Responses to the Audit
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Education
July 10, 2017
Elaine M. Howle, State Auditor
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Subject: California Department of Education: It Has Not Ensured School Food Authorities Comply with the Federal Buy American Requirement, Report Number 2016-139, July 2017
The California Department of Education (Education) appreciates the opportunity to comment and provide proposed corrective actions for the recommendations outlined in the California State Auditor’s (CSA) Audit Report No. 2016-129 titled: California Department of Education: It Has Not Ensured School Food Authorities Comply with the Federal Buy American Requirement.
Perspective Comments
To provide better perspective to the CSA’s audit report, Education has the following comments.
Education appreciates the CSA’s work on this topic, which will assist Education going forward as it continues to monitor the compliance of California’s school food authorities (SFAs) with the Buy American requirement. However, Education is concerned that the report is misleading regarding Education’s obligations and compliance record over the years. Therefore, to provide context and balance, Education provides the following comments:
- The CSA began this audit at the same time that the United States Department of Agriculture (USDA) released its Administrative Review Manual (AR Manual) for the 2016-2017 school year. This was the first manual that required state agency monitoring of compliance with the Buy American provision. Accordingly, Education implemented this requirement for the 2016-17 monitoring reviews.
- The statutory and regulatory provisions containing the Buy American requirement are notable for their generality and essentially state that the USDA shall require SFAs to purchase domestic commodities or products “to the maximum extent practicable.” 42 U.S.C. § 1760 and 7 C.F.R. § 210.21(d) and § 220.16(d). The regulations perfectly mirror the statute and add no additional information. There is no legal definition for “extent practicable.” Moreover, the Buy American requirement does not override applicable competitive procurement rules.As a result, it is unclear how a state agency should have monitored such a vague standard in the absence of regulations (or at least USDA guidance) regarding monitoring to settle national policy questions inherent in the matter and create a standardized process.
- The USDA did not expressly state the need for state agency monitoring of the Buy American provision until 2016. Prior to 2016, the USDA distributed an AR Manual that expressly purported to provide state agencies with a “comprehensive evaluation” tool for monitoring that was silent regarding the Buy American provision.
- The USDA’s pre-2016 silence regarding state agency monitoring of compliance with the Buy American requirement is also reflected in its minimally infrequent guidance on the requirement (i.e., the letters and memorandums issued on September 24, 2001, April 17, 2006, August 9, 2006 and February 13, 2012), which focused on steps that local SFAs could take to comply, but did not expressly state the need for state agency monitoring.
- CSA’s assertion that Education has always had a legal obligation to perform on-site monitoring of local SFAs’ compliance with the Buy American requirement is based on general provisions that state agencies shall require or ensure compliance with all requirements imposed by the National School Lunch Program and School Breakfast Program (e.g., eligibility, meal counting and reporting, nutritional components, food safety, resource management, etc.). See 7 C.F.R. § 210.3(d) and § 220.13(k). However, the obligation is stated generally with respect to all program requirements, and there is no “ensure compliance” provision specific to the Buy American requirement.
- In prior year contracts, Education included provisions contractually obligating SFAs to comply with all program requirements, including the Buy American provision.
- Education has taken additional steps to ensure compliance with the Buy American provision, including: (1) providing training to SFAs that covered the Buy American provision; (2) routinely and timely communicating USDA guidance concerning the Buy American provision to SFAs; (3) investigating public notices regarding alleged non-compliance; and (4) providing technical assistance as necessary.
As previously mentioned, Education appreciates the CSA’s work on this topic and provides the following responses to the recommendations below.
Recommendation 1
To strengthen its administrative reviews and help ensure school food authorities comply with the Buy American requirement, Education should update its written procedures to include the following:
- A requirement that reviewers collect and retain evidence for all items they evaluate for compliance with the Buy American requirement. This update should occur no later than October 1, 2017.
Education’s Comments and Corrective Actions
Education does not concur with the recommendation. The level of evidence recommended to be collected and retained significantly exceeds the evidence required by the USDA’s AR Manual. Specifically, the USDA requires deficiencies be recorded on the assessment tools in the applicable comments section, which is consistent with the level of assurance expected from an administrative review. Further, the recommendation exceeds the evidence required to be collected and retained for performance audits conducted in accordance with Generally Accepted Government Auditing Standards, which are designed to provide a higher level of assurance than that of administrative reviews.
Education’s administrative review procedures are based on the most recent AR Manual issued by the USDA. The AR Manual specifies requirements for administrative review of the Buy American provision, and Education complies with the requirements in accordance with its agreement with the USDA. Education collects and retains documentation reflecting non-compliance with the Buy American provision. However, Education does not, and is not required to, collect and retain evidence for all items that it evaluates.
