SFA told
                          us that even if an SFA is allowed to participate in the project, the amount of
                          commodity funds is often not enough to allow the SFA to purchase all of its
                          fresh produce through DOD. Officials in other states—including Florida,
                          Georgia, and Maryland—and FCS officials that we spoke to in both regional
                          offices and headquarters also identified the limits on commodity funds
                          available for the pilot project as the primary factor impeding its expansion.

                          Beginning in school year 1995-96, to overcome the impediment caused by
                          limited commodity funds, FCS approved the use of cash reimbursement
                          funds—funds provided by the federal government to SFAs to subsidize the
                          cost of the school meals—to purchase fresh fruits and vegetables under
                          the pilot project for seven states. Texas did not receive approval to use
                          cash reimbursement funds until the 1996-97 school year. Moreover, Texas’
                          SFAs were not notified until January 1997 that they could use their cash
                          reimbursement funds for the pilot project. An FCS official told us that the
                          delay in approving Texas’ use of cash reimbursement funds for the project
                          was caused by Texas’ late request and the need to study each state’s
                          request individually because the project is still in the pilot phase. (For a
                          more detailed discussion of Texas’ participation in USDA’s pilot project, see
                          app. II.)


Other Factors Influence   The ability to share best practices depends on circumstances at the state
the Sharing of Best       or SFA level. USDA officials told us that not all best practices should or
Practices                 could be replicated in all states and SFAs. For example, while cooperative
                          purchasing agreements may work well for small SFAs in rural areas, larger
                          SFAs in urban areas generally do not need such agreements to obtain
                          competitive prices. Similarly, while other states and SFAs are requesting
                          permission to participate in USDA’s pilot project for purchasing fresh fruits
                          and vegetables through DOD, one California SFA told us that it can purchase
                          comparable fruit and vegetables at competitive prices locally without
                          going through DOD because it is located near growing areas.




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                       Since January 1995, the training and technical assistance provided by USDA
Training and           to the states and SFAs (including the services provided by NFSMI and FNIC)
Technical Assistance   have focused primarily on nutrition education because of USDA’s new
for Managing and       dietary guidelines that emphasize the use of more grains and vegetables
                       and less fat. Less attention has been given to providing training and
Operating the School   technical assistance to SFAs for improving the management and operation
Meal Programs Is       of the school meal programs. For fiscal year 1997, FCS has about
                       $10 million to spend on all training and technical assistance activities for
Limited                the school meal programs, including activities targeting improvements in
                       the management and operation of these programs.

                       FCS officials told us that because of competing priorities, such as the need
                       to provide nutrition education, they generally have few resources for
                       providing SFAs with training in the use of better management practices for
                       the school meal programs. They agree, however, that this kind of training
                       is needed and could help the states and SFAs obtain the best value for the
                       dollars spent on purchasing and processing commodities for the school
                       meal programs. FCS officials also agreed that encouraging the use of best
                       practices by other states and SFAs nationwide is a good way to provide
                       training and technical assistance, given the agency’s limited resources.

                       Furthermore, sharing best practices will allow USDA to provide valuable
                       assistance to the states and SFAs if these practices are identified as
                       solutions for correcting deficiencies found during management
                       evaluations or audits of the school meal programs. For example, according
                       to an FCS regional official, during a management evaluation of New
                       Jersey’s operations, an SFA official indicated that the SFA would like to use
                       more processed beef products to help reduce the large amounts of
                       fine-ground beef it was keeping in storage, as well as the costs incurred for
                       storage. To address this concern, the FCS regional official suggested that
                       New Jersey consider using a computerized commodity-ordering system
                       similar to Pennsylvania’s to improve the state’s commodity-ordering
                       processes. The use of such a system could improve the process not only
                       for the SFA reviewed under the management evaluation but for all other
                       SFAs within the state. After New Jersey officials contacted Pennsylvania,
                       Pennsylvania officials told us that they demonstrated their system and
                       provided information on how to set up a similar system in New Jersey.

                       Sharing best practices has also been recognized by the National
                       Governors’ Association (NGA) as a practical means for states to learn about
                       programs that operate effectively and efficiently in other states, innovative
                       practices that other states have employed with success, and solutions to



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              problems in programs that are not working. To promote the use of best
              practices, NGA revamped its Center for Policy Research to form a Center
              for Best Practices and established a new mission that includes
              (1) identifying states’ best practices and innovations and sharing this
              information with the nation’s governors and (2) providing the technical
              assistance needed to transfer and implement best practices to make
              current programs more effective. In addition, sharing best practices has
              been generally acknowledged by GAO, other governmental agencies, and
              the private sector as a cost-effective approach for providing management
              training and technical assistance to organizations.9

              Although USDA had a best practices awards program for the school meal
              programs, it discontinued this program because of limited resources and
              other competing priorities, according to an FCS official. The best practices
              awards program operated during fiscal years 1992 through 1994 at a total
              estimated cost of $190,000. The program was designed to recognize and
              share information on successful practices used by school food service
              personnel. However, while the awards program provided ideas for the
              states to enhance their programs, it did not provide a means for the states
              and SFAs to seek FCS’ technical assistance and guidance to ensure the
              successful implementation of these best practices.


