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State watchdogs tout their ability to track down misspent public money. But when it comes to retrieving that money, state officials have been largely ineffective, a Dayton Daily News investigation found.
Of roughly $72 million the state auditor’s office has singled out in audits of local government entities as mishandled and missing since it began tracking it in 2001, only about $12 million has been brought back to public coffers.
Some outstanding debts are in the millions of dollars, a Daily News investigation found. In the Miami Valley, an analysis of state data found 578 findings totaling more than $2 million outstanding.
With a backlog of cases and a six-year statute of limitations, those with smaller debts were able to simply wait out the state.
The Daily News found several people or entities in the area who were accused of mishandling public funds, but whose cases have expired so no effort is being made to collect those debts.
This includes more than $5,000 owed by a now-closed Dayton charter school and its administrators for allegedly mismanaged funds; $1,517 in income taxes an audit found wasn’t paid by a councilman to the village of Corwin, just outside Waynesville; and a county treasurer’s clerk in Springfield who state officials said couldn’t account for $307 during her watch.
“Once we came into office, we saw this as something that needed to be addressed and improved,” said Carrie Bartunek, spokeswoman for Auditor of State David Yost. “One of the primary purposes of our office is to protect taxpayer dollars.”
State Rep. Clayton Luckie, D-Dayton, said he’s glad the auditor’s office is taking a tougher stance in order to recoup misspent public money.
“Stick their names in the newspaper,” Luckie said. “Stick their board members’ names in the newspaper if they belong to a charter school or any entity and let folks know we need to recoup those monies.”
Yost’s office conducts the audits, then hands unpaid debts to the attorney general’s office for collection. Yost took office in January 2011 and said he has since been working with fellow newly elected Attorney General Mike DeWine to improve debt collection.
Yost took office from Mary Taylor, the current lieutenant governor. Officials in Taylor’s office said this issue was something she worked on while auditor and that she applauds the changes.
DeWine took over for Richard Cordray, who was appointed by President Barack Obama as the country’s consumer financial protection chief. A spokesperson for Cordray said when he took over the office in 2009 he found no state process in place for these collections and worked to create one.
Under DeWine, the state is starting to use the same collections process used for unpaid taxes — up to and including going after tax refunds — for debts less than $1,000.
Before, findings for less than $3,000 were not pursued unless there was clear evidence of criminal behavior.
Exactly how many people statewide avoided paying back public dollars they were accused of mishandling is unclear. There are 266 people listed on the state’s database who owe combined more than $85,000 for audits that have reached the statute of limitations and are under $3,000.
This includes 16 people with findings less than $3,000 and predating the first half of 2006 in the Miami Valley.
Some of the debtors object to the auditor’s findings and refuse to pay it back. Others have paid back small amounts, but are listed as owing the full amount until it is paid off.
Who are the ‘abusers’ state is targeting here?
Many of the state’s findings still outstanding locally are linked to closed charter schools and small villages and townships.
The largest is $929,850 in findings issued last month — for “booze, missing money, missing records and self-dealing,” according to the auditor’s office — after a special audit of the Dayton-area Richard Allen Academy charter schools’ books in fiscal year 2008.
School officials challenged some of the audit’s findings and said they will work to get them resolved.
Fifth on the list locally is another charter school whose treasurer Yost recently called “a serial abuser of public dollars and taxpayer trust.”
Carl Shye, former treasurer of now-closed Nu Bethel Center of Excellence in Dayton was accused of illegally spending taxpayer dollars in four separate audits of three schools since mid-2011. The findings totaled more than $600,000.
“The evidence is clear — Carl Shye is a serial abuser of public dollars and taxpayer trust,” Auditor Yost said. “All the money, including this latest finding, must be returned, and Mr. Shye should be held accountable for his actions.”
These findings are in addition to hundreds of thousands of dollars of resolved findings issued against Shye — more than 50 findings in total since 2002. Still, he was listed as treasurer for two Columbus-area charter schools when the last audit was released. Shye could not be reached for comment.
Mark Grube, a Columbus-area accountant who is contracted to handle state audits on area governments, said charter schools, villages and townships often have high turnover in their financial offices, as well as less oversight.
“A lot of times your villages or townships, they’ll just have their clerk or treasurer that’s pretty much the only person in their accounting department,” he said. “It’s easier for just one person to try to cover up the theft.”
