Report: New Jersey employees defraud federal lunch program

TRENTON, N.J. (AP) - July 18, 2013

Comptroller Matthew Boxer said the names of the employees, as well as 26 of their family members, were referred to state authorities for prosecution after widespread fraud was uncovered in a national school lunch program meant to serve children in low-income families. Forty of the employees work for school districts, including teachers, and six are elected school board members, he said. Others were state, county and local employees.

"What we found are people who work for the government lying to the government about how much the government is paying them, all to benefit from a program that is designed to help those in need," Boxer said at a Trenton news conference announcing the results of the three-year investigation.

Taken together, the 109 cases had underreported incomes of $13 million, including some instances of the same person underreporting multiple times. Other states, like Illinois, have documented similar fraud by public employees, he said.

Boxer said he launched the investigation of 15 of the 53 districts in New Jersey that receive at least $1 million a year from the federal program after reports of fraud in the Elizabeth school district by school officials.

Marie Munn, president of the Elizabeth board of education, resigned this year after being charged with stealing from the lunch program by filing false applications for her own children. Munn said she repaid the school district after learning her children had received free lunches since 2006.

Another Elizabeth board member and two attorneys for the district were charged by the attorney general's office in a scheme to cover up additional fraudulent applications for free lunches earlier this year.

Program applicants are required to certify that they may face criminal penalties for giving false information.

Yet one Pleasantville school board member underreported her household income by $59,000 for the three years covered by the review. She later said in a comptroller's office interview that her income was "none of (the school district's) damn business," and that she didn't report it because she wasn't the person receiving the free lunch.

The woman was also referred to tax officials for failing to file state tax returns for multiple years.

Schools have an incentive to sign up as many students as they can, because their eligibility for additional school aid based on the number of children in the program, Boxer said. The report recommends breaking the connection between free lunch eligibility and receipt of state aid.

Boxer said he couldn't speculate on whether the fraudulent applicants were motivated by the idea of saving on lunches or inflating program numbers to get more state aid for the district.

Noting that link, the Comptroller recommends that "breaking the connection between free lunch eligibility and state aid to school districts could both avoid awarding aid based on inaccurate information and address district incentives to enroll ineligible applicants in the free lunch program."

Republican Sen. Michael Doherty cited the report in renewing his call for revisions in the funding formula on which school aid is based.

Doherty, one of the most conservative of the 120 members of the Legislature, is the sponsor of the Fair School Funding plan, which would replace the current school funding formula with one that provides an equal share of state education to every child regardless of where they live.

Assembly Speaker Sheila Oliver of Essex County called the abuses infuriating.

"This program is among the best anti-poverty efforts the nation has put forth and is vital to young children who desperately need the proper nutrition to learn and thrive," she said.

"I am deeply disturbed by the findings and fully expect the Department of Agriculture and school districts to implement the reform recommendations to ensure this program is used only by those who truly need it," she said. "I also expect those guilty of fraud to be prosecuted to the fullest extent."

The investigation also found flaws with the way the National School Lunch Program is structured, insuring that the vast majority of the applications are not reviewed for accuracy. Federal law doesn't require proof of income along with the application and generally requires school districts to verify the validity of the 3 percent of applications whose reported incomes are closest to the eligibility limit.

Districts are prohibited from verifying the remaining 97 percent unless fraud is suspected, Boxer said.

"What that means is, as long as you lie big enough about your income to avoid being real close to the income limit, your application will go right through and you'll be enrolled in the program without anyone ever checking to see if you're telling the truth about the income numbers."

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