              The states and SFAs have adopted a variety of management practices to
Conclusions   operate the school meal programs. Some of these practices have resulted
              in more efficient and effective ways of providing nutritious meals to
              students. As more responsibility for nutrition programs is transferred to
              the states and as federal funding for these programs decreases, it is
              important that the states and SFAs develop and implement more efficient
              and effective programs. We believe that encouraging the states and SFAs to
              share their best practices with one another could result in the more
              efficient operation of the school meal programs; potentially more
              nutritious meals; and, in some cases, cost savings for the SFAs.

              However, recognizing that all best practices may not apply to all states and
              SFAs equally, we believe that as part of its oversight function and
              regulatory responsibilities, USDA should take the lead in facilitating the
              sharing and replicating of best practices across states and SFAs. We believe


              9
               Best Practices Methodology: A New Approach for Improving Government Operations
              (GAO/NSIAD-95-154, May 1995); Inventory Management: Adopting Best Practices Could Enhance Navy
              Efforts to Achieve Efficiencies and Savings (GAO/NSIAD-96-156, July 12, 1996); Best Practices:
              Commercial Quality Assurance Practices Offer Improvements for DOD (GAO/NSIAD-96-162, Aug. 26,
              1996).



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                    that this approach could be particularly useful for improving the operation
                    of programs in which USDA has identified weaknesses. Furthermore, given
                    USDA’s limited resources for providing training and technical assistance to
                    the states and SFAs, we believe that sharing best practices is a relatively
                    low-cost method of providing assistance on better program management
                    practices.


                    To improve the management and operation of the school meal programs,
Recommendation to   we recommend that the Secretary of Agriculture direct the Administrator,
the Secretary of    Food and Consumer Service, to identify and encourage the adoption of
Agriculture         best practices and to provide the necessary training and technical
                    assistance to successfully transfer these practices to other states and SFAs,
                    where appropriate.


                    We provided a draft of this report to FCS for its review and comment. FCS
Agency Comments     agreed that sharing best practices in the school meal programs is an
                    excellent means of improving program management at the state and local
                    levels. FCS reiterated its continued commitment to promoting the sharing
                    of best practices among states and SFAs. While FCS agreed with the concept
                    presented in the recommendation, it raised some concerns about the
                    feasibility of developing a program of this type at the current time because
                    of the agency’s limited resources. FCS said that, within available resources,
                    it will continue to share and transfer information that will benefit the
                    operation of the school meal programs.

                    We recognize that resource limitations may impede the establishment of a
                    nationwide program to promote the sharing and transfer of best practices
                    to states and SFAs, but we believe that FCS could explore a number of other
                    low-cost opportunities to do this. For example, FCS could establish an
                    Internet site to describe in detail how some states and SFAs manage and
                    operate their school meal programs and how these best practices could be
                    applied in other states and SFAs. Other USDA agencies have established such
                    Internet sites to share information on best practices. In addition, FCS could
                    require its regional management evaluation teams to identify best
                    practices as part of their oversight function and to report these practices
                    nationally. These teams could also point out the availability of an existing
                    best practice during the course of their evaluations, especially in those
                    cases in which they determine that deficiencies exist in program
                    operations. To provide training and technical assistance, FCS does not need
                    to establish a new national program. Instead, it could use its existing



                    Page 13                                    GAO/RCED-97-126 School Meal Programs
              B-276623




              training and technical assistance efforts, such as the National Food
              Service Management Institute and its workshops held in conjunction with
              the American Commodity Distribution Association and the American
              School Food Service Association, to incorporate training on best practices.

              FCS also provided us with a number of technical comments that we
              incorporated into the report as appropriate. Appendix III contains FCS’
              written response to our draft report.

              In addition, we received clarifying comments on a draft of this report from
              AMS, DOD, Pennsylvania, and Texas officials responsible for the matters
              discussed in this report. These comments have also been incorporated into
              the report as appropriate.


              To identify best practices developed and implemented by states and SFAs
Scope and     for managing and operating the school meal programs, we interviewed
Methodology   USDA officials in headquarters (in the Agricultural Marketing Service, Farm
              Service Agency, and Food and Consumer Service); officials in four of FCS’
              seven regional offices; state and local officials; and officials of the
              American Commodity Distribution Association and American School Food
              Service Association. We also used information we had obtained during our
              past review of federally donated meat and poultry for the school lunch
              program, in which Pennsylvania’s computerized commodity-ordering
              system for meat was identified as a best practice.10

              To determine the feasibility of replicating best practices in other states
              and SFAs, we evaluated two practices in detail to ascertain whether other
              states and SFAs could benefit from adopting these practices and to identify
              any impediments to their implementation. To obtain information on the
              benefits of and the requirements for using Pennsylvania’s computerized
              commodity-ordering system, we spoke with Pennsylvania officials. To
              determine the benefits of using this system in other states, we spoke with
              AMS and FCS officials and with state officials in California, Texas, and
              Washington. We chose California and Texas because they receive the
              largest amounts of donated beef from USDA and also backhaul large
              quantities of fine-ground beef. We chose Washington State because while
              it receives a smaller amount of beef from USDA, it also backhauls relatively
              large quantities of beef. To obtain information on the benefits and
              operation of DOD’s infrastructure for purchasing fresh fruits and

              10
               Federally Donated Meat and Poultry: Information on Extent and Impact of States’ Restrictions on
              Processors (GAO/RCED-96-220, Aug. 29, 1996).



