Using the number of students who receive free lunches may no longer be the best way to allocate funding for public school students who are at risk of failing academically, a new state audit concludes.
Free lunches have been used to determine at-risk funding for schools because the number of students in poverty and the number of students at risk of academic failure tended to be similar, the auditors said in their report to lawmakers.
But legislative auditors found that over time the program has changed significantly, which allowed more students to qualify for free lunch without submitting the required household income information to qualify for free lunches.
“We found that a significant number of students receiving free lunch had household incomes that well exceeded the poverty threshold,” the auditors wrote.
As a result, the free lunch count might not be an accurate measure of the number of students in poverty in Kansas schools, they concluded.
The auditors further reported that school districts now consider more factors than poverty when determining which students need at-risk services.
“As a result, the free lunch count may no longer be an accurate measure for determining the number of students at risk of academic failure in a district,” the audit concluded.
Auditors also warned that the free school lunch program is at a high risk for fraud, waste, and abuse because of the inability of school districts – through no fault of their own – to verify household income.
The auditors recommended that the Legislature reexamine how at-risk funding should be allocated, including whether it should continue to be allocated based on the free lunch count.
School districts receive about $2,500 for every student who meets the at-risk funding criteria, which totaled $488 million in state spending in 2023-24.
The state provides additional at-risk funding to districts whose free lunch percentage is 35% or greater. In 2023-24, the state paid about $75 million to districts that qualified for that so-called high-density at-risk funding.
At-risk funding has been a controversial issue among some Republican lawmakers who believe that school districts are not spending it properly.
The issue dates back to a 2019 legislative audit that questioned whether $191,000 in spending on at-risk programs was directly related to at-risk students.
The issue resurfaced again in a 2023 legislative audit.
The issue is gaining new attention as a special education task force considers a new school funding formula.
Deputy Education Commissioner Frank Harwood said the funding task force has been looking at alternative ways to fund at-risk students.
Harwood said there are ways to fund at-risk education without using free lunches as a determining factor, although he noted that could change how much each district gets.
He said the school funding task force has looked at modeling for at-risk funding that could include using census data to be a determining funding factor.
“Those are things that are already on the table, just no decisions that have been made.”
In Kansas, children may qualify for free or reduced-price school meals based on their household income and size.
Families earning at or below 130% of the federal poverty level are eligible for school free lunches, while those earning up to 185% of the federal poverty level are eligible for reduced-price meals.
The auditors said that during the 2023-24 school year, about 198,000 students received a free lunch because their reported household income was less than 130% of the
federal poverty line, which was double what they expected based on census data.
The auditors found instances of where they believe some students who received free lunches were not financially eligible, but in other cases they had to rely on estimates while not being able to access some free-lunch determinations entirely.
Students become eligible for free lunches one of three ways, each of which auditors analyzed, some to a greater extent than others. They include:
Direct certification: Students who meet certain criteria are automatically eligible to receive a free lunch. Generally, these students are not required to submit a National School
Lunch Program application to receive this benefit. Instead, state agencies and school districts use a process called direct certification to determine which students are automatically eligible to receive a free lunch. The federal government requires states to directly certify students who receive federal food-assistance benefits, but states can choose to directly certify certain other groups. The percentage of free-lunch students who are directly certified has increased from about 77,000 students in the 2020-21 school year to about 157,000 students in the 2023-24 school year. About 80% of students who qualified for a free lunch did it using this process. Auditors selected a sample of 615 students in this category to audit.
National School Lunch Program application: For students who are not directly certified, a parent or guardian must submit a National School Lunch Program application to determine eligibility for a free lunch. The application requires the parent to provide various information including listing all members of the household members total income. School districts use the household income information on the application to determine whether the student may receive a free lunch, a reduced-price lunch, or must pay full price for lunch. During the 2023-24 school year, auditors estimated about 34,000 students who qualified for a free lunch submitted a National School Lunch Program application. Auditors selected a sample size of 122 students in this category to audit.
Community Eligibility Provision: This allows eligible schools to provide free lunches to all enrolled students without collecting applications. To be eligible, 25% of a school’s students must be eligible for free lunches through direct certification in the previous year. The state requires students who attend these schools, but who are not directly certified, to complete a Household Economic Survey to determine at-risk funding counts because the department only counts students whose household income is 130% or below the federal poverty line. About 7,000 students submitted a Household Economic Survey in the 2023-24 school year. The audit selected a sample size of 32 students in this category to audit.
The auditors estimated that 54% to 72% of all Kansas students who qualified for free lunches when they submitted a National School Lunch Program application were likely ineligible in the 2023-24 school year.
