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Report Number: 2016-139

California Department of Education
It Has Not Ensured That School Food Authorities Comply With the Federal Buy American Requirement



Summary

AUDIT HIGHLIGHTS

Our review of California’s school food authorities’ compliance with the federal Buy American requirement highlighted the following:

Although required to ensure compliance, Education did not begin monitoring school food authorities’ compliance with the federal requirement until school year 2016–17.

Education’s new compliance review process has weaknesses that have led to inadequate and inconsistent reviews.

None of the six school districts we reviewed had adequate policies and procedures related to the Buy American requirement and they had purchased foreign‑sourced food items, but did not have adequate documentation to justify the purchases.

Verifying compliance with the requirement will be challenging because federal food labeling laws do not always mandate that the country of origin for food items or their ingredients be included on labels.

Results in Brief

As a result of federal law authorizing grant funding to states in support of the School Breakfast and National School Lunch programs (meal programs), California receives nearly $2 billion each year to provide meals to children throughout the State. In 1998 Congress amended federal law to include the Buy American requirement in the meal programs. The Buy American requirement requires school districts and other entities that participate in the meal programs—known as school food authorities—to purchase, to the maximum extent practicable, domestic commodities or domestic products. 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.

Because California has the largest agricultural economy in the country, compliance with the Buy American requirement offers the State significant benefits. However, despite these benefits, the California Department of Education (Education) has not taken adequate steps to ensure that California’s school food authorities comply with the Buy American requirement. For example, until recently, Education did not monitor school food authorities’ compliance with the Buy American requirement when it assessed their compliance with other federal requirements related to the meal programs. Although Education asserted that it was not required to do so until the U.S. Department of Agriculture (USDA) explicitly prescribed how it should perform such monitoring, we disagree with its conclusion. Specifically, federal regulations require Education to ensure that school food authorities comply with all federal requirements related to the meal programs, and the Buy American requirement has been a part of federal law since 1998. Further, the USDA issued guidance in 2006 that clearly stated that state agencies have an obligation to ensure that school food authorities comply with the Buy American requirement. Because Education did not monitor school food authorities’ compliance with this requirement, it did not meet the USDA’s expectations and did not ensure statewide compliance with federal law.

Education began evaluating school food authorities’ compliance with the Buy American requirement in school year 2016–17, in response to updated guidance the USDA published that explicitly directed state agencies to do so. However, Education’s process for evaluating school food authorities’ compliance has weaknesses that have led to inadequate and inconsistent reviews. For example, Education has not established procedures identifying the level of evidence its reviewers must collect during their reviews. As a result, the reviewers do not collect a sufficient level of documentation to support their determinations of compliance, and Education’s managers cannot monitor the reviewers’ conclusions. Moreover, as of July 2016, federal regulations require state agencies to post on their websites a summary of the most recent results for each review no later than 30 days after Education provides those results to the school food authority. Nonetheless, as of June 2017, Education had yet to report the results of any of the 146 reviews for which it shared the results of and had an exit conference with the relevant school food authorities since the regulations took effect. Until Education begins posting the results of its reviews, it will continue to not comply with federal regulations and it will fail to provide the public with important information about meal programs, including whether California schools are complying with the Buy American requirement.

Further, Education’s current efforts do not allow it to identify all foreign‑sourced food that school food authorities purchase annually. Because the USDA’s guidance only directs reviewers to inspect a limited selection of food items across nine food categories at the school food authorities’ storage facilities, Education’s reviews are unlikely to identify all foreign‑sourced food items. Therefore, Education would need to go beyond the USDA’s minimum requirements to identify the magnitude of the foreign‑sourced food items that school food authorities are procuring. Education asserted that it does not collect this level of information because doing so is not a USDA requirement. However, this information is potentially valuable to different stakeholders. For example, it could provide local food producers opportunities to market to school food authorities. It could also provide information for policymakers to consider when making decisions regarding food policy. Finally, it could better allow parents to make informed choices regarding the food their children eat while at school.