              Page 14                                                GAO/RCED-97-126 School Meal Programs
B-276623




vegetables, we spoke to USDA officials and DOD officials in Washington,
D.C., Pennsylvania, and Texas. We also interviewed state and local
officials in Texas, as well as visited three schools participating in the pilot
project and one school not participating in the project in Texas. To
determine what impediments exist to expanding this project to other
states and SFAs, we spoke to officials from USDA, DOD, Florida, Georgia,
Maryland, and Texas.

To determine what training and technical assistance USDA provides to the
states and SFAs for improving the management and operation of the school
meal programs, we obtained data from USDA and interviewed officials at
FCS’ headquarters and the Mountain Plains and Southeast regional offices.
We also visited and spoke with officials at the National Food Service
Management Institute in Mississippi. To obtain information on the training
and technical assistance that USDA had previously provided for similar
programs, we reviewed information on USDA’s past best practices awards
program. To determine what training and technical assistance states are
providing to SFAs, we interviewed state officials in Florida, Kansas, and
Texas.

We conducted our review from September 1996 through April 1997 in
accordance with generally accepted government auditing standards.


This report contains a recommendation to you. As you know, the head of a
federal agency is required by 31 U.S.C. 720 to submit a written statement
of the actions taken on our recommendation to the Senate Committee on
Governmental Affairs and the House Committee on Government Reform
and Oversight not later than 60 days after the date of this letter and to the
House and Senate Committees on Appropriations with the agency’s first
request for appropriations made more than 60 days after the date of this
letter.

We are sending copies of this report to the congressional committees with
responsibility for appropriations and legislation affecting USDA and to the
Administrator of FCS. We will also make copies available to others on
request.




Page 15                                     GAO/RCED-97-126 School Meal Programs
B-276623




Please contact me at (202) 512-5138 if you or your staff have any questions.
Major contributors to this report are listed in appendix IV.

Sincerely yours,




Robert A. Robinson
Director, Food and
  Agriculture Issues




Page 16                                   GAO/RCED-97-126 School Meal Programs
Page 17   GAO/RCED-97-126 School Meal Programs
Contents



Letter                                                                                              1


Appendix I                                                                                         20
                        Background                                                                 20
Pennsylvania’s          Objectives for Implementing the Computerized                               20
Computerized              Commodity-Ordering System
                        System Operation                                                           21
Commodity-              Benefits of Using the Computerized Commodity-Ordering System               22
Ordering System         Costs Saved by Using the Computerized Commodity-Ordering                   23
                          System
                        Potential Impediments to Replicating This System in Other States           24

Appendix II                                                                                        26
                        Background                                                                 26
Texas’ Use of the       Objectives and Operation of the Pilot Project                              26
Department of           Benefits of Participating in the Pilot Project                             28
                        Impediments to Expanding the Pilot Project                                 28
Defense’s
Infrastructure to
Purchase Fresh
Produce
Appendix III                                                                                       31
                        GAO Comments                                                               34
Comments From the
Food and Consumer
Service
Appendix IV                                                                                        35

Major Contributors to
This Report
Table                   Table I.1: Total Amount of Commodity Beef Received and                     23
                         Backhauled by Pennsylvania, Texas, and Washington, School
                         Years 1993-94 Through 1995-96




                        Page 18                                   GAO/RCED-97-126 School Meal Programs
Contents




Abbreviations

AMS        Agricultural Marketing Service
DOD        Department of Defense
FCS        Food and Consumer Service
FNIC       Food and Nutrition Information Center
GAO        General Accounting Office
NFSMI      National Food Service Management Institute
NGA        National Governors’ Association
SFA        school food authority
TAP-IT     Telephonic Automated Produce Information Technology
USDA       U.S. Department of Agriculture


Page 19                               GAO/RCED-97-126 School Meal Programs
Appendix I

Pennsylvania’s Computerized Commodity-
Ordering System

                     This appendix discusses the objectives, operations and requirements, and
                     potential impediments of replicating the computerized
                     commodity-ordering system developed and implemented by Pennsylvania.
                     During this review and our 1996 review of federally donated meat and
                     poultry,1 this system was identified by officials as a best practice for
                     improving the ordering of commodities from the U.S. Department of
                     Agriculture (USDA) and for reducing the backhauling of certain
                     commodities, such as beef. During both reviews, we were told that if more
                     states used ordering systems like Pennsylvania’s, they would be able to
                     place more accurate orders with USDA and could benefit from more
                     efficient operations, cost savings, and better-quality meat and poultry
                     products. Consequently, we selected Pennsylvania’s commodity-ordering
                     system as one of two best practices for detailed review.


                     With over 900 school food authorities (SFA), Pennsylvania is one of the
Background           larger states participating in the school meal programs. According to a
                     Pennsylvania official, participating SFAs represent public and private,
                     urban and rural, and large and small school systems. The
                     commodity-distributing agency for the state is responsible for
                     consolidating each SFA’s request for commodities into a total request for
                     the state and providing this total request to USDA’s Food and Consumer
                     Service (FCS), which oversees the school meal programs. USDA delivers the
                     commodity foods that the state is to receive for the school meal programs,
                     in the form requested by the SFAs, to one of eight commercial warehouses
                     that Pennsylvania uses for storage. From these warehouses, deliveries are
                     made to the SFAs. Each warehouse serves the SFAs located within a
                     specified area of the state.


