New York City Comptroller’s School Food Investigation

On December 9, 2021, the Deputy Comptroller for Audit and Investigation by letter provided the New York City Schools Chancellor with the results of an investigation the New York City Comptroller’s Office conducted of the Department of Education’s (DOE’s) procurement of food for the City’s public schools, including recommendations to mitigate the identified risks of waste, fraud and corruption.

Findings in Brief

• Over a four-year period (Fiscal Years 2015 – 2018), DOE spent more than a half-billion dollars, averaging $134,585,721 per year, on scores of food products called “approved brands,” with no competitive bids or proposals, no published rules or procedures, no transparency, and little if any oversight.
• The noncompetitive and opaque approval process was extraordinarily vulnerable to abuse. That risk was not abstract: federal prosecutors have charged the former Chief Executive Officer of DOE’s Office of School Support Services and three food company executives with felonies related to DOE’s procurement of “approved brand” food products. The Comptroller’s investigation was separate, but both investigations exposed a system that was ripe for abuse.
• “Approved brand” products were overpriced. DOE’s data indicates that the agency paid $7.8 million more for just five “approved brand” food items in two years than it paid for the same items at prices it obtained through subsequent competitive bidding.

Recommendations

1. Implement and publish a written policy and procedure for “approved brands.” DOE’s written policy and procedure should set forth all required steps and timeframes necessary for its approval of a branded food product, identify the DOE units responsible for each step, and provide for independent review. DOE should publish the policy and procedure on its website and publicly disseminate it through additional means, such as the online City Record. The policy and procedure should define and limit the circumstances, if any, in which a specific required step or timeframe may be eliminated or modified and require a documented justification and advance approval by an independent reviewer for any such departure from the standard process.
2. Procure food competitively and justify “approved brands” procurements as exceptions. DOE’s written policy and procedure should expressly state that DOE must select food products through competitive procurement methods except to meet true short term needs, justified in writing as exceptions, subject to the written approval of an independent reviewer with no direct role in the procurement.
3. Reexamine pricing. DOE’s Division of Contracts and Purchasing should assess current methods for determining whether the prices of the food products vendors market to DOE, including existing and prospective “approved brands” are “fair and reasonable.” The assessment should factor in DOE’s purchasing power as one of the nation’s largest customers.
4. Vet “approved brand” suppliers. Institute appropriate vetting of “approved brand” suppliers, using the review required for contract direct vendors as a guide.
5. Create transparency. Publish, in advance, on the relevant public pages of DOE’s website, in DOE’s Vendor Portal, and, where appropriate, in the City Record: (a) all required steps of the “approved brand” process; (b) each new solicitation of products; (c) the results of each solicitation; and (d) a current list, updated regularly and not less than once per months, of all “approved brand” products, with unit prices and the total amount spent each year on each product.
6. Review food purchases periodically. Review “approved brand” food products periodically, not less than annually, to identify food items appropriate for procurement through competitively bid contracts.

The complete letter is posted on this page.