LOVELAND MAGAZINE

News and Events from the Loveland, Ohio Area

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Tag: special audit

  • Auditor of State’s criminal investigation and special audit of the Loveland City School District

    Auditor of State’s criminal investigation and special audit of the Loveland City School District

    There was insufficient evidence to meet the standards for recommending criminal charges

    (Read the District’s public response at the end of this story)

    Loveland, Ohio – The Special Investigations Unit of the Ohio Auditor of State has released the results of a criminal investigation and special audit of the Loveland City School District based on “improper spending of public funds”. The investigation began in March 2020, after receiving complaints from a District resident. It was alleged that the District used operating funds in support of a levy campaign. After reviewing information from interviews and preliminary examination of records, a special audit was undertaken by the Auditor.

    Background:

    Dr. Amy Crouse was Superintendent during this time and Kevin Hawley was the Treasurer. The Board President was Art Jarvis; also on the Board at the time was Eileen Washburn, Ned Portune, Michele Pettit, and Dr. Kathryn Lorenz.

    The District engaged in two one-year contracts with Allerton Hill Consulting (AHC), dated March 20, 2018 and March 19, 2019, to “assist with its communication needs and provide a strategic communication marketing and outreach plan”.

    The first contract, costing $73,000, included an agreement that AHC would conduct a “satisfaction” survey using a third-party pollster. A second contract cost $60,000 as it did not include an agreement that AHC would conduct a survey.

    The District summarily canceled the second contract on November 22, 2019. Among the objectives contained within each of these contracts, was a goal to “offer high-quality, long-term, strategic communications, marketing and outreach plan so the District is successful in future public initiatives”.

    “This intimates services provided to aid the passage of a tax levy”, according to the Auditor’s report.

    While there was no levy issue during the first contract period, the District did seek to pass ballot initiatives in both November 2019 and March 2020.

    The 2019 ballot initiative was to pursue a 16.78-mill combined operating and permanent improvement/bond levy including buying approximately 110-acres of land – part of a property known as Grailville. Proposed was a new campus at Grailville for all Pre-K through fifth-grade students and other District wide facility improvements.

    Pursuant to the initial AHC Contract, Fallon Research & Communications, Inc. (Fallon) was hired to conduct a survey in May 2018 of 303 randomly selected residents of the District. This contract cost $13,000 and was inadvertently paid twice by the District: once as part of the AHC contract and a second time directly to Fallon, resulting in a double-payment.

    Additionally, the District subsequently hired Fallon to conduct a survey in March 2019 of 301 registered voters at a cost of $15,000. The first survey contained two general questions regarding how the District spends funds received from tax payers, while the second survey contained three questions that appeared to the investigators “partially designed to aid in the passage of a levy”. These questions provided different funding scenarios with detailed millage options to gauge the likelihood of community support if placed on the ballot.

    Findings

    Based on the special audit procedures and investigation, the Auditor of State confirmed noncompliance as well as a double-payment of survey costs by the District.

    The audit report said, “We issued $13,000 in a finding for recovery for illegally spent funds as well as a management recommendation related to noncompliance regarding contracts partially advocating for the passage of a levy”

    The full details of the finding for recovery and management recommendation are located in the Appendix below.

    Prosecution

    At the conclusion of the special audit and investigation, the special audit results were reviewed by an Auditor of State attorney, who determined there was insufficient evidence to meet the standards for recommending criminal charges.

    ______________

    Loveland City School District’s public response

    Joint Statement regarding Ohio Auditor of State finding

    “Loveland City School District fully cooperated with the Auditor of State’s office and appreciates their work to ensure accuracy in financial reporting and district processes. The investigation relates to actions taken nearly six years ago under previous district leadership,” Loveland City School District Board of Education President Jonathan Eilert stated.

    “The current board and administration have reviewed and discussed the statutory requirements surrounding levies to mitigate future issues. I appreciate the Auditor of State resolving this matter with no penalties towards the district or the previous leadership,” Superintendent Mike Broadwater said.

    “The payment in question was resolved, to the district’s benefit, nearly three years ago.  The district has put into place processes and software to protect against errant payments and remains committed to fiscal responsibility,” Treasurer John Espy said.