In the absence of adequate oversight by Education, school food authorities have not adequately addressed the Buy American requirement. We reviewed six school districts—Elk Grove Unified, Fresno Unified, Los Angeles Unified, San Diego Unified (San Diego), San Francisco Unified (San Francisco), and Stockton Unified (Stockton)—to determine whether they had controls in place to ensure their compliance with the Buy American requirement.1 We found that none had implemented adequate policies and procedures related to the Buy American requirement. Further, only San Diego and San Francisco consistently included language related to the Buy American requirement in their bid solicitations and contracts with food vendors. Most of the districts we reviewed cited Education’s lack of emphasis on the Buy American requirement, which, we concluded, likely contributed to their lack of policies and procedures that addressed purchasing domestic food. However, by not implementing appropriate policies and procedures or including adequate language in their contracts, these school districts risk noncompliance with the Buy American requirement. In fact, we found all six of these districts had purchased foreign‑sourced food items without maintaining adequate documentation justifying their purchases, as the USDA requires.

However, as Education and the school food authorities address the deficiencies we noted in our audit, they will face challenges in using food product labels to verify compliance with the Buy American requirement. Specifically, federal food labeling laws do not always mandate that the country of origin for food items or their ingredients be included on their labels; in fact, we found that 241 of the 375 food items we reviewed at the six school districts had labels that did not clearly identify country of origin for those items or their ingredients. Instead, these products were often labeled with information about where a product was distributed from or the location of the distributing company. This language does not provide sufficient information about whether the items or their ingredients are domestic commodities or products, making it difficult to determine compliance with the Buy American requirement.

California’s economy stands to gain from increased compliance with the Buy American requirement; accordingly, resolving the challenges created by these federal requirements is in the State’s best interest. California lawmakers could work with their counterparts in the California congressional delegation to petition Congress for changes that would add clarity about the origins of food products that school food authorities purchase. For example, Congress could direct the USDA to develop a certification program that would indicate whether food products were compliant with the Buy American requirement. Specifically, the USDA could develop a voluntary certification program that would allow vendors to submit information regarding the origin of food items. The USDA could then verify that information and certify food items as Buy American‑compliant.

Summary of Recommendations

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 post this information to its website.

To address the challenges food labels present to ensuring that California’s school food authorities purchase domestic food items, the Legislature should work with the California congressional delegation and request that Congress direct the USDA to establish a voluntary certification program through which the USDA could certify that food products are compliant with the Buy American requirement.

Education

To strengthen its administrative reviews and help ensure that school food authorities comply with the Buy American requirement, Education should update its written procedures no later than October 1, 2017, to include a requirement that reviewers collect and retain evidence for all items they evaluate for compliance with the Buy American requirement.

To comply with federal regulations and provide transparency to the public, Education should immediately begin posting to its website a summary of the results of any administrative reviews that it has shared with the relevant school food authorities.

To ensure that school food authorities comply with the Buy American requirement, Education should use its 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 documentation that justifies foreign‑sourced food purchases.

School Districts

To help ensure that they consistently comply with the Buy American requirement, the school districts we reviewed should establish written policies and procedures related to the Buy American requirement by October 1, 2017. At a minimum, those policies and procedures should include the following:

Agency Comments

Although it agreed with all but one of the recommendations we made to it, Education expressed concern about our conclusion that it did not adequately ensure compliance with the Buy American provision. Five of the six school districts we audited agreed with the recommendation we made to each of them and indicated they would implement it. The sixth district—Stockton—did not indicate whether it agreed with our recommendation that it establish written policies and procedures to ensure compliance with the Buy American requirement.




Footnotes

1 The conclusions we present in this report are based on guidance the USDA had issued regarding compliance with the Buy American requirement at the time of our review. On June 30, 2017, after we completed our on‑site review, the USDA issued guidance that updated how it expects state educational agencies and school food authorities to understand and apply the Buy American requirement. After a review of the new guidance, we determined that our recommendations remain the same. Go back to text



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