Thousands of students getting free or reduced-cost school lunches may not be eligible for the program, a report released by the state auditor this week finds. But school districts have little incentive to question applications because a higher participation rate also increases their state aid, the report states.

As a result, the state auditor has recommended that the state stop using the school lunch program enrollment to calculate how the aid is distributed.

“There is a significant error rate,” state auditor Stephen M. Eells said of the school lunch database. “It’s not accurate by a long shot, and I don’t think we should be using it to determine state aid.”

The 428,000 students in the free meal program in 2010 would generate about $2 billion in extra “at-risk” state aid under the state school funding formula, which provides an extra $4,700 to $5,700 per student in the program.

Some state legislators are using the report to push for an overhaul of the school funding law.

“We are talking about millions of dollars in school aid, and if it’s based on faulty information, we should know that,” said state Sen. Michael Doherty, R-Warren, Hunterdon, whose “Fair School Funding Plan” calls for a formula that would essentially provide the same amount of state aid for every child in the state, no matter where they lived.

But advocates for children say participation in the school lunch program, while not perfect, is the most effective method available for determining the number of low-income children in a school district who need extra help.

“If anything, studies show that the lunch program undercounts the actual number of students who are poor because some never apply, especially at the high school level,” said David Sciarra, executive director of the Education Law Center, which has represented students in the state’s poorest school districts.

The state auditor reviewed the state’s participation in the National School Lunch Program, which is operated through the state Department of Agriculture. The audit report notes that local school districts are running the program within the guidelines set by the U.S. Department of Agriculture. Those guidelines require that districts verify just 3 percent of applications each year, although they are expected to target those that appear closest to the income cutoff.

“The (districts) are doing what they are asked to do,” Eells said. “They do a good job with the 3 percent they are required to check. But there are a lot more outside of that.”

School lunch program income limits are more generous than the national poverty level. A family can make as much as 185 percent of the poverty level to qualify for the reduced-cost school lunch. For 2011-12, the income limit for a family of four will be $29,055 for the free meal program and $41,348 for the reduced-cost meal.

The state audit says that in 2009-10, districts statewide found that 44 percent of those verified were no longer deemed eligible for either free or reduced-fee lunches. Taking into account families that reapplied, at least 37 percent were deemed ineligible, mostly because the applicants failed to respond to requests for supporting documents.

The state auditor’s office did its own random sampling in 10 districts and found status changes for 23 percent of applicants. Another 24 percent did not provide Social Security numbers, so they could not be verified. The application does not require proof of income or household size, and Eells said it is very difficult to verify how many people are actually living in a household.

Eells said the state has toughened the application process for other state programs, such as Family Care, and could do something similar for determining state aid to schools. He said that while urban districts have proportionally higher enrollment in the school lunch program, the verification process is a problem statewide.

“I’m not saying, ‘Don’t provide state funding,’” he said. “I’m just saying with the significant error rate we should be discussing how we do it.”

Nancy Perella, spokeswoman for Advocates for Children of New Jersey, urged state officials to be cautious in how they proceed.

“I understand we don’t want to fund students or districts that don’t need it,” she said. “But what can you do instead that won’t hurt children? No data set is perfect, and (the auditor) has a valid point. But this is the best data we have right now.”

Children in families that participate in other state subsidy programs, such as Temporary Assistance for Needy Families and the Supplemental Nutrition Assistance Program, are automatically eligible for the school lunch program and account for about 25 percent of all students in the program, the state audit finds.

Jean Daniels, spokeswoman for the U.S. Department of Agriculture, said there was a huge discussion of the verification process when the Healthy, Hunger-Free Kids Act, which includes the school lunch program, was reauthorized in December 2010, but ultimately Congress decided to maintain the 3 percent verification rate.

“There were compelling arguments from districts about handling the administrative paperwork,” Daniels said.

The National School Lunch Program is considered a “high error” program by the federal government, which found that in 2009 about $1.5 billion of almost $9 billion in funds — or more than 16 percent — paid to the program were considered improper.

Daniels said the program is difficult to track since family status may change during the year based on their employment status.

“Verification is for an entire school year, but family circumstances change,” she said. 

Daniels said all parties are concerned about improving the integrity of the program, while also maintaining access and not punishing children who are hungry.

“We would tend to err on the side of giving a child a meal,” she said. “It is a difficult balance, especially in these economic times.”

Contact Diane D'Amico:

609-272-7241