Federal funds intended for helping poor children succeed in school were instead spent to pay part of their principals' salaries, according to state officials. The shift of funds occurred at 455 campuses across the L.A. Unified School District this year.

State regulators are demanding that the school district either return the dollars – $4 million in all – or restore the money to its proper purpose. “These funds are intended to provide direct services to students and cannot be used to augment salaries,” said Vivian Burton, who oversees the state's use of federal funds for the state education department.

District officials downplayed the dispute. The whole matter is a minor bookkeeping issue, “one of those things that primarily was a technical correction,” in the words of special-funds administrator Margaret Jones. And this week, district controller Olonzo Woodfin reported the problem solved. It was only “a matter of which pot the money is coming out of,” he said, because the state is paying either way. But state officials vigorously disagree, calling the district's practice illegal. They continue to press for a full accounting of the funds.

The whole dispute centers on the use of federal Title I money, which is for helping schools counter the effects of poverty on their students. These funds are used for extra teaching time, field trips, classroom materials and other direct student services normally outside the scope of district funding.

Because offering such programs means extra work, the state allows L.A. Unified to spend 15 percent of its $162 million in Title I funds on overhead and administrative costs. But the rest is supposed to benefit children directly. The school district argued that the money compensated principals for time spent to prepare for the year's Title I programs, said Burton, “but in most cases there is already a full-time Title I coordinator at each school.”

Funding disputes like this one constantly play out across the school district. District officials frequently complain that special programs – such as Title I, special education or bilingual education – are never adequately funded, and often end up draining the district's general fund. For their part, many advocates for children assert just the opposite, that the district wrongly taps into special funds to cover normal operating expenses.

The alleged misappropriation – which amounts to about $8,800 per school – arose in January during a regular state review of the district's Title I program. Upon discovering the problem, the state's Burton called for an immediate correction. But the school district still had not complied when the Weekly first inquired about the matter four weeks ago.

Now L.A. Unified is proposing to restore the $4 million to its intended purpose. The proposal, which has yet to be formally submitted, would require redoing school budgets, a thorny process this late in the year. Principals contacted by the Weekly said their Title I budgets were either spent or already committed.

In any case, word of the problem apparently has not filtered to school sites. The principals interviewed had not even heard of the issue. Even top district officials were in the dark, including controller Woodfin, who oversees all district expenditures.

“Where did you get that information?” asked a surprised Woodfin, when first questioned about the dispute. “Pay what money back? What state office said that?” Woodfin, who later declared that the matter was resolved “weeks ago,” added that “it was our opinion” that Title I should pay for “their portion” of the increased costs of year-round schooling.

In interviews district officials acknowledged that this is the third year they've used some Title I funds for principals' salaries. State education officials weren't happy with this news either, but added that they lack the resources to investigate or punish past abuses. Burton said her main goal is to correct this year's mistake and prevent it in the future.

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