They said that translated to between 18,400 and 24,600 students, meaning the state may have overpaid between $38 million and $54 million in at-risk funding during the 2023-24 school year. Auditors suggested that the estimate was on the low side.
The estimate was based on just 16% of the free-lunch population because auditors could not project eligibility for the other 84% of students who were directly certified for a free lunch or submitted a Household Economic Survey.
The auditors also conceded that the application represented a snapshot in time, while income tax returns and wage information include earnings for the whole year.
“This means it is possible that a student was eligible for a free lunch at the time the application was filed, even if the household’s total income for the year exceeded the threshold,” the auditors said.
“This means we could have determined that a student was not eligible even though they were at the time they submitted the application,” they said.
Of the 122 free-lunch applications they reviewed, 68 applications did not appear to meet the income eligibility for free lunches based on financial information collected from the Department of Revenue or the Department of Labor.
They found that 45 of the ineligible applicants had incomes that were at least 50% over the income threshold, the audit said.
For about half of these applicants, they had incomes greater than $100,000 in the year the student received free lunches, the audit said. Two applicants had incomes greater than $200,000.
In some cases, the application provided income for only one adult household member. However, auditors found two or more adults living in that household.
“As a result, the income provided for that 1 person might have been accurate, but the
household income they reported appeared to be incomplete,” the audit said.
The auditors acknowledged that they couldn’t verify the incomes of the 157,000 students who qualified for a free lunch because they were directly certified, “which means we couldn’t assess the overall accuracy of the free lunch count.”
Auditors said those students do not submit an application, so they don’t provide income information to the school district.
Instead, eligibility for most of these students is determined by information they provide to the state when seeking food-assistance or Medicaid benefits.
They said that because of limits on time on data, they could not not determine whether
those agencies accurately assessed eligibility for those programs.
“Further, some directly certified students are determined by their school district. We could not evaluate whether all the districts made these determinations correctly,” the audit said.
“The high percentage of automatically eligible students – about 80% of all free-lunch students – means the overall accuracy of the free lunch count is difficult to assess,” the audit said.
“Ultimately, much of the accuracy of the free lunch count – and in turn the at-risk funding
count – depends on whether state agencies and school districts accurately approve individuals for their respective programs.”
While the auditors said they could not determine whether students were correctly determined to be directly certified, they tried to verify that those students’ eligibility was
properly documented.
Out of 615 students the auditors reviewed, they verified documentation for 612. They could not verify documentation for three, including one district that did not respond.
They said one district may have inappropriately extended free lunch eligibility to the sibling of a student who was not part of the household.
Auditors also had difficulty gathering enough information to make broad conclusions about students whose families completed household economic surveys as part of the community eligibility program. Nevertheless, they had reservations.
“We could not find income information for enough of the students who submitted a household economic survey to project the results to the whole population of students who submitted a survey,” the auditors said.
“Nevertheless, these results do raise additional concerns about the accuracy of the free lunch count,” they wrote.
For 16 of the 32 surveys submitted as part of that program, auditors could not find any tax or wage earnings from either the revenue or labor departments to confirm eligibility since the surveys didn’t require a Social Security number.
However, out of the other 16 surveys, auditors said that nine did not appear to be eligible for a free lunch, including five that had incomes that exceeded the allowable threshold by more than 50%.
Two had incomes that exceeded the allowable threshold by 10% to 50%.
The audit acknowledged that school officials are limited in what they can do to verify whether students are eligible for free lunches.
For instance, federal rules significantly limit school districts’ ability to verify household income for students applying through a National School Lunch Program application.
Generally, federal rules require districts to verify eligibility for a small percentage of the total approved applications, the auditors said.
The schools districts must verify either 3% of applications or 3,000 applications, whichever is less under federal rules, the auditors said.
In the 2023-24 school year, districts verified about 1,900 applications.
State education department auditors review several aspects of the National School Lunch program applications but cannot independently verify the household income parents report, the audit said.
Also, school districts and state education department auditors review household economic surveys, but they cannot independently verify the reported income.
Parents or guardians are only required to report the total number of people in the household and the total household annual income. Parents must submit the survey to the district annually.
School districts require applicants to document the income reported on the survey.
However, district officials cannot verify through other sources that the reported income is complete and correct.
The auditors warned that the lack of income verification means the free lunch program is at high risk of fraud, waste and abuse.
They said the accuracy of the free-lunch count is based on whether state agencies accurately make eligibility decisions.
“If there is fraud or other errors in determining eligibility for those programs, it is likely to have an impact on free lunch eligibility,” the auditors said.
However, the districts and KSDE do not have the resources or the authority to provide oversight of the eligibility and verification processes of these programs.