                     The major objective of developing a computerized commodity-ordering
Objectives for       system, according to a Pennsylvania official, was to provide each SFA
Implementing the     within Pennsylvania with its fair share of federally donated commodities.
Computerized         The system was also expected to enable the state and SFAs to more
                     accurately determine the type of commodities needed for the school meal
Commodity-Ordering   programs, thereby reducing the amount of commodities, especially of
System               meat, that SFAs received from USDA and then backhauled to processors for
                     reformulation during the year.




                     1
                      Federally Donated Meat and Poultry: Information on Extent and Impact of States’ Restrictions on
                     Processors (GAO/RCED-96-220, Aug. 29, 1996).



                     Page 20                                                 GAO/RCED-97-126 School Meal Programs
                   Appendix I
                   Pennsylvania’s Computerized Commodity-
                   Ordering System




                   Before implementing the computerized commodity-ordering system,
System Operation   according to an official with Pennsylvania’s commodity-distributing
                   agency, the state used historical estimates to determine each SFA’s fair
                   share of the commodities donated by USDA for the school meal programs.
                   According to this official, in the past, the commodity-distributing agency
                   could not guarantee that every SFA in the state would receive its fair share
                   of all commodities. With the computerized commodity-ordering system,
                   when FCS notifies the state of an opportunity to receive commodity food
                   donations and identifies the amount of commodity food the state is to
                   receive, Pennsylvania’s state commodity-distributing agency is now able to
                   enter the information into the computer system and calculate each SFA’s
                   fair share of the commodity being offered by USDA. The results of this
                   fair-share calculation are provided to the SFAs and to the network of
                   commercial food brokers and processors that sell products to the SFAs.
                   These entities can then incorporate the commodities that will be available
                   into their school meal menu plans. According to a Pennsylvania official, a
                   very important benefit of the system is that even small SFAs that receive
                   only a small quantity of a commodity, such as one case of donated meat,
                   can now participate in the program.

                   To ensure that the state places the most accurate order possible to USDA
                   for commodities needed by the SFAs for the school meal programs, most
                   SFAs work with a network of commercial brokers and processors to
                   determine which products best satisfy their menu requirements. The
                   commercial vendors offer the SFAs a variety of options for processing
                   USDA-donated commodities into products that can be used in the school
                   meal menus. This is particularly important for meat products because they
                   often need further processing before they can be used. For example,
                   donated beef could be processed into wafer steaks (used in cheesesteak
                   sandwiches), meatballs, and hamburger patties. In Pennsylvania, each SFA
                   selects the product mix that best meets its needs and provides a list of its
                   selections to the commodity-distributing agency. The
                   commodity-distributing agency enters all 900 lists into the computerized
                   system to determine (1) the form or forms in which USDA should provide
                   the state’s allotment of the donated commodity (e.g., 25 percent as
                   fine-ground beef, 65 percent as coarse-ground beef, and 10 percent as
                   hamburger patties) and (2) the percentage of each SFA’s fair share that
                   should be delivered to the SFA or the warehouse or sent directly to the
                   processor. Pennsylvania provides this information to USDA, which uses it to
                   solicit procurement bids and deliver products to the SFAs, warehouses, or
                   processors. Processors that receive commodities from USDA deliver the
                   kinds of product agreed upon with the SFAs to the warehouse that serves



                   Page 21                                   GAO/RCED-97-126 School Meal Programs
                        Appendix I
                        Pennsylvania’s Computerized Commodity-
                        Ordering System




                        those SFAs. When the processed product arrives at the warehouse, the SFAs
                        are informed that the food is in storage in their account.


                        According to Pennsylvania officials, the computerized
Benefits of Using the   commodity-ordering system provides the state and SFAs with a number of
Computerized            benefits. First, each of the over 900 SFAs in the state is sure to receive its
Commodity-Ordering      fair share of all USDA-donated food. Second, by requiring the SFAs to work
                        with commercial vendors and accurately estimate the quantity and type of
System                  commodities needed to fulfill their menu requirements, the system
                        minimizes the backhauling of fine-ground beef, which degrades the quality
                        of beef and increases the SFAs’ costs. Third, the computerized ordering
                        system allows Pennsylvania and its SFAs to better control their inventory of
                        federally donated food so that commodities are not left in storage for long
                        periods of time. Finally, Pennsylvania’s system encourages the ordering of
                        more processed products by the SFAs, which ultimately results in more
                        efficient and economical meal preparation because the processing is
                        performed by commercial companies on a large scale in central locations
                        rather than by employees of the SFA as needed.

                        Pennsylvania’s ordering system particularly benefits the federal
                        government in purchasing high-value commodities like beef. Because
                        Pennsylvania’s method of ordering commodities encourages the use of
                        bulk coarse-ground beef in processed beef products—such as wafer steaks
                        and meatballs—the federal government buys more bulk coarse-ground
                        beef than fine-ground beef—which is better suited for use in spaghetti,
                        chili, and tacos—or hamburger patties. Since coarse-ground beef costs the
                        federal government less per pound to purchase than other beef products,
                        the government can buy more meat to stabilize domestic commodity
                        markets at a lower cost. AMS officials told us that they encourage the states
                        and SFAs to order coarse-ground beef for processing, rather than
                        fine-ground beef, because of quality factors and cost savings to both the
                        federal government and to the SFAs. These officials told us that bulk,
                        coarse-ground beef is less costly than fine-ground beef when producing a
                        processed product because processors need fewer resources for
                        processing, and these savings are reflected in reduced costs to the SFAs.
                        Moreover, according to AMS officials, less processing improves the quality
                        and acceptability of the meat products provided for the school meal
                        programs. Because bulk coarse-ground beef is specifically intended for
                        further processing, its processing results in a finished product with better
                        texture, appearance, and quality, which is also more acceptable to
                        schoolchildren.



