October 22, 2014

Medