State reprimands SD schools for financial missteps

SD Unified and Sweetwater prohibitively dipped into nutrition accounts

Two San Diego area school districts have received a reprimand from California state auditors for charging their federally funded cafeteria accounts interest and unallowed operations costs.

Five [districts] charged more than $171,000 in interest to their cafeteria funds, despite a federal regulation prohibiting such charges," according to a February 27 audit report. "Further, seven [districts] inappropriately charged a total of more than $94,000 in utilities and other support costs to their cafeteria funds."

The worst interest-charge offender was San Diego Unified, according to the report, with $102,702 of improper charges, followed by Sweetwater Union High School District with $32,875.

"Sweetwater Union High School District (Sweetwater Union) charged almost $33,000 in interest costs to its cafeteria fund for money that it periodically borrowed from other school district funds to cover costs for its child nutrition programs."

Explained Sweetwater in a February 5 letter to auditors:

Due to cash flow issues, it is commonplace that the Cafeteria Fund periodically borrows from other District funds, such as the General Fund.

It has been the District’s standing practice that the Cafeteria Fund pay interest to the funds borrowed from; however, the District was unaware that costs incurred for interest on borrowed capital for the use of the governmental unit’s own funds are unallowable.

"In contrast," the audit said, "San Diego Unified School District and San Francisco Unified School District did not explicitly loan money to their cafeteria funds, but they elected to charge their cafeteria funds to recover what they referred to as lost interest earnings.

"San Diego...explained that it charges interest to its cafeteria fund because its general fund forgoes interest earned from the county treasurer when, due to a negative balance in its cafeteria fund, the general fund is used to pay for food service obligations."

According to the audit report, "Although...San Diego Unified believes that interest charges to the cafeteria fund were fair and reasonable, it accepted the [audit's] finding and indicated that it would reimburse the cafeteria fund for the interest it charged."

"Like Sweetwater Union," the auditors wrote, "both San Francisco Unified and San Diego Unified explained that they were unaware of the federal regulation that does not allow costs for interest to be charged to the child nutrition programs."

In addition to the interest expenses, auditors found that San Diego Unified had improperly charged its food fund $16,829 for utilities and support costs.

A February 6 letter from San Diego Unified attached to the report says that the district took action to correct the situation in January and reimbursed the state for the disallowed interest last October. Sweetwater told the auditors in a February 5 letter that the district had also made the appropriate refunds.

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The good news is that the State is actually looking at some of this stuff.

The bad news is that apparently they have not reached the deeper levels of the problems.

But I will take this as a start--maybe Sweetwater will interpret this as the shot across the bow, or maybe Sweetwater will at long last decide to come clean, own up and clean up?

We are not going away until that happens. No more siphoning off of funds...we need the honest and correct allocation of our school resources. Stop the scams!

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