                        Page 22                                    GAO/RCED-97-126 School Meal Programs
                                       Appendix I
                                       Pennsylvania’s Computerized Commodity-
                                       Ordering System




                                       Since Pennsylvania implemented its computerized ordering system, the
Costs Saved by Using                   amount of beef backhauled by SFAs in the state has declined. When the
the Computerized                       state implemented the system, in school year 1993-94, the amount of
Commodity-Ordering                     fine-ground beef backhauled for reprocessing was about 152,000 pounds.
                                       Four years later, Pennsylvania expects to have only about 8,000 pounds of
System                                 fine-ground beef backhauled. More importantly, during this period, the
                                       amount of coarse-ground beef sent directly to processors has grown from
                                       756,000 pounds in school year 1993-94 to 1,932,000 pounds in school year
                                       1996-97. For school year 1995-96, the state estimated that SFAs saved about
                                       $177,000 in backhauling costs for beef through their use of the state’s
                                       revised system of ordering federally donated food.2 State officials
                                       estimated $460,000 in cost savings during the 1995-96 school year because
                                       of the reduced amount of meat (beef and pork) and poultry sent for
                                       backhauling.

                                       To compare the benefits of Pennsylvania’s system with other states that do
                                       not use a similar system, we obtained data from officials in three
                                       states—California, Texas, and Washington—that receive significant
                                       quantities of beef from USDA for the school meal programs. We found that
                                       the percentage of USDA-donated beef backhauled in Pennsylvania was
                                       much lower than the percentage backhauled in Texas and Washington.
                                       Table I.1 shows the amount and percent of donated beef backhauled by
                                       SFAs in Pennsylvania, Texas, and Washington for school years 1993-94
                                       through 1995-96.

Table I.1: Total Amount of Commodity
Beef Received and Backhauled by        Amounts in pounds
Pennsylvania, Texas, and Washington,                                                                                         Percent of
School Years 1993-94 Through 1995-96                                     Commodity beef          Commodity beef          commodity beef
                                       State                                  received              backhauled              backhauled
                                       Pennsylvania                             15,360,000                 238,236                          1.6
                                       Texas                                    38,365,600               2,656,171                          6.9
                                       Washington                                 6,177,600                798,804                     12.9
                                       Source: GAO’s analysis of FCS’ and states’ data.



                                       For California, state officials could provide us with data only on the
                                       amount of beef that was backhauled for 2 school years, 1994-95 and
                                       1995-96, and for beef that was stored in state-operated warehouses at two
                                       locations. California officials told us that for these 2 school years, about
                                       2.6 million pounds, or 11.9 percent of the state’s total commodity beef, was

                                       2
                                        Pennsylvania’s estimate of the cost savings reflects savings in warehouse charges and backhauling
                                       charges. It does not include efficiency savings.



                                       Page 23                                                 GAO/RCED-97-126 School Meal Programs
                       Appendix I
                       Pennsylvania’s Computerized Commodity-
                       Ordering System




                       delivered to their state-operated warehouses. During these 2 years, SFAs
                       using the warehouses backhauled about 750,000 pounds of the fine-ground
                       beef they received from USDA.


                       Pennsylvania officials told us that their computerized commodity-ordering
Potential              system had certain requirements that needed to be in place if the system
Impediments to         were to be replicated successfully in other states. These requirements
Replicating This       include (1) an established network of commercial food brokers and
                       processors that are willing to work with the SFAs and the state’s
System in Other        commodity-distributing agency to place accurate initial orders for the
States                 donated foods offered by USDA; (2) accurate information from the SFAs on
                       their plans for using their share of the donated commodities, including the
                       percentage they want delivered to the SFA, to the processor, or to the
                       warehouse; and (3) adequate computer support, including hardware and
                       software. Pennsylvania officials stated that, if other states ask for
                       information about their system, they would share information on its
                       purpose, operation, and requirements and on the specifications for the
                       automatic data-processing equipment and software needed to support the
                       system. For example, they told us that they had recently provided
                       information on their system to New Jersey state officials.

                       Pennsylvania officials also told us that establishing the requirements for
                       operating the system took over a year. For example, it was initially
                       difficult to convince commercial processors and food brokers that it was
                       in their best interest to work with the SFAs in determining how best to
                       provide the SFAs with processed products that would meet the needs of the
                       school meal programs. Furthermore, it was not easy to convince all the
                       SFAs that they needed to improve the accuracy of their ordering processes.
                       For example, one SFA resisted because it believed that it would be required
                       to give up autonomy and flexibility in ordering, storing, and using donated
                       commodities.

