Missteps with nutrition funding cost LAUSD, raising concern over trend

After months of negotiations, Los Angeles Unified has agreed to repay over $55 million for a series of internal misallocations involving federal school meal funding.

The settlement comes in the wake of a 2009 internal audit that found the district was using federal meal money for purposes unrelated to nutrition services.

The district's error and subsequent repayment plan is the largest but by no means the only jurisdiction to be targeted by state and federal auditors for violating meal spending laws that officials said have become more frequent since the onset of the economic crisis.

We've had a growing number of instances where we're finding problems with districts misspending their cafeteria funds, similar to what we found with L.A.," said Phyllis Bramson, director of nutrition services at CDE

"We get that districts are really hurting financially. But in its recent reauthorization of child nutrition programs, Congress' direction is that federal reimbursement funds should really go for meals and delivering those meals," she said.

For years, districts have argued that nutrition accounting and reporting is unreasonably complex and burdensome, said Bramson. But state and federal officials also say there's been an escalation of instances where districts overbilled the government for meal reimbursements or made inappropriate charges to their cafeteria funds.

A total of $61 million in nutrition spending has already been recently ruled misappropriated, according to a report made last month to the California State Board of Education.

Along with L.A. Unified, state officials reported that Baldwin Park Unified made similar errors and now must pay back $1.6 million.

The remainder of the misapplication came from Oxnard Union High School District, which overbilled the federal government by $5.6 million for free and reduced priced meals and now must return the funds to the state and federal government.

According to the Ventura County Star, Oxnard Union was found to have improperly claimed about 4.1 million meals between 2005 and 2008. After being tipped to the matter through an employee worker compensation claim, the district launched an internal investigation in 2008.

Shortly thereafter, the U.S. Department of Food and Agriculture began a separate investigation into Oxnard. In September, a district spokesman told the Star that Oxnard Union would likely ask the state for help with an internal repayment plan. State and local officials declined requests for an update on the case.

At L.A. Unified, the 2009 audit noted a lack of communication between the chief operating officer's food services branch and the office of the chief financial officer.

As a result, an unchecked and outdated funding mechanism made "unjustified and unreasonable" charges to the cafeteria fund.

Meal service dollars were allocated to five unrelated district offices including the communications department, but the offices were unaware of it.

The audit also explained that some school staff directly funded by the cafeteria funds were found not to be devoting 100 percent of their time to the food services program.

Also noted were a series of prior audits dating back to 2006 that identified "internal control deficiencies" related to food service, but corrective actions were not taken.

"Because of the ongoing and unresolved issue of the cafeteria fund charge allocations, funding was not consistently available for necessary improvements, and has negatively impacted the overall quality of the food services program," the audit's authors wrote.

A spokesman for L.A. Unified declined to comment on the case.

School meal advocates said the errors are understandable given the unprecedented cutbacks that schools have coped with in recent years.

"I haven't heard that school districts or school business officials are plowing money into condos in Baja - that isn't what I've heard. I think they are meeting real budget challenges," said Matthew Sharp, a senior advocate at California Food Policy Advocates.

However, said Sharp, misapplying cafeteria funds can hurt the quality of school meals.

"That's a problem for strengthening the nutrition quality of the program, for investing in the equipment and facilities needed to modernize and improve the student eating areas. And it's a problem for school districts that are looking for ways to subsidize the cost of meals," he said.

In response to this trend, the CDE has asked the Legislature to fund four new state personnel that would educate districts on nutrition compliance.

On the federal level, the recently passed Healthy and Hunger Free Kids Act requires the U.S. Secretary of Agriculture to issue guidance on what constitutes an indirect cost, or the ancillary costs of serving meals that include janitorial kitchen cleanup. This guidance is expected to help districts better understand nutrition accounting and reporting laws.