Auditor-General issues warning over government's school lunch scheme

Alarm bells are ringing over the coalition's school lunch programme, with the Auditor-General warning the government has not been able to clearly show the scheme is delivering its aims.

A report tabled in Parliament on Tuesday afternoon finds the programme is saving money compared to Labour's approach, but says its performance is not being properly monitored or tracked.

It also flags concerns about how the new system was set up, including weak back-up planning and last-minute changes even after contracts had been signed.

The findings were part of a final report from the Auditor-General's investigation begun last year after concerns were raised about the programme - in the media and with the Office directly - over quality, timeliness, appropriateness of the food provided, how costs were determined and how providers were selected.

Associate Education Minister David Seymour had in October 2024 signed a two-year contract for $85 million a year with the School Lunch Collective.

The collective included Compass and Libelle, but the latter went into liquidation in March, owing more than $14m to hundreds of creditors.

The inquiry does not comment on the policy decisions behind the new model. The ministry has also made changes in response to a draft version of the report, which were not reviewed.

In a statement, Seymour rebuffed the criticisms, saying the report "favours process over outcomes, and the disgruntled over reality".

"The report is driven by former suppliers and former employees of the Ministry of Education," he said.

"By making the programme more efficient I have saved the taxpayer $360m and counting. The Auditor-General should be happy about this outcome. Reading the report, it feels like the Auditor-General would be happy if we spent another $360m to get the same outcome, so long as we followed his preferred process.

"More generally, the report acts as a rear-view mirror, telling us what we already knew. There were some teething issues at the start of the programme, and they were addressed. With any contract delivering a quarter of a million meals to a thousand schools, there will be the need for constant management, which we provide.

"We accept there is a challenge regarding surplus. In the last couple of weeks we have seen surplus come down slowly due to the ministry working with schools to help them order meals to attendance. Further changes are underway to bring it down further, including improving menu variety, quality, and responsiveness to school feedback."

Concerns around procurement and planning

The report found several concerns about procurement and planning.

About 125 existing suppliers had contracts not renewed at short notice, despite some having been told they would be. The change cut revenue by about 48 percent on average. "In our view, the Ministry's inconsistent messaging and short notice to existing suppliers did not reflect good supplier management practices."

Cabinet agreed to a $3-per-meal price tag despite officials warning it might not meet nutritional needs and could create operational complexity for schools with multiple age groups, and that it could increase the burden on schools, affect the health of students, and increase cost of living pressure for whānau and families.

The ministry also warned it had not tested the $3 cost with the market or thoroughly analysed the cost. Advice from the ministry also changed so that where $3 was initially intended as a "high-level estimate" covering only food, it became a policy benchmark and was expanded to cover all costs.

After the ministry put out a tender, the scope was changed to require a shift to hot lunches and the cost was kept at $3 per meal, despite suppliers and schools warning this may not be achievable.

The ministry did not hold preliminary discussions with all 20 shortlisted suppliers.

The scope was expanded to include area, composite and full primary schools despite these being previously explicitly excluded.

After a contract was signed with School Lunch Collective, it was provided an extra $18m to meet nutrition standards for Year 9 students and above; just over $1m to collect food waste and rubbish; and schools were given a further $3m to offset the costs of distribution within the school.

The ministry was aware of past performance issues with both Compass and Libelle, and had concerns about Libelle's financial stability under the previous model, but relied on Compass' assurance of Libelle's production capacity and contracted with Compass as lead contractor to reduce risk exposure.

The model was implemented before the officials had contingency planning finalised. Contingency planning was "inadequate for a programme of this size, scale and risk, particularly given the previous performance of key suppliers".

The approach to provision of a contract for Early Childhood Education services through KidsCan "reduced the pool of potential suppliers to just one", with officials carrying out the procurement having not been informed that KidsCan previously made an unsolicited bid. While there was no evidence the choice of supplier was actually predetermined, this "could have been managed better" and could lead to perceptions that it was.

The report said changes to scope and costs happened "while the Ministry was engaging with the market for a supplier, during contract negotiations with the chosen supplier, and after the contract had been signed".

"This gives rise to concerns about fairness, especially for those suppliers who withdrew from the procurement process after concluding that they could not provide all aspects of the Alternative Provision Model for the $3 a meal cost signalled to the market."

Speed also appeared to be a factor in several of the problems, with the report finding a "desire for a new model to be ready for the start of the 2025 school year".

"To achieve that, decisions needed to be made before the Budget in May 2024, and a procurement process run to secure a provider in time. The effect of this timing, combined with ongoing revisions to the design of the model, meant that the scope of the services and the contract price continued to change."

The scope was also further expanded in September 2025, with costs rising by nearly $30m as a result.

Monitoring falls short, targets not met

Multiple food safety concerns arose during the early days of the revamped programme, ranging from dietary meals being mislabelled to students finding melted plastic, broken seals or bits of glass in their food, or being burnt by overheated meals.

The report found 51 complaints were logged in February alone. Some concerns were resolved in a single day, one took 260 days.

"The Ministry told us that these figures represent an 'unprecedented increase' in the number of incidents, which reflect 'significant structural and staffing changes' within the School Lunch Collective and school holidays affecting incident resolution."

The report also found the 2025 costs were about $130m less than under the previous model, but "did not have sufficiently robust mechanisms to "measure, manage, and monitor important aspects of performance".

That was despite Seymour having said he would prioritise improvement of data on waste and surplus because not effectively measuring them was "not acceptable when funds can be directed elsewhere".

Assistant Auditor-General Melanie Webb noted that even where there was measurement, "not all the programme's goals are being met".

She said the number of unopened, uneaten meals - or surplus - were higher than the maximum contracted for, and rates are increasing.

"We understand that surplus rates for the School Lunch Collective have increased to 17 percent in 2026," the report said.

"The average level of surplus for the 2025 school year was 10.39 percent, which is similar to surplus rates under the previous model. Thirty-six schools consistently recorded surplus rates above 20 percent until August 2025, and the School Lunch Collective identified 160 schools that needed 'surplus action plans'.

"The plans included adjusting meal numbers based on attendance, sharing information with schools, and changing lunch service times and tuck shop hours."

Information about the number of lunches delivered in full and on time were "not independently or formally verified".

The collective did not consistently meet the 99.9 percent target in term 1, "with meal production often falling below 50 percent of the required numbers", although a weekly average reduced target of 97 percent was met from term 2.

On waste, although the collective was required to have a waste management plan, the report found no contractual target for it.

The waste plan shows all packaging is to be sent to landfill rather than recycled apart from in Auckland, Waikato and Bay of Plenty where only trays are recycled.

No measure of food waste was in place in early 2025, and waste was only measured once, over 10 days in Term 3, 2025.

Nutrition standards also fell short, with only 50.5 percent of the meals complying with nutrition standards across 2025 - although terms 3 and 4 showed improvements (69 percent and 75 percent).

The report shows differences in the way the collective and the ministry measured nutrition, with the collective's assessments "based on the ingredients list for meals".

"The Ministry told us that the discrepancy between the Ministry's findings and the School Lunch Collective's findings might be due to the variation in how nutritional compliance is measured."

The ministry's measurements of nutrition varied thanks to factors including whether the meals were assessed on the day they were delivered, and "the availability of Ministry staff".