                       We asked state officials in California, Texas, and Washington if they would
                       choose to replicate a system like Pennsylvania’s. While these officials all
                       acknowledged that SFAs in their states could order commodities more
                       cost-effectively, they cited the following obstacles to implementing such a
                       system:

                   •   According to a California official responsible for overseeing the
                       distribution of commodity beef for the state, the greatest obstacle to
                       adopting a system like Pennsylvania’s would be convincing SFAs to give up



                       Page 24                                   GAO/RCED-97-126 School Meal Programs
    Appendix I
    Pennsylvania’s Computerized Commodity-
    Ordering System




    the independence and flexibility they have under the current system. SFAs
    like the flexibility of ordering and storing fine-ground beef and
    backhauling it for processing throughout the school year, as needed.
    California officials stated that the complexity and size of the state and the
    number and diversity of the SFAs are also factors that affect the
    transferability of systems used by other states.
•   The Texas manager of the food distribution program acknowledged that
    using commercial vendors to work closely with the SFAs is the optimum
    way to increase direct processing of raw commodities. However, he
    believes that commercial brokers in Texas would be unwilling to spend
    the time to work with SFAs in this manner. Without the cooperation of the
    commercial vendors, the Pennsylvania system could not be replicated in
    Texas.
•   The director of Washington’s food distribution program said that although
    the state’s current manual system could be upgraded to a computerized
    system like Pennsylvania’s, he was not sure that the cost could be justified.
    He also said that SFAs in Washington would prefer to maintain their
    flexibility over the use of USDA-donated beef, including backhauling.

    We recognize that there are impediments to implementing a computerized
    commodity-ordering system like Pennsylvania’s. However, these
    impediments are similar to those that Pennsylvania encountered and
    overcame in setting up its system and should not prevent other states from
    exploring the possibility of using, and, if necessary, modifying
    Pennsylvania’s computerized commodity-ordering system to suit their own
    circumstances.




    Page 25                                   GAO/RCED-97-126 School Meal Programs
Appendix II

Texas’ Use of the Department of Defense’s
Infrastructure to Purchase Fresh Produce

                         This appendix discusses USDA’s pilot project for purchasing fresh fruits and
                         vegetables using the Department of Defense’s (DOD) infrastructure and the
                         reasons Texas chose to participate in the project; explains how the project
                         works; and identifies the impediments that other states and SFAs could
                         encounter in attempting to participate in this project. The pilot project was
                         identified by USDA and state officials as a best practice for improving the
                         nutritional content and availability of fresh produce in the school meal
                         programs. Although this project is currently operating in 32 states, we
                         examined its operation in detail in Texas. We chose Texas for our review
                         because it was one of the eight states that chose to participate in the
                         project when it was first implemented in 1994.1


                         In recent years, FCS has emphasized the importance of improving
Background               schoolchildren’s access to high-quality fresh fruits and vegetables to fulfill
                         the nutritional standards for the school meal programs. Most schools
                         receive canned fruits and vegetables purchased by the Agricultural
                         Marketing Service (AMS) for the school meal programs. On occasion, AMS
                         purchases fresh produce if it is in surplus and fulfills the agency’s market
                         stabilization objectives. However, because these purchases are usually
                         sporadic and cannot fulfill all the SFAs’ needs for fresh fruits and
                         vegetables for the programs, SFAs use their cash reimbursement funds to
                         purchase these products themselves.2


                         To improve SFAs’ access to high-quality fresh fruits and vegetables, FCS
Objectives and           began a pilot project in 1994 to supply fresh produce to the schools using
Operation of the Pilot   DOD’s nationwide commodity-purchasing infrastructure. DOD was chosen

Project                  for the pilot project because of its proven ability to provide high-quality
                         fresh fruits and vegetables at competitive prices with on-time deliveries to
                         its customers.3 During the first year of the pilot program, DOD provided
                         about $3 million in fresh produce to schools in eight states, including
                         Texas. By the beginning of the 1996-97 school year, the pilot project had
                         been expanded to schools in 32 states, and $20 million in commodity funds

                         1
                          The other states were Colorado, Florida, Maryland, New Hampshire, South Carolina, South Dakota,
                         and Wyoming.
                         2
                          The federal government will provide cash reimbursements to SFAs in school year 1996-97 of about
                         $1.02 for each free breakfast, $0.72 for each reduced-price breakfast, and $0.20 for each full-price
                         breakfast; and of about $1.84 for each free lunch, $1.44 for each reduced-price lunch, and $0.18 for
                         each full-price lunch.
                         3
                          The Defense Subsistence Office within the Defense Personnel Support Center of the Defense Logistics
                         Agency purchases fresh produce for DOD’s military bases and commissaries, federal prisons, and
                         veterans hospitals.



                         Page 26                                                  GAO/RCED-97-126 School Meal Programs
Appendix II
Texas’ Use of the Department of Defense’s
Infrastructure to Purchase Fresh Produce




were set aside for purchases through DOD’s purchasing infrastructure.4
Each participating state is allocated a portion of the $20 million cap on the
basis of the number of reimbursable meals served in the state—Texas’
share for school year 1996-97 is $2 million.

Although participating states and SFAs have some discretion in
implementing the pilot project, the project operates in Texas much as it
does in other participating states. To participate in the pilot project in
Texas, SFAs must enter into an agreement with the Texas Department of
Human Services—the agency responsible for distributing USDA
commodities—to follow specific operating procedures. The state agency
determines which SFAs will be allowed to participate in the pilot project
and determines the amount of commodity funds each participating SFA will
be authorized to spend on the project. This amount is based on the
number of meals the SFAs serve under the National School Lunch Program
and the total amount that FCS has allocated to the state for use on this
project. The list of SFAs authorized to participate in the project and the
dollar amount each is authorized to spend is provided by the state agency
to DOD.