  • Teachers’ pension system touts clean audit. Retirees unimpressed

    Teachers’ pension system touts clean audit. Retirees unimpressed

    BY: MARTY SCHLADEN – Ohio Capital Journal

    The State Teachers Retirement System of Ohio has been flagging the results of a special audit conducted in response to complaints from some teachers and retirees. But for its part, the group representing the state’s retired teachers isn’t backing down from its critiques of the system.

    The examination, conducted by state Auditor Keith Faber, was prompted by retirees who have received few cost-of-living adjustments in recent years while retirement system employees have gotten big salaries and bonuses. And, in the most recent fiscal year, they did so as their investments lost billions.

    In a Dec. 29 statement, the retirement system noted that the probe found no evidence of illegal conduct.

    “The special audit found no evidence of fraud, illegal acts or data manipulation related to the funds held in trust by STRS Ohio for its members,” the statement said. 

    It added, “The special audit’s findings include, ‘STRS’ organizational structure, control environment and operations are suitably designed and well monitored, both internally and by independent experts. These experts help assure that STRS follows applicable asset and liability measurement, reporting, investing and cash management laws, professional standards, and best practices. Our conclusions are consistent with the findings of these independent firms.’” 

    The same statement quoted STRS Executive Director Bill Neville as saying, “It is noteworthy that the special audit’s findings refute much of the inaccurate information circulated about STRS Ohio over the past two years, and the report provides extensive detail and analysis in support of its conclusions.”

    However, at least some of the complaints retirees have been raising don’t involve claims of criminality.

    At least 200 of the retirement system’s 500 employees make more than $100,000 a year. And, with bonuses, in the 2021-2022 fiscal year 33 of the system’s employees made more than $300,000. Nine made more than $500,000. 

    Meanwhile, the average public teacher salary in 2022 is $67,000 a year, according to the Ohio Department of Education.

    The retirement system manages about $90 million in teachers’ assets. The system makes traditional investments, while also putting money into high-fee “alternative” investments such as private equity and hedge funds. 

    In making such investments, the system is effectively trying to beat the stock market. STRS spokesman Nick Treneff has said alternative investments also allow for a more diversified portfolio, which can help to manage risk.

    But over at least the medium term, the stock market has proven to be the better investment.

    Over the past decade, it has provided a 14.8% return on investments, while the system’s alternative investments have provided 11.84% once fees are subtracted, Treneff said in July.

    Retirement system salaries and bonuses have grown large as retiree benefits have stagnated. 

    The latter group got a 3% cost-of-living bump in their benefits last year — their first since 2017. Treneff has explained that the freeze was due to new rules set down by the legislature in 2012. State and local governments were still reeling from the Great Recession and there were nationwide concerns about unfunded pension liabilities.

    In addition, the General Assembly hasn’t increased its contribution rate to the pension fund in 38 years.

    But what really has retirees incensed is the way the STRS board handled staff bonuses last year. In August, it awarded $10 million in bonuses even though it estimated that it would lose $3 billion in an environment that was brutal for investors. 

    Then in October, the actual numbers for alternative investments came in. System losses were 77% higher than original estimates — $5.3 billion. 

    For perspective, the losses follow $22.3 billion in gains a year earlier, according to the system’s financial statements. 

    However, the retired teachers union argued, if staffers are going to do well in times of plenty, they shouldn’t do so well when times are bad. Also, the group argued, the system’s board should have delayed awarding bonuses until after the actual loss figures came in instead of using a big underestimate.

    In light of those occurrences, the Ohio Retired Teachers Association wasn’t mollified by a clean audit

    “As expected, the State Auditor confirmed that a broken system yields broken results,” ORTA’s Executive Director Robin Rayfield said in a statement. “Although finding no direct evidence of criminal activity, the Auditor confirmed that the board allowed the staff to use an accounting gimmick to pay themselves $10 million in bonuses despite losing $5.3 billion last year. For years, the board’s bad policies have yielded bad results for teachers, who are working longer and paying more for less, while enriching STRS staff. The only way to change bad policies is to change the STRS board, which teachers will do in this Spring’s election.”