- Guidance for how its reviewers should interpret common food labels with regard to compliance with the Buy American requirement. It should develop this guidance in consultation with the USDA and should begin working with the USDA by no later than October 1, 2017.
Education’s Comments and Corrective Actions
Education concurs with the recommendation. Education provided training and guidance to staff. However, in response to challenges experienced during the first year of implementation, Education will strengthen training and guidance to its staff regarding reviewing common food labels for compliance with the Buy American requirement beginning in September 2017. In addition, Education will work with the USDA in an effort to revise the current Buy American guidance in order to provide more specific information regarding product label evaluation, ensuring compliance with all Buy American requirements.
Recommendation 2
To comply with federal regulations and provide transparency to the public, Education should immediately post to its website a summary of the results of any administrative reviews that it has shared with the relevant school food authorities. Moving forward, it should comply with federal regulations by posting the results of administrative reviews to its website within 30 days of sharing them with school food authorities.
Education’s Comments and Corrective Actions
Education concurs with the recommendation. Education drafted a change request to its technology contractor to post the administrative review results on the Child Nutrition Information and Payment System (CNIPS) website. Posting administrative review results can be implemented once the request is approved and submitted to the technology contractor, and all changes are finalized on the CNIPS website.
Recommendation 3
To ensure school food authorities comply with the Buy American requirement, Education should develop, no later than December 31, 2017, a training course that explains to school food authorities how to comply with the Buy American requirement. Further, as soon as it develops this training, Education should make it available to all school food authorities.
Education’s Comments and Corrective Actions
Education concurs with the recommendation. Education was already in the process of developing a Buy American online training for SFAs at the time of the audit. The online training is based on the USDA’s regulations and guidance, and explains the Buy American requirement and exceptions, necessary documentation, and review elements. Education will make the online training available to all SFAs by December 30, 2017, and will notify the SFAs of its availability. In addition, Education will promote the training at conferences, meetings, and other training venues.
Recommendation 4
To ensure school food authorities comply with the Buy American requirement, Education should use procurement reviews or its administrative reviews to verify that school food authorities have policies and procedures that address the Buy American requirement. Further, Education should verify that these policies and procedures align with the USDA’s guidance for including Buy American-related language in bid solicitations and contract documents and for maintaining exception documentation for foreign-sourced food purchases.
Education’s Comments and Corrective Actions:
Education concurs with the recommendation. Education will perform Local Agency Procurement Reviews (Reviews) of approximately one-third of its School Nutrition Program (SNP) operators in Fiscal Year 2017–18, with the remaining SNP operators reviewed during the remaining procurement review cycle, as approved by the USDA.
The Reviews determine whether the SNP operator’s contracts contain: (1) Buy American language for small purchases; (2) formal procurements; (3) Food Service Management Company (FSMC) contracts; and (4) processing contracts. Additionally, as required by the USDA, Education will ensure through the Reviews that SNP operators maintain exception documentation for formal procurements and FSMC contracts. As part of the Reviews the USDA requires Education to use a spreadsheet based procurement tool (USDA Review Tool). Specifically, the USDA Review Tool requires the review of the following:
- The SNP operator’s procurement procedures for compliance with all applicable federal regulations (including an SNP operator using Buy American provisions in solicitations and contracts), and
- The SNP operator’s procurement for various types of procurement methods.
For additional information of the USDA Review requirements, please refer to the USDA Policy Memorandum SP 03–2017 located at https://www.fns.usda.gov/draft-tool-local-agency-procurement-reviews-school-food-authorities-sy2016-2017-revised.
Recommendation to the Legislature
To ensure effective oversight of the meal programs and to increase public transparency, the Legislature should require Education to track school food authorities’ purchases of
foreign-sourced food items and to post to its website the school food authorities that purchase foreign-sourced food items, the types of food items they purchased, and the countries of origin of the food items they purchased.
Education’s Comments
This recommendation, addressed to the Legislature, will require significant resources to collect, track, and post all individual purchases of foreign-sourced food items for 1,313 SFAs at over 10,000 sites.
Education will need significant and ongoing state general funds to support the costs and staffing resources required to design, develop, implement, and maintain a statewide information technology (IT) solution to track the food purchases of SFAs. Also, state laws must be developed to mandate the use of the IT system by the SFAs. Developing a statewide IT system to support this recommendation also creates redundancy since local SFAs are already required to track and maintain their own records and documentation of food purchases.
If you have any questions regarding Education’s comments or corrective actions, please contact Sandip Kaur, Director, Nutrition Services Division, by e-mail at skaur@cde.ca.gov.
