When the superintendents of the 17 member school districts of Northwest Tri-County Intermediate Unit 5 called for an audit, they got one.
Now the Warren County School District's board of directors has issued a response. Calling for the return of almost $11 million that allegedly should have been allocated to the IU's member districts but was witheld, the resolution and action plan passed by the WCSD board of directors on Monday also calls for "the existing financial management and procedure of cash hoarding and disguise of funds" to be discontinued.
IU 5, which provides special education supports for students in the Warren County School District and the other 16 member districts in Erie and Crawford counties, reported an $8.8 million general fund balance while raising prices to the districts
The superintendents of the member districts authorized an audit to review both the accounts and financial policies of the organization and also called on each of the school boards in the IU to pass a resolution and action plan to rectify the situation.
The letter attached to the resolution, addressed to the IU 5 board of directors and written by WCSD board president Arthur Stewart, addresses several changes to the resolution that the district imposed to a draft resolution circulated to all member districts, several of which emphasize the distinction of the IU as its own separate entity.
The audit alleged, "The financial policies of the IU were established by the management team that was in place at any given point in time. These policies were not approved or known by the IU Board based on our review of the Board minutes and interviews of management." As a result, the IU "was able to establish cash-hoarding policies disguised as legitimate business transactions that in the aggregate concealed millions of dollars" from the districts.
The IU has agreed to return $5 million to the member districts.
While the law requires the budget of the IU to be approved by a majority of member boards, "Our full board does not have the benefit of the information presented, or discussions held, at the IU 5 Board meetings and we do not wish to undertake the responsibility of directing particular action without the benefit of the information and discussion," Stewart wrote, noting earlier in the letter, "We think it is appropriate to continue the practice of having our IU 5 representative act independently at IU 5 Board meetings, and report that action to us."
Exhibiting confidence in the district's IU 5 board representative, Donna Zariczny, Stewart wrote, "In many respects, the IU Board representatives are in fact authorized to act, and do act, independently. We want to preserve that distinction and affirm the good judgment of our representative, while at the same time being respectful of the requirements of this fund balance matter."
The board also redacted a clause in the sample resolution that called for fund dispersal to start Jan. 1, even if the forensic audit the IU is undertaking is not completed by then. "If the forensic audit is worth doing, then it is worth waiting for the results," Stewart wrote. "If the results are not achieved timely we do not wish to abandon the audit...if that progress is not satisfactory we would look to the IU Board to hopefully sanction or replace the auditor...all with an end toward obtaining the audit...not abandoning it."
The board added an additional paragraph to its edition of the resolution that calls for the process of deciding on the funding distribution formula "to be inclusive of all parties," according to Stewart, "since it would seem likely that any excluded or dissatisfied school district could block any attempted distribution by the simple action of filing suit. We fear our district would be named in any such suit and we want to act proactively to avoid such litigation."
The letter concludes on a cautionary note. "Our district shares the goal of examining and treating the IU funds equitably," Stewart wrote. "But as the resolution notes, the school districts (or the subcategory of those districts participating in the Assessment) are not the only stakeholders. We want to proceed in a way that does not compound the difficulties we face, by inviting post-distribution claims or litigation by other stakeholders."
The resolution passed unanimously with Zariczny abstaining. There was no public board discussion on the issue.