DOD provides each SFA authorized to participate in the pilot project with a
list of available produce from which the SFA can order the fresh fruits and
vegetables it needs for school meals. According to a Texas official, orders
may be placed by telephone, fax, or DOD’s automated telephone ordering
system (known as TAP-IT).5 The SFA also provides information to DOD on the
frequency of deliveries—such as weekly or biweekly—and the number of
delivery stops, which may include more than one school location and/or
the SFA storage facility.

According to DOD officials, the produce that DOD provides to SFAs is
purchased through commercial produce vendors or is delivered directly
from DOD’s distribution points —which DOD uses to consolidate purchases
from wholesale produce markets. The fresh produce is delivered by
commercial vendors who are under contract with DOD. DOD provides an
invoice to each school or SFA at the time of delivery and deducts the total
amount purchased by the SFA from its allocation. DOD notifies an SFA when

4
 According to an FCS official, of the $620 million available for commodity purchases in school year
1996-97, FCS allocated approximately $470 million for commodities to be purchased through AMS
such as meat, fish, and fresh, frozen, and canned fruits and vegetables, of which $20 million has been
set aside for the pilot project with DOD; and $150 million for commodities to be purchased through the
Farm Service Agency, such as grain, peanuts, oil, and dairy products.
5
 Telephonic Automated Produce Information Technology (TAP-IT) enables SFAs to place orders 24 hours
a day, 7 days a week. SFAs can call in their orders by entering, among other things, a toll-free telephone
number, the identification number, and the quantity of the desired items.



Page 27                                                    GAO/RCED-97-126 School Meal Programs
                       Appendix II
                       Texas’ Use of the Department of Defense’s
                       Infrastructure to Purchase Fresh Produce




                       it has spent 90 percent of its allocation and will not accept an order that
                       would cause the SFA to exceed its spending limit.


                       Over the 3 years of its operation in Texas and nationwide, the pilot project
Benefits of            has enabled a growing number of SFAs to take advantage of DOD’s ability to
Participating in the   provide fresh produce in a timely manner. For example, in Texas, with
Pilot Project          over 1,100 SFAs, the number of participating SFAs has increased from 85 to
                       more than 200.6 The amount spent on fresh fruits and vegetables
                       purchased by Texas SFAs through DOD has grown from $340,000 in school
                       year 1994-95 to a projected $2 million for school year 1996-97. Texas
                       officials reported two reasons why SFAs’ prefer to use DOD instead of other
                       vendors: (1) a wider variety of high-quality fruits and vegetables at
                       comparable prices and (2) advantages in customer service, such as more
                       efficient ordering procedures and more convenient delivery. FCS officials
                       told us that SFAs in other participating states have reported similar reasons
                       for satisfaction with DOD’s service.

                       Moreover, a recent study conducted in Colorado7—a state that also
                       participates in the project—found that, during school year 1994-95,
                       students at schools that were in the pilot project (1) were likely to eat
                       more fresh fruits and vegetables and wasted less than those who were not
                       and (2) ate more than four times the amount of fruits and vegetables as
                       children in schools that were not participating. However, the study did not
                       address the extent to which other factors, such as the SFA’s demographics
                       or the quantity of other foods served during the meal, may have affected
                       the observed differences. Thus, it is unknown to what extent, if any,
                       factors other than the fresh fruit and vegetables may have played in the
                       observed differences.


                       Federal restrictions on the amount of commodity funds that can be used to
Impediments to         purchase fresh produce through DOD is the most significant impediment to
Expanding the Pilot    expanding the pilot project to all 50 states and all SFAs within each state.
Project                FCS has capped this amount at $20 million for school year 1996-97. Each of
                       the 32 participating states is allocated a portion of this cap on the basis of
                       the number of reimbursable meals served in the state. As a result, states

                       6
                        A Texas official stated that, in addition to the 200 SFAs already participating in Texas, another 181
                       SFAs were offered the opportunity to participate during the second half of school year 1996-97. These
                       SFAs are in Austin and San Antonio and the surrounding areas.
                       7
                       J. Anderson, and L. Ryan, Evaluating the Fresh Fruit and Vegetable Pilot Project in Colorado-Final
                       Report. Department of Food Science and Human Nutrition of Colorado State University, (Fort Collins,
                       Colorado: 1996).



                       Page 28                                                  GAO/RCED-97-126 School Meal Programs
Appendix II
Texas’ Use of the Department of Defense’s
Infrastructure to Purchase Fresh Produce




are unable to allow all SFAs within their state to participate in the project.
For example, Texas officials told us that because their portion of the
national cap—$2 million—is not enough to allow all SFAs in the state to
participate in the project, they have had to restrict participation to
selected SFAs in the state. Moreover, an SFA official in Texas told us that
even if his SFA is allowed to participate in the project, the amount of
commodity funds allocated to it out of the state cap is often not enough to
allow his SFA to make all of its fresh produce purchases for the entire
school year through DOD. Consequently, some SFAs are choosing to
purchase only a limited number of items through DOD and are
supplementing these purchases with purchases of fresh produce through
other vendors. Other state officials said that more SFAs would participate
in the project if more funds were available to them.