Sincerely,
Michelle Zumot
Chief Deputy Superintendent of Public Instruction
Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM EDUCATION
To provide clarity and perspective, we are commenting on Education’s response to our audit. The numbers below correspond to the numbers we have placed in the margin of Education’s response.
We disagree with Education’s assertion that our report is misleading and do not believe that any additional context or balance is necessary. We shared our conclusions with Education on multiple occasions during our audit and include its perspective related to our conclusions throughout our report.
As we discuss here, we acknowledge Education’s perspective that it was not until June 2016 when the USDA issued an updated administrative review manual that it believed it was required to monitor this area. However, it is important to note, as we do here, that federal regulations and its contractual obligation to the USDA have called for Education to ensure compliance with this requirement since 1998. Further, as we indicate, guidance the USDA issued in August 2006 reiterated state agencies’ obligation to ensure compliance. Finally, as stated here, an essential component of ensuring compliance is monitoring activities to verify that processes are working as required.
It is disappointing to see that Education believes it lacked sufficient guidance for monitoring compliance with the Buy American requirement despite the guidance memos the USDA issued about the requirement—memos that Education acknowledges in its response the USDA issued well in advance of its 2016 review manual. These memos provide suggestions for how school food authorities can comply with the Buy American requirement, including providing example contract language and suggesting steps that the school food authorities can take to verify that vendors provide compliant products. Therefore, for years Education had guidance for what steps the school food authorities it oversees should be taking to comply with the Buy American requirement. It is unclear to us what additional direction Education needed to verify whether school food authorities were taking those steps. Further, Education states that none of the USDA guidance memos expressly state the need for state agency monitoring. As we describe here, the August 2006 USDA guidance—which Education refers to in its response—explicitly stated that state agencies have an obligation to ensure school food authorities comply with the Buy American requirement to the maximum extent practicable. As we state here, monitoring is an essential component of ensuring compliance. Therefore, to fulfill the USDA’s stated expectations, Education would need to have performed some verification that school food authorities were complying with the Buy American requirement, which it did not.
Education’s response acknowledges that federal regulations require it to ensure compliance with all federal meal program requirements. As we indicate throughout our report, the Buy American requirement is a federal requirement under the meal programs. Therefore, we question the relevance of Education’s assertion that there is no specific provision that directs it to ensure compliance with the Buy American requirement. It is unclear to us why such a specific provision would be needed.
Education asserts it included provisions in contracts that obligated school food authorities to comply with all program requirements. We explain here that Education deferred to school food authorities the responsibility to ensure statewide compliance. However, as we note, although school food authorities must take steps to comply with the Buy American requirement, Education is responsible for statewide compliance. Therefore, because it did not actively monitor school food authorities’ compliance, Education did not meet the USDA’s expectations or ensure statewide compliance with federal law.
Education largely reiterates perspective we have included in our report. As stated here, we provide Education’s assertion that it ensured compliance by forwarding the USDA’s guidance to school food authorities, by investigating complaints regarding violations of the Buy American requirement, and by offering training to school food authorities about the requirement. However, we explain in our report why these steps are inadequate for ensuring compliance. Specifically, as stated here we present our conclusion that Education offered inadequate training related to the Buy American requirement. Further, as stated here, we provide the assertion from a manager in Education’s Nutrition Services Division, who stated that Education has received only three complaints related to the Buy American requirement. Finally, although Education indicates that it communicates USDA guidance concerning the Buy American requirement to the school food authorities, as we describe here, without monitoring, Education could not know whether school food authorities statewide were following the guidance it distributed.
Our report describes clear reasons why we recommend that Education’s reviewers collect and retain evidence for all items they evaluate for compliance with the Buy American requirement. As we state here, we explain that, without such evidence, Education’s managers have to accept the work of the reviewers without verifying the accuracy of their compliance judgments. Additionally, as stated here we conclude that because of limited supporting evidence Education would fail to identify instances of noncompliance that reviewers may have overlooked or misjudged. Our audit demonstrates that the lack of evidence has resulted in inconsistent reviews. Also, as stated here, we describe how two separate administrative reviews reached different conclusions about the same food item. We also note that because of the limited supporting evidence they are given to examine, the managers who monitor these reviewers are not in a position to know such a difference exists. Further, Education asserts that our recommendation would have it keep a level of evidence that exceeds the level of evidence required by generally accepted government auditing standards (audit standards). The audit standards direct auditors to document the evidence obtained to support significant judgments and conclusions and note that auditors must obtain sufficient, appropriate evidence to provide a reasonable basis for their findings and conclusions. The audit standards describe that, in assessing the sufficiency of evidence, auditors should determine whether enough evidence has been obtained to persuade a knowledgeable person that the findings and conclusions are reasonable. Further, the audit standards state that the quantity, type, and content of audit documentation are a matter of professional judgment. Because the audit standards indicate that professional judgment should guide the level of documentation, it is unclear to us how Education can claim our recommendation exceeds the level of evidence these standards require.