Rep. Luckie, a former Dayton school board member, said the state board of education should take a cut of per-pupil funding for charter schools with findings against them as they do with public schools.
“Hold back their check,” he said.
State attorneys now handling backlog
The Ohio auditor’s office examines the books of 5,600 political subdivisions across the state each year. It issues findings for recovery against specific people when auditors believe money was misspent, misappropriated, stolen or just simply disappeared.
“The person in charge of that money is in charge of its disposition,” said William Owen, chief legal counsel for the auditor’s office.
In 2004, state lawmakers required the state auditor to begin keeping a list of uncollected findings since the beginning of 2001 and barred anyone on that list from receiving a state contract. Since then, the state issued findings on 374 audits totaling roughly $72 million. More than $60 million is still outstanding.
Names can be removed from the list by the attorney general if the person pays off the debt, enters a payment agreement with the entity or successfully argues against it.
Officials in the Attorney General’s Office told the Daily News the two-attorney staff that handled these findings was overwhelmed with a growing number of cases. “(We) realized we had to stop the bleeding because there were findings that became uncollectible,” Owen said.
The two offices conducted a thorough review of the collection process and came up with a fix: Have the 12 lawyers who handle the collections take over the cases. They hope this will speed up findings that have languished for years.
The Attorney General’s Office on Dec. 1 filed an 11th-hour suit against nine former administrators from the Rhea Academy Community School. The Dayton school was shuttered in 2006 when it couldn’t keep a sponsor. The suit is based on a Dec. 8, 2005 audit.
The suit seeks $29,192 it says is owed to the state — for alleged overpayment to employees and poorly documented spending — plus interest and legal costs. It also alleges school fiscal officer Monica Rhea committed fraud by submitting forged bond documents.
DeWine’s office gave up on going after more than $5,000 that state auditors said in 2006 was mismanaged at Wright Dunbar Technology Academy in Dayton. Some of this was written off because the school is closed. Other findings for up to $811 were simply considered too small to pursue by the former attorney general and the findings will hit the statute of limitations in April, according to state records.
Some contractors use loophole in bid process
State law says contracts awarded through competitive bidding can’t go to people whose names are on the auditor’s office list. But this rule is riddled with loopholes, the Daily News found.
Firstly, people whose names are on the list are not prevented from getting no-bid contracts through the state’s approved vendor listing, which only requires a company to meet certain price requirements. And if a company bids on a contract and doesn’t use the name of the person with a finding against them, the rule is unenforceable.
Also, the rule does not apply to employment contracts.
A local example of this is an intake specialist at Montgomery County Developmental Disabilities with an annual salary of more than $80,000 who is listed as owing the county more than $1,500 from a 2003 audit.
Developmental Disabilities Director Mark Gerhardstein said the agency vehemently disagrees with this finding and that the Montgomery County prosecutor “refused to collect anything on anybody and asked that the names of the people be removed from the website.”
In Butler County, Joe Ebbing ran for fiscal officer of Fairfield Twp. in November, despite having 23 outstanding findings for recovery against him from 2008 and 2009 audits. He is listed as owing $17,922 for his time as fiscal officer of the village of New Miami.
Ebbing said he plans to sue the state to have his name removed.
“Those were fraudulent findings. I don’t owe the village any money,” he said. “I did not authorize any illegal expenditure.”
The Butler County village with a population of less than 3,000 has 170 findings listed in four audits in recent years. The Attorney General’s Office says these have been handed over to a special prosecutor for collection.
Some of the largest debts listed in the database likely will never be collected in full. Tom Noe was ordered in 2006 to repay the state $13.7 million the GOP fundraiser was convicted of stealing from the workers compensation bureau as part of the “coingate” scandal. He is serving an 18-year prison term.
Robert Kendall of Cleveland owes the Ohio Department of Administrative Services nearly $5.8 million officials say his company took but didn’t pass along to natural gas vendors on the state’s behalf when his company collapsed, according to a 2003 audit. He has paid $34,000 since a 2009 settlement he negotiated that requires him to pay. Meanwhile, the state has tacked on a 10 percent penalty and interest.
Data and graphics reporter Gerald Fullam contributed to this report. Contact this reporter at (937) 328-0374.
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