NSLP AND SBP ACCESS, PARTICIPATION, ELIGIBILITY, AND CERTIFICATION (APEC) STUDY RESULTS John Endahl, ORNA Melissa Rothstein, CN 2007 USDA/State Agency Conference November 27-30, 2007 Nashville, TN In response to the requirements of the Improper Payments Information Act, FNS launched a study known as APEC (Access, Participation, Eligibility, and Certification) to produce the first reliable national estimates of erroneous payments made to school districts for the NSLP and SBP. Results are based on a sample of 87 school districts, 266 schools, and about 7,800 free or reduced-price meal applicants or directly certified students participating in NSLP/SBP in the contiguous U.S. Over 3,400 in-person surveys were conducted to collect household income and household size information. The findings apply to school year 2005-06.

Findings and Conclusions Program errors and the risk of erroneous payments in NSLP and SBP continue to be a problem Estimates of the cost of erroneous payments in school meal programs in school year 2004-05 approach $1.8 billion Most payment errors result from: Household misreporting Administrative errors Cashier errors Given the nature of the errors, there is no simple solution Program errors and the risk of erroneous payments in the National School Lunch and School Breakfast Programs continue to be a problem. Over the last several years, USDA has worked with closely with Congress, the States, and advocacy partners to strengthen State and Federal oversight and technical assistance, and to improve program policies, most recently through the Child Nutrition and WIC Reauthorization Act of 2004. New data for estimating the cost of school meals erroneous payments have become available. We estimate a combined total of about $1.8 billion in payment errors – both overpayments and underpayments in NSLP and SBP. Errors in certifying children for meals account for about $935 million, while other operational errors represent about $860 million. The net cost (overpayments minus underpayments) to the federal government is about $1 billion. Almost all payment errors resulted from (1) household misreporting of income, (2) administrative errors by school districts in processing applications, and (3) errors by cashiers in counting reimbursable meals. USDA will use this new information to continue the extensive work underway, and step up its commitment to work with Congress and advocacy partners to address these erroneous payments. There is no simple solution. Actions to reduce these errors must improve accuracy without compromising access for low-income families, must not unduly increase burden on schools, and must be cost-effective.

Erroneous Payment Sources Students' Certification Status Misclassified Administrative error Misreporting by households Errors Occurring After Student Certification Cashier errors Meal counting and claiming errors The study examines two types of erroneous payments: certification errors – mistakes made in the determination of a student’s free, reduced-price, or paid meal status – and non-certification errors – operational mistakes in determining whether a meal meets the requirements for reimbursement or in reporting the number of reimbursable meals. Erroneous payments under the NSLP and SBP can result from misclassification of the school meal certification status of participating students, due to administrative errors or misreporting by households at the time of application or verification. They can also result after student certification when schools and school districts submit improper meal counts and claims for reimbursable meals (cashier errors, meal counting and claiming).

Estimated Costs of Erroneous Payments in the NSLP and SBP $1797 $935 $860 The study estimates about $935 million in erroneous payments related to certification error, and about $860 million in erroneous payments related to non-certification operational errors, for a total gross of about $1.8 billion. The $1.8 billion may overstate the cost somewhat because of the potential overlap in certification and non-certification errors. The net cost to the government related to certification errors was about $485 million, and the net cost of non-certification errors was about $545 million, for a total net cost of about $1 billion.

Certification Error Rate Estimates Slightly more than one in five students was certified inaccurately or erroneously denied meal benefits. Among all certified students and denied applicants, 22 percent were certified in error, with 15 percent receiving an improperly high benefit level (overcertification) and 7 percent receiving an improperly low benefit level (undercertification).

Total National Reimbursements & Erroneous Payments—NSLP & SBP During SY 2005-06, there were an estimated $759 million in erroneous NSLP reimbursements due certification error, or 9.4 percent of the roughly $8.06 billion in cash reimbursements and commodities provided to school districts in the contiguous US. Erroneous SBP payments totaled $177 million, or 9.1 percent of the $1.9 billion in cash reimbursements paid for all SBP breakfasts. More than three quarters of certification related erroneous payments in both NSLP and SBP were overpayments.

Certification Error Rate Estimates Eligibility Status Among students certified for free meals Among students certified for RP meals Among students denied F/RP meals Free 86% 34% 19% Reduced-Price 8 41 17 Paid 6 25 64 The certification process was most accurate among students certified for free meals. Most students receiving free meals were certified correctly; 14 percent receiving free meals were overcertified. Certification errors were much more common among students certified for reduced-price meals, with about one-third under certified—receiving reduced-price meals but eligible for free meals—and one-fourth over certified—receiving reduced-price meals but not eligible for either free or reduced-price meals.

Reporting and Administrative Error Rates Percent Errors by applicants in reporting their household circumstances (income and size) were substantially more common than administrative errors by schools. Household misreporting (23 percent of applicants) was nearly three times more likely than school district administrative error (8 percent of applicants). In both cases, these errors lead to overcertification more often than undercertification.

