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School Investigator: Widespread Fraud Pervades Chicago School Lunch Program

CHICAGO (CBS) -- Fraud in the Chicago Public Schools' free and reduced lunch program is system wide, the CPS Inspector General concluded in a report released Monday.

CBS 2 and the Better Government Association first disclosed how CPS employees were gaming the $175 million program meant for poor children.

Now Pam Zekman reports parents are playing the same games at taxpayer expense.

To qualify for a free or reduced lunch, parents have to fill out an application stating their family income and the number of household members.

The inspector general reviewed of 1,000 cases of children enrolled in the program and reported "an astonishing 707 recipients -- nearly 71 percent -- had their benefits decreased" because of violations by parents.

"This overwhelmingly suggests that the fraud problem pervades the entire application process," the report said.

"This is a scam, a scandal and a rip-off of staggering proportions. I have rarely seen any systemic rip-off of this magnitude," says the BGA's Andy Shaw.

As CBS 2 first disclosed with the BGA in 2010, the children of school employees at North Grand High School were getting a free lunch by under-reporting their income.

Now, 55 employees have been cited, including principals and assistant principals like a married couple whose combined CPS salaries of $230,000 weren't listed on the application of their children.

The more children in the free and reduced lunch program, the more federal and state money CPS gets, the IG noted.

What is especially important about the cases," the IG said, "is together they show that the lucrative federal and state benefits tied to the forms drive the fraud."

"The I-G has done its job," Shaw said. "It's up to CPS and the feds to swoop in, come up with a plan and punish the offenders."

Most of the school employees who have been cited have resigned or have been disciplined or fired. The question remains whether the U.S. Department of Agriculture, faced with how big this problem is, will relax some of its regulations so CPS can cast a wider net.

They are limited as to how many of these applications they can carefully scrutinize each year.

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