L.A. Unified misspent millions marked for school lunches

At least eight California school districts have misappropriated millions of dollars in funding intended to pay for meals for low-income students — the biggest culprit being the Los Angeles Unified School District, according to a state Senate watchdog group.

The California Department of Education has ordered districts to repay more than $170 million in misused funds to their student meal programs, the California Senate Office of Oversight and Outcomes said in a report issued Wednesday. L.A. Unified has been forced to pay back more than $158 million in misappropriations and unrelated charges that the district made over six years ending in 2011.

State officials suspect the alleged misuse of funds could be more widespread across California school districts.

In most cases, school systems attempted to use cafeteria funds to pay for personnel, utilities and other expenses. Other school districts named in the report are Oxnard, San Diego, Santa Ana, San Francisco, Baldwin Park, Centinela Valley and Compton.

Oxnard was forced to repay $5.6 million. San Diego and Santa Ana are challenging the findings of the department, which has ordered them to pay $4.5 million and $2.7 million, respectively.

L.A. Unified redirected funding for years –- ignoring reports from administrators and its own inspector general –- before an employee alerted state authorities, the survey said. Among other expenses, the district diverted funding to pay for sprinklers and salaries of employees at a district television station.

L.A. Unified said in a statement that administrators have been working with the state to ensure compliance and said the district “looks forward to success with state education officials in this work to find a more rational approach to accounting and compliance guidelines for all schools statewide.”

Federal regulations require districts to keep the student meal funding in an account to be used only for the improvement of food service. Most districts keep federal, state and other cafeteria revenues in that same account and all funds must comply with federal regulations, the report said.

The report, however, found that the system to monitor the spending of those funds is overloaded and that the regulations governing spending are too complex. School districts, as a result, have repeatedly disregarded the rules and subsequently contested violations as arguable interpretations of the law, the report said.

Oversight of these funds is carried out by 60 state examiners who monitor nearly 3,000 districts. Examiners — who are nutritionists — have not completed all inspections required by law since 2001 and “rarely take more than a cursory look at the books,” the report said.

The diversion of funds often contributes to conditions that discourage eligible students from seeking free or reduced-priced meals. To maximize funds, districts have used cost-saving methods of serving processed rather than fresh foods, shortening lunch periods and cutting back on cafeteria maintenance and staff — all of which hinder student participation, the report said.

“They are literally taking food out of the mouths of kids,” Richard Zeiger, chief deputy superintendent of public instruction, said in a statement.

From the 2004-2005 school year to 2010-2011, the number of L.A. Unified students eligible for reduced-price or free lunches fell below statewide averages. During those years, the district — the state’s largest — averaged a participation rate of between 51% and 60% among eligible students. School districts statewide averaged between 71% and 74% participation.

Students who are eligible for reduced-priced or free lunches are from low-income and poverty-level families.

L.A. Unified has become a leader in providing more healthful meals, offering foods with less sodium and fat, and including more fresh fruit and vegetables. The district serves 650,000 meals a day.

The state has allowed L.A. Unified to use money from its general fund that was already going toward covering a deficit in its food services budget to “write off” the debt, the report said. The district has used those funds to pay off about $120 million so far.

The state Education Department said it has begun training employees on how to flag accounting issues and is in the process of hiring additional monitoring staff.

stephen.ceasar@latimes.com