San Gabriel Valley Tribune (California) - by Thomas Himes

Alleging school officials misspent nearly $1.5 million intended for needy children, state regulators have withheld federal dollars from Baldwin Park for the second time in five years, according to official documents obtained by this newspaper.

In letters from the California Department of Education, state regulators claim that between 2004 and 2008 Baldwin Park Unified School District officials used nearly $1 million intended to buy food for poor students to instead clean their cafeterias.

Another $500,000 of the federal food money was used to reimburse the district for banking fees and interest, according to documents.

Superintendent Mark Skvarna denied the money was misspent, saying that he plans to file a lawsuit and fight the state.

"I will get an injunction against them and take them to court," Skvarna said. "I'm not willing to do anything other than that. They're going to lose and we're going to win."

The district has until Oct. 26 to repay the $1.5 million or state officials say they might permanently prohibit the district from receiving federal food funds, according to letters from the California Department of Education.

In all, the district receives more than $6.6 million a year to provide food to 18,000 school children. A majority of those students are economically disadvantaged and qualify for free or discounted meals, according to officials.

Federal and state authorities restrict spending of the money to ensure that districts don't use it to pay for general expenses, while serving sub-par food or stopping kids from receiving free and discounted lunches, CDE Staff Services Manager David Jang said.

While school districts are allowed to pay custodians and buy cleaning supplies with the funds, BPUSD failed to properly document the expenses, Jang said.

Repaying the money could prove challenging for the district, which recently ordered its employees to take six furlough days in an effort to cut payroll costs, according to district officials.

"The district is reluctant to give that up because we're strapped for cash," school board member Hugo Tzec said.

It's not the first time state authorities have taken issue with the district's use of federal funding intended for the school lunch program, according to documents.

State officials ordered the district to repay $1.6 million and draft a five-year spending plan when they withheld funding in 2006, according to state documents.

The district had used the $1.6 million to remodel cafeterias in several elementary schools and Olive Middle School, a use that is prohibited by state and federal law, Jang said.

The five-year plan was implemented as a means for the district to lawfully spend a multimillion-dollar surplus it had collected, Jang said.

The state prohibits surpluses of the funding that amount to more than three months, Jang said.

Under the plan, the district could have used the money to provide free lunches to its children or serve higher-quality food, such as more fruits and vegetables, Jang said.

But when state officials returned in 2008 to check in on the district, they discovered the nearly $1.5 million had been spent outside that written plan, according to one of the letters.

The school district's Chief Financial Officer Marcene Hamilton said the cafeteria fund was never billed for legitimate expenses the district had been paying in error.

"(The cafeteria fund) was encroaching on the general fund by not paying the cost of all of their program," Hamilton said. "They had never, ever paid for any custodian costs at all or any of their costs of supplies to clean the kitchen."

The state, however, has rejected the district's argument.

"After fully considering BPUSD's justifications for the transfer and its supporting documents...none of these cost items were allowable," according to a Sept. 26 letter from the CDE's Chief Deputy Superintendent of Pubic Instruction, Richard Zeiger.

In lieu of immediately repaying the money, the CDE said the district can have the State Controller's Office audit its books, according to Zeiger's letter.

However, if the state controller finds the district erroneously spent the money, the district will have to pay for the audit and legal fees, according Zeiger's letter.

Skvarna said he has no intention of agreeing to the audit, which would prohibit him from filing a lawsuit.

"The State Controller's Office still works for the state. I'm not going to agree with that," Skvarna said.

School board member Jack White said he's not too worried about the funding. Kids are still being fed and the district still has money in its cafeteria fund, he said.

"I'm certain we're not going to have to repay it," White said. "We're certain the money was legally spent."