Introduction
Background
Federal law authorizes grant funding and food donations to states in support of, among other things, the School Breakfast and National School Lunch programs (meal programs). These meal programs can operate in public and nonprofit private schools as well as in residential childcare institutions to help fight hunger. Participating schools and institutions receive cash subsidies from the U.S. Department of Agriculture (USDA) for each meal served, and in return these meals must meet federal requirements. According to records maintained by the California Department of Education (Education), California receives approximately $2 billion in federal funding each year to deliver the meal programs to children throughout the State.
With the William F. Goodling Child Nutrition Reauthorization Act of 1998, Congress amended federal law to include in the meal programs a requirement known as the Buy American requirement. Congress added this requirement to address concerns regarding the healthfulness of foreign‑sourced food and to benefit the United States’ agriculture industry. This federal law requires local meal program providers, known as school food authorities, to purchase domestic commodities or products to the maximum extent practicable. Domestic commodities are agricultural goods that are produced in the United States. Domestic products are foods that are processed in the United States substantially using agricultural commodities produced in the United States. In this case, substantially means that the final processed product must be composed of more than 51 percent domestic agricultural commodities. In addition, USDA guidance only allows the Buy American requirement to be waived for one of the two following reasons:
- When food products are not produced or manufactured in the United States in sufficient and reasonably available quantities of satisfactory quality.
- When competitive bids reveal the costs of domestic products are significantly higher than the costs of foreign‑sourced products.
Congress intended the Buy American requirement to, in part, benefit United States agriculture, and because California has the largest agricultural economy of any state in the nation, the State’s overall economy stands to benefit from compliance with it. Based on the most recently available information from the USDA, California products accounted for about 11 percent of all agricultural sales in the country in 2012—a higher share than any other state—including nearly 70 percent of fruit, tree nut, and berry sales; more than 35 percent of vegetable sales; and nearly 20 percent of dairy sales. According to a publication by the University of California (UC) Agricultural Issues Center at UC Davis, every dollar of value added to California’s farming and agriculture related industries leads to an additional $1.27 for the State’s economy.2
Education’s Responsibilities Related to the Meal Programs
The USDA provides funding to Education, and Education then distributes these funds to school food authorities. These school food authorities—the majority of which are school districts—provide meals to students across the State. Federal regulations require state educational agencies—which in California is the California Department of Education—to ensure that school food authorities comply with all meal program requirements, some of which relate to food safety, local school wellness policies, dietary specifications, and certification of student eligibility for free or reduced‑price meals, as well as the Buy American requirement.
To review participating school food authority compliance, the USDA expects Education to conduct two types of reviews of the meal programs: administrative reviews and procurement reviews. To help guide administrative reviews, the USDA publishes an administrative review manual (review manual). Federal regulations require Education to perform administrative reviews of all school food authorities at least once during a three‑year cycle. According to Education’s website, administrative reviews have four objectives: to determine if the school food authority is meeting all federal and state meal program requirements; to provide focused technical assistance to assist with correcting any findings; to secure necessary corrective action documentation demonstrating the school food authority’s corrections; and to assess fiscal action and, when applicable, recover improperly paid funds.
In school year 2016–17, Education began assessing compliance with the Buy American requirement during its administrative reviews. The USDA’s review manual directs state agencies to evaluate compliance with the Buy American requirement by checking food labels in various on‑ and off‑site storage facilities to assess the country of origin of the products. The review manual asks state agencies to review up to four products from nine food categories, such as condiments, frozen fruit, and fruit juice. If the information on the label does not provide the product’s origin, the USDA’s review manual suggests that the reviewer should check whether the school food authority’s contract documents contain language about the Buy American requirement. If so, the reviewer can consider the school food authority to be compliant for that food item. If a label identifies that a food product originates from outside of the United States, the reviewer must check to determine if the school food authority has documentation to support that the purchase of the item fits into one of the two exception categories for the Buy American requirement noted previously.
As another means of ensuring school food authorities’ compliance with meal program requirements, the USDA expects Education to conduct procurement reviews and encourages state agencies to conduct them on a three year‑cycle. According to guidance the USDA issued in 2016, during these reviews Education should examine bid solicitations, contracts, and invoices to determine their compliance with federal requirements. The USDA’s June 2016 procurement review tool explicitly states that the procurement reviewer should assess whether the solicitations include a requirement that food items must be produced and processed in the United States. As we discuss further in the Audit Results, Education has yet to conduct these procurement reviews.
The School Food Authorities’ Responsibilities Related to the Meal Programs
School food authorities are responsible for maintaining compliance with many federal requirements under the meal programs. For example, they need to plan food purchases in advance, addressing issues such as the federal requirement to ensure that students have access to dark green vegetables at least once every week. Education’s records indicate that the majority of school food authorities in California are public school districts. In addition, they may be public or nonprofit private schools with high school grades or below, or public or private nonprofit licensed residential childcare institutions. School food authorities can directly purchase food from vendors by soliciting bids or proposals to ensure that they receive the best possible goods at the lowest possible prices. They can also either contract with vendors to provide prepared food, or they can prepare the food themselves. School food authorities can also choose to outsource the provision of food services by contracting with food service management companies. The USDA’s guidance indicates that in making decisions about their meal programs, school food authorities should also consider how they will maintain compliance with the Buy American requirement.
Scope and Methodology
The Joint Legislative Audit Committee (Audit Committee) directed the California State Auditor to determine whether Education is ensuring that public school districts under its jurisdiction are complying with the Buy American provision in the William F. Goodling Child Nutrition Reauthorization Act of 1998. Table 1 lists the objectives that the Audit Committee approved and the methods used to address those objectives.
| Audit Objective | Method | |
|---|---|---|
| 1 | Review and evaluate the laws, rules, and regulations significant to the audit objectives. | Reviewed relevant laws, rules, and regulations related to the Buy American requirement. |
| 2 | Assess the extent to which Education monitors and enforces public school districts’ compliance with the Buy American requirement, including whether school districts’ procurement specifications and solicitations include Buy American provisions and whether school districts are appropriately documenting exemptions to the Buy American requirement. |
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| 3 | Determine whether Education tracks purchases of food products by individual public school districts and, if so, whether Education can identify those districts purchasing food for school meal programs from outside of the United States when such foods are also grown or produced domestically. To the extent possible, identify school districts making such purchases and identify the food products purchased. |
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| 4 | Assess whether Education policies related to reporting school purchasing decisions are sufficient to identify foreign‑sourced food products served by California school districts. Determine whether Education has made any recent changes to improve transparency of school districts’ decisions to purchase foreign‑sourced food products. |
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| 5 | Identify and report any changes that Education plans to make related to monitoring and enforcing the Buy American requirement and assess whether such changes will ensure greater compliance with the requirement. |
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| 6 | Review and assess any other issues that are significant to the audit. | Reviewed available information about a haphazard selection of 10 other states’ monitoring of school food authorities’ food purchases to determine whether they tracked school food authorities’ foreign‑sourced food purchases. For four of the 10 states and one additional state, we also reviewed their websites to determine if those states had posted the results of their administrative reviews. |
Sources: California State Auditor's analysis of state law, planning documents, and information and documentation identified in the table column titled Method.
Footnote
2 Jonathan Barker, et al., “The Measure of California Agriculture,” UC Agricultural Issues Center, August 2009, http://aic.ucdavis.edu/publications/moca/moca09/moca09.pdf, accessed on June 26, 2017. Go back to text