As stated here, we include Education’s perspective about the level of resources it believes our legislative recommendation would require. However, we also note that an Education official confirmed that Education has never studied the cost of tracking and reporting foreign-sourced food purchases. Therefore, it is unclear to us how Education can be so confident of the level of effort that would be required to implement this recommendation.
We disagree with Education’s assertion that our recommendation creates redundancy. Specifically, there is no central location for information about school food authorities’ foreign-sourced food purchases that would be easily accessible to stakeholders such as local food producers, policymakers, and parents. If implemented, our recommendation would create such a resource.
Elk Grove
July 10, 2017
California State Auditor
Attention: Elaine M. Howle
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Subject: Response to the California State Auditors report regarding compliance with the federal Buy American Provision.
Dear Ms. Howle,
On behalf of Superintendent Hoffman, the Elk Grove Unified School District is in receipt of the California State Auditor’s draft report regarding compliance with the federal Buy American Provision. The draft report was received on July 3, 2017 requesting response within five business days, an opportunity the district appreciates.
The district recognizes that its policies and procedures related to the Buy American Provision needed to be refined and strengthened to ensure compliance. Previous to the audit and based on recent trainings by California Department of Education (CDE) Nutrition Services Division the Food and Nutrition Services (FNS) department has been working towards improved policies and procedures. This is important and critical work for the district, work we take very seriously.
The district is committed to buying its food products locally, in concert with the Buy American Provision. This commitment includes the formation of a “Farm to School” presence throughout our nutrition education program. The commitment includes a goal is to procure more of our produce from local farms within 250 miles of Elk Grove. Currently approximately 40% of our fresh fruits and vegetables are sourced from local farms and many other products are sourced from California’s vast resources. Our district was one of the first innovative districts that focused on California Foods to California Kids. The district offers a robust Food Literacy program, teaching students where their food comes from and how it is grown, thereby establishing a connection between the cafeteria and the classroom. This includes a monthly Harvest of the Month produce item highlighting and promoting where in California the item is grown. These are just a few examples of our commitment, which can be found throughout the district’s FNS literature, website, and programs.
In February 2016, the district’s FNS Buyer attended training by the CDE Nutrition Services Division, titled Procurement in the 21st Century. After attending the training, the Buyer discovered that FNS would need to be more detailed relative to the Buy American Provision. For the 2016-17 general food bid, FNS ensured that more detailed language was included in the bid documents and also requested that vendors supply county of origin as part of their bid response.
In May 2016, the district’s FNS Director also attended the Procurement in the 21st Century training. As a result the district FNS department has been working on procurement policies and procedures to better comply with the Buy American Provision. The district’s FNS department will ensure more comprehensive documentation for all food products and will address the ability to collect and provide the documentation in an efficient manner.
The district also recognizes that Table 2 in the report provides confirmation of the district’s efforts to strengthen and ensure compliance with the Buy American Provision as a result of the relatively recent CDE training. This is evidenced in the fact that all bid solicitations and contracts audited for the 2016-17 school year contained adequate language related to the Buy American Provision. Again these efforts will continue and will also be strengthened as a result of the audit.
The district sincerely appreciates the time and efforts of the audit team and will work diligently and with fidelity to continue the work it has already begun to ensure that its policies and procedures address the findings of the audit. Like all audits the district views the findings of this audit as an opportunity to improve its work and services to students.
Please do not hesitate to contact me or Mrs. Drake with any questions.
Sincerely,
Robert Pierce
Deputy Superintendent, Business Services and Facilities
cc: Christopher R. Hoffman, Superintendent
Michelle Drake, Director, Food & Nutrition Services
Fresno
July 6, 2017
Elaine M. Howle, CPA
California State Auditor
621 Capital Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle,
The California State Auditor's office recently conducted an on-site audit of Fresno Unified School District's compliance with the Buy American provisions of the federal William F. Goodling Child Nutrition Reauthorization Act of 1998.
During the on-site review state auditors reviewed various records, files, procurement practices related to the Buy American provision, and conducted a physical review of the Food Services warehouse.
On July 3, 2017 Fresno Unified School District received and examined the draft final report. The District agrees to comply with the recommendations made by the State Auditor's Office. In addition, effective May 9, 2017 Fresno Unified School District began strengthening the internal procurement policies and procedures regarding the Buy American requirements in all food bid solicitations.
