Taxpayers in the District have subsidized a public schools meals program that lost more than $10 million a year since it was outsourced to save money in 2008, according to an independent audit commissioned by the school system.
Meanwhile, many other local school systems break even or even profit from their food service programs. Montgomery County, which operates its meals program in-house instead of contracting out, ended the 2011-12 school year with a $2 million surplus.
School leaders in the District must improve their management and monitoring of the food service program, said D.C. Council Chairman Phil Mendelson, speaking at an oversight hearing Thursday.
Council member Mary M. Cheh (D-Ward 3) spoke more forcefully, calling the audit’s findings “impressively despicable” and the outsourcing of school meals “a failed experiment.” Serving healthful food to children should be central to the school system’s mission and run by school officials, not by a for-profit company, she said.
“I think what we’ve done over the past several years is really an abomination,” said Cheh.
Schools Chancellor Kaya Henderson has previously been reluctant to resume operations of the food service program, saying that the school system is staffed by experts in teaching and learning, not in managing a food service operation.
The city’s largest school meals vendor is Chartwells-Thompson Hospitality, which serves meals in more than 500 school systems across the country. The company released a statement Thursday saying the audit — which analyzed a period from 2008 to 2012 — is riddled with errors and was conducted by a firm with no experience in the food service industry, Washington-based Federal Management Systems.
The District’s school system is now losing less on its food program each year than it was before Chartwells took over in 2008, according to company officials.
“Over the past four years, Chartwells-Thompson Hospitality has helped DCPS implement a school foods program with the highest food quality and nutrition standards in the city’s history,” the company said in a statement. “We are deeply disappointed by the recent public release of a highly-flawed audit of DCPS food service vendors.”
The D.C. schools program has won widespread recognition in recent years for overhauling its offerings, serving more fresh fruits and vegetables and getting rid of flavored milk and other sugary, processed foods.
The meals program has also expanded, serving more breakfasts and introducing supper in a city where many poor children get their most nutritious meals at school.
But costs have been an ongoing concern.
Chartwells won a contract in 2008 to serve 50 million meals to D.C. students at a cost of $42 million. In fact, the food services company charged the city more money — $49 million — and served only 35 million meals, the audit said.
Over the four years of the contract, Chartwells’s meals program lost more than twice as much as the company originally anticipated, according to the audit.
Company officials said the rising cost was partly because of their efforts to comply with Cheh’s Healthy Schools Act of 2010, which gave the District some of the most stringent nutrition requirements in the nation.
School system officials, concerned about those losses, did not renew the Chartwells contract for the current school year. Instead, they issued a new request for bids.
Chartwells responded and succeeded in winning a $29 million contract to serve 107 schools.
Anthony DeGuzman, the school system’s chief operating officer, suggested that the District’s costs are not comparable to other school systems’ costs, in part because of the city’s stringent nutrition requirements.
He said he’s optimistic that the new contract with Chartwells will result in savings.
The school system used to reimburse the company for all its costs and now pays a fixed price for each meal regardless of the company’s expenses.
But DeGuzman still anticipates millions of dollars in losses: Because of the contract’s price structure, the school system loses money on every meal it serves.
The more meals it serves, the more losses it incurs.
Mendelson said the school system needs to be more aggressive in contract negotiations to get a better deal for D.C. taxpayers.
“There’s a significant management problem,” Mendelson said. “We can manage ourselves to substantially less cost while maintaining quality and nutrition.”
Ivy Ken was among several parents who testified Thursday, arguing that for-profit companies are ill-suited to run school meals programs because of their mission to make money. This fall, Ken pointed out, New York reached an $18 million settlement with Chartwells’s parent company for overcharging dozens of schools for meals.
“Anyone who wants to continue the District’s relationship with this company, or any other large for-profit company, must be able to make an extra-persuasive case,” she said.