Gross NSLP/SBP Erroneous Payment Rates Due to Noncertification Error Percent Overall gross payments due to non-certification error accounted for 6.9 percent of total reimbursements in NSLP ($555 million) and 15.8% of total reimbursement in SBP ($306 million). The process by which cashiers assess and record whether a meal is reimbursable was a substantial source of erroneous payments, 3.1 percent in NSLP and 9.8 percent in SBP. Erroneous payments due to SFA errors in recording meal counts reported to them by schools equaled about 2 percent of NSLP reimbursements and 4 percent of SBP reimbursements. Erroneous payments due to aggregation error when SFAs submit reimbursement claims to state agencies represent 1.5 percent of NSLP reimbursements and nearly 2 percent of SBP reimbursements. Note: most schools had fairly low levels of cashier error, but high aggregate levels resulted from a few large schools having very high levels of this type of non-certification error. Median rate of cashier error was 1.0 for NSLP and 1.7 for SBP. (10% of schools had cashier error of more than 10% in NSLP and about 20% of SBP schools had erroneous payment rate due to cashier error of more than 10%).

Addressing the Erroneous Payment Problem: No Simple Solution A successful error reduction strategy must: Improve accuracy without compromising access for low-income families Limit increased burden on schools Be cost-effective Consider the needs of other users of school meal program eligibility data There is no simple solution. Any approach to addressing erroneous payments must: Improve accuracy without compromising access for low-income families. Any solution that inadvertently prevents eligible children from participating would undermine the program’s goals and nutritional benefits. Limit increased burden on schools. Many schools consider the program burdensome today. Additional requirements may discourage a number of schools from participating in the future. Be cost-effective. Improving accuracy will likely be resource-intensive. The cost required to improve accuracy must not be greater than achieved savings. Consider the needs of other users of school meal program eligibility data, such as the Department of Education’s Title I Program, the E-Rate Program (the Federal Communications Commission’s initiative to support telecommunications service in schools), and State and local educational programs. Any proposed solutions should consider the potentially large impact on other programs. For example, in many States, the amount of Title I and other funding that is distributed on the basis of school meals eligibility far exceeds the value of school meal reimbursements.

Addressing the Erroneous Payment Problem: Efforts to Date National Data Collection and Analysis to Inform Policy Improved State and Federal Oversight and Technical Assistance Strengthened Certification Process Through Legislative Program Reauthorization FNS has worked closely with OMB, Congress, the States, schools, and advocacy partners for two decades to gain a better understanding of erroneous payments, and to develop and implement the following initiatives that attempt to achieve a careful balance between access and accuracy: 1. National Data Collection and Analysis to Inform Policy Initiated an annual measure of administrative errors in the certification process in school year 2004-2005; As early as the 1990s, tested alternative approaches to the existing school meals certification and verification processes to assess their impact on accuracy and program access; Highlighted the results of these data collections at numerous briefings with State and Federal partners and Congressional staff; and Developed the APEC study, which provides the first comprehensive national estimate of erroneous school meal payments for the PAR, as required by the IPIA. 2. Improved State and Federal Oversight and Technical Assistance Beginning in school year 2005-2006, required schools to report annually to State agencies (and States to FNS) on verification results, and to take action on problems found; Since 2004, required annual training for schools on certification and accountability issues; Secured funding from Congress in 2004 for FNS technical assistance to help State and local partners reduce administrative errors and improve program integrity; Provided ongoing guidance and training materials to State agencies to improve monitoring of schools; and Since 1995, provided ongoing guidance and training materials to States on the School Meals Initiative (SMI), to help schools improve compliance with program nutrition and menu planning standards in order to increase the accuracy of meal-counting. 3. Strengthened the Certification Process through Legislative Program Reauthorization Worked with Congress to develop the Child Nutrition and WIC Reauthorization Act of 2004 (CNR) to enact program changes that address school meals certification problems, including: Requiring food stamp direct certification for free meals in all school districts, and adding authority for optional direct certification using data from the Temporary Assistance for Needy Families (TANF) and the Food Distribution Program on Indian Reservations (FDPIR); Simplifying the certification process by requiring a single application for all eligible children in a household; Requiring eligibility determinations to be in effect for the entire school year; Modifying verification requirements, and adding authority for optional direct verification of children’s eligibility; Requiring State agencies to conduct additional administrative reviews of school districts with higher rates of error; and Continuing efforts to fully implement all the provisions of the CNR designed to improve program accountability.

Addressing the Erroneous Payment Problem: Next Steps Expand training, technical assistance, and other efforts to reduce payment errors from operational problems: Training on State monitoring of schools Update/issue guidance on F/RP eligibility determinations Use of annual verification data to ensure corrective action is taken Web-based training to States and schools on certification/accountability issues Partner with SNA to coordinate training and TA to its membership Secure funding for additional national studies The data used for the study was collected before provisions of the CNR were fully implemented, and before many other actions listed above could have meaningful impact. Nonetheless, the key findings underscore the need to continue the efforts described above, and to develop new, additional strategies to reduce error in the school meals programs. FNS proposes to expand training, technical assistance, and other efforts to reduce payment errors that result from operational problems. Planned efforts include: Delivering training on State monitoring of schools in fiscal year 2008; Updating and issuing guidance on free and reduced price eligibility determinations to State agencies and school districts; Emphasizing to State agencies that annual verification data must be used to ensure that corrective action is taken by school districts to address error rates; Working with the National Food Service Management Institute to provide web-based training to States and schools on certification and other accountability issues; and Partnering with the School Nutrition Association to coordinate efforts on training and technical assistance to its membership on accountability issues. Additional funding would allow FNS to continue the APEC study, which would enable FNS to estimate and measure changes in erroneous payments over time, and would help inform FNS, Congress, the States, and advocacy partners on the development of additional guidance, training, and policy options.