Cafeteria pricing suit provides cautionary tale – Sysco steals school lunch money!

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Cafeteria pricing suit provides cautionary tale

by The Oklahoman Editorial Board Published: March 4, 2018 5:00 AM CDT Updated: March 4, 2018 5:00 AM CDT

CONSIDERING what happened in recent years at Yukon, school districts across Oklahoma would be wise to thoroughly review their food service contracts — indeed, any contracts with vendors — because it’s possible large sums of money are being misspent.

The Oklahoman‘s Randy Ellis reported Feb. 25 that over the course of four years, Yukon Public Schools believed it paid about $700,000 more than it should have for cafeteria food. The district sued distributor Sysco Oklahoma, ultimately agreeing to a financial settlement.

That settlement included a nondisclosure agreement — a questionable approach, at best, considering taxpayer money paid those food bills. Following the story, however, the district provided details: Sysco paid $500,000 to settle, with the district receiving $270,611. The remainder went to pay litigation expenses, the district’s attorneys and to a company that dug into the food contract and discovered the billing discrepancies.

As Ellis reported, the district was approached more than four years ago by a former Sysco employee who operates Cost Defender, a limited liability company that audits and identifies overbillings. Cost Defender sought 15 percent of any money recovered.

The district initially said no thanks. Yukon’s superintendent explained that school districts often get similar solicitations from companies that want the districts to do most of the work. But after Cost Defender issued an open records request for food service bidding and invoice documents, administrators realized the company “must have some information that was pertinent to the situation,” he said.

The Yukon district filed its lawsuit in September 2016, alleging that Sysco’s bid prices were supposed to be guaranteed for the full school year, but that invoices accompanying the delivered products billed the district at higher prices.

Sysco, a multinational food distributor, denied wrongdoing but has had other issues involving billing. In 2014, Sysco Oklahoma agreed to pay or credit the state of Oklahoma more than $36,000 after overcharges were found by the Department of Corrections. A year earlier, a Sysco subsidiary in Houston agreed to pay $4.2 million to resolve allegations it had overcharged the Department of Defense.

In the Yukon case, food service workers checked invoices to ensure the proper quantities of groceries were delivered to the schools, but didn’t check the prices. As the district’s chief financial officer put it, “We didn’t connect the dots.”

It would be unfair to place all, or even much, of the blame with the kitchen staffers. The CFO noted that Yukon’s kitchen director oversees 11 kitchens and 65 employees, and is responsible for planning the menus. That’s a full-time job and then some.

Instead, this episode should sound an alarm to school districts large and small about the importance of conducting internal reviews of existing contracts, even if only occasionally. If $700,000 in unnecessary spending was possible over four years at Yukon, then it’s not inconceivable to think other districts are paying more than they should in this area. Extant fiscal concerns in Oklahoma’s public schools make strict oversight a must.