The District will continue to monitor and enforce the Buy American provisions of the federal William F. Goodling Child Nutrition Reauthorization Act of 1998 to ensure continued compliance.
Please feel free to contact me if you have any questions or require any additional information.
Sincerely,
Karin Temple,
Chief Operations Officer
Cc: Robert G. Nelson, Interim Superintendent
Ruthie F. Quinto, Deputy Superintendent/Chief Financial Officer
Paul Rosecrans, Executive Director, Purchasing
Kim Kelstrom, Director, Fiscal Services
Jose Alvarado, Director, Food Services
Los Angeles
May 24, 2017
Elaine M. Howle, State Auditor
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
San Diego
Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
The San Diego Unified School District Food & Nutrition Services department will establish written policies and procedures as it relates to the Buy American requirements. The policies and procedures developed will include language that addresses the following four topics that are outlined in the report:
The District currently has language in all food bid documents related to the Buy American requirement. To ensure that the Buy American requirements continue to be consistently included in all food contracts and food bid solicitations, the District’s Strategic Sourcing and Contracts desk guide for Food & Nutrition Services will be updated. The update will note that the Buy American language is required to be included in all food contracts and food bid solicitations.
Food & Nutrition Services will develop a process which results in regular inspections of food products received by Food & Nutrition Services to ensure that the items are domestic products. Food products delivered to the various cafeteria sites in the District are currently inspected on a daily basis. The current inspection process ensures that products received are of good quality and that the products received match what was ordered by the site. To address the Buy American requirement, Food & Nutrition Services will develop a schedule which will result in periodic inspections from central office staff, to further inspect the food products received from vendors to ensure that they are domestic products.
Food & Nutrition Services will identify any potential foreign-sourced products as early as possible in the menu planning process so that justification for such exceptions can be noted. The Food & Nutrition Services department takes great pride in its use of not only domestic products, but of the many local products sourced within the State of California and also San Diego County. There are currently only a few food products used within the District that are known to be import products and these items are products that we cannot source domestically or cannot obtain in sufficient quantities to meet our demand. The new procedures that are developed will result in department staff addressing possible exceptions to the Buy American requirement during the menu planning process.
Food & Nutrition Services will develop a procedure to maintain proper documentation for any foreign-sourced food products purchased. The procedure will ensure that any foreign-sourced products purchased meet one of the two allowable exceptions and the documentation will include the reason and justification as to why these items are purchased.
Sincerely,
Gary Petill
Director of Food and Nutrition Services
San Francisco
July 6, 2017
Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Dear Ms. Howle,
We received the draft report from the State Auditor related to the federal Buy American requirement. We are in agreement with the findings specific to San Francisco Unified School District (SFUSD), and we will establish written policies and procedures that include the following:
- An explanation of how SFUSD will ensure it consistently includes language related to the Buy American requirement in its bid solicitation documents and contract,
- A minimum expectation for how regularly SFUSD will verify that food items its vendors provide are domestic commodities or products, and
- A requirement that its staff identify the need to purchase foreign-sourced items as early as possible in the meal-planning phase and that they begin documenting the justification for such exceptions to the Buy American requirement at that time.
- Guidance for how it will maintain documentation showing that its purchases of nondomestic food meet one of the two allowable exceptions.
We would like to thank your staff for the assistance they have provided to SFUSD to help us become more compliant in our operation of the National School Lunch Program. Please direct your questions to Libby Albert, Director of Student Nutrition Services (alberte1@sfusd.edu).
Sincerely,
Vincent Matthews, Ed.D.
Superintendent
Cc: Orla O’Keeffe, Chief, Policy and Operations
Libby Albert, Director, Student Nutrition Services
Stockton
July 10, 2017
Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Ms. Howle,
The Stockton Unified School District has reviewed the draft report of the Federal Buy American Requirement and has no comments nor amendments to the summary you have presented.
Please advise if you have any further requirements or requests. There are no attachments to this document and the District will also shred the two copies sent to us in support of your confidentiality requirements.
Sincerely,
Lisa Grant-Dawson
Comment
CALIFORNIA STATE AUDITOR’S COMMENT ON THE RESPONSE FROM STOCKTON
To provide clarity and perspective, we are commenting on Stockton’s response to our audit. The number below corresponds to the number we have placed in the margin of Stockton’s response.
Stockton did not indicate whether it agreed with our recommendation that it should establish written policies and procedures to ensure its compliance with the Buy American requirement. Therefore, we look forward to reviewing its effort to address our recommendation in its 60-day response to the audit.