To overcome the limitations on expanding the pilot project that result
from the cap placed on the use of commodity funds, starting in school year
1995-96, FCS allowed the states to use their cash reimbursement funds as
well as their commodity funds to purchase produce through DOD. In
January 1997, Texas became the eighth8 state allowed by FCS to permit SFAs
to use their cash reimbursement funds to purchase fresh produce from
DOD during the 1996-97 school year. DOD officials expect that SFAs in the
states authorized to use cash reimbursements for the pilot project will
spend about $5 million in cash reimbursement funds in addition to their
allotted commodity funds during the 1996-97 school year.

In addition, because Texas officials have a goal of providing each SFA in
the state with the opportunity to participate in the pilot project by school
year 1997-98, they have decided to phase in the participation of SFAs in
groups, by geographic area, over several years. Each new group of SFAs
will be allowed to use commodity funds for the project. For example, SFAs
in the Dallas-Fort Worth area were given the first opportunity to
participate during the 1994-95 school year; in school year 1995-96, the
opportunity was extended to additional SFAs in central and western Texas;
and during the 1996-97 school year, eligibility was expanded to SFAs in the
Austin and San Antonio metropolitan areas.

However, according to Texas officials, under the Texas expansion plan,
not all participating SFAs have been allocated enough commodity funds to
purchase fresh produce for the entire school year through DOD. SFAs that
participated in the project in a prior year are authorized to supplement

8
 The other seven states that used cash reimbursement funds are California, Colorado, Hawaii, Nevada,
South Dakota, West Virginia, and Wyoming. According to FCS officials, West Virginia is planning to
rely entirely on cash reimbursement funds to purchase from the project in school year 1996-97.



Page 29                                                 GAO/RCED-97-126 School Meal Programs
Appendix II
Texas’ Use of the Department of Defense’s
Infrastructure to Purchase Fresh Produce




their commodity funds with cash reimbursement funds. For example, SFAs
from the Dallas-Fort Worth area that participated in the project last year
are required to use their cash reimbursement funds after their commodity
funds for the project are depleted if they want to continue to purchase
fresh produce through DOD for the rest of the school year. But SFAs new to
the project this year were authorized to use only their commodity funds
for the project starting in February 1997. For example, SFAs in the Austin
and San Antonio areas were allocated enough commodity funds to use for
the pilot project from February through June 1997. According to state
officials, this strategy will allow newly eligible SFAs to purchase through
the DOD project by using their commodity funds rather than cash
reimbursements. Furthermore, gradually phasing in participation of
additional SFAs will not overburden the state and DOD resources available
for implementing the project statewide. While Texas’ plan may not be
suitable to all states participating in the pilot project, it does provide one
approach to expanding participation to all SFAs within a state.




Page 30                                     GAO/RCED-97-126 School Meal Programs
Appendix III

Comments From the Food and Consumer
Service

Note: GAO comments
supplementing those in the
report text appear at the
end of this appendix.




See comment 1.




                             Page 31   GAO/RCED-97-126 School Meal Programs
                 Appendix III
                 Comments From the Food and Consumer
                 Service




See comment 2.




See comment 3.




See comment 4.




                 Page 32                               GAO/RCED-97-126 School Meal Programs
Appendix III
Comments From the Food and Consumer
Service




Page 33                               GAO/RCED-97-126 School Meal Programs
               Appendix III
               Comments From the Food and Consumer
               Service




               1. We have included FCS’ concern regarding the universal applicability of
GAO Comments   Pennsylvania’s computerized commodity-ordering system. While we agree
               that the use of a commodity-ordering system like Pennsylvania’s does not
               relieve SFAs from the $10,000 threshold requiring the use of the competitive
               bid process, we do not agree that this requirement should prevent states
               from developing and implementing more accurate and efficient
               commodity-ordering systems. We also do not agree with FCS’ statement
               that a computerized commodity-ordering system can only be used in states
               that have very small SFAs. We found that a large number of SFAs in
               Pennsylvania, such as the ones in Philadelphia and Allegheny County,
               continue to order commodities through the state’s computerized
               commodity-ordering system as well as comply with the competitive
               bidding requirement.

               2. We have included a summary of various FCS initiatives to provide
               training and technical assistance.

               3. We have included a summary of FCS’ regional office management
               evaluations of state operations.

               4. Regarding FCS’ response to our recommendation, while we recognize
               that resource limitations may impede the establishment of a nationwide
               program to promote the sharing and transfer of best practices to states
               and SFAs, we believe that there are a number of other low-cost
               opportunities to do this. For example, FCS could establish an Internet site
               to describe in detail how some states and SFAs manage and operate their
               school meal programs and how these best practices could be applied in
               other states and SFAs. Other USDA agencies have established such Internet
               sites to share information and best practices. In addition, FCS could require
               its regional management evaluation teams to identify best practices as part
               of their oversight function, especially in those cases in which they
               determine that deficiencies exist in program operations. With regard to
               providing training and technical assistance, FCS does not need to establish
               a new national program. Instead, it could use its existing training and
               technical assistance efforts, such as the National Food Service
               Management Institute and its workshops held in conjunction with the
               American Commodity Distribution Association and the American School
               Food Service Association, to incorporate training on best practices.




               Page 34                                   GAO/RCED-97-126 School Meal Programs
Appendix IV

Major Contributors to This Report


               Anu K. Mittal, Assistant Director
               Kathy R. Alexander
               Daniel F. Alspaugh
               John M. Nicholson, Jr.




(150266)       Page 35                             GAO/RCED-97-126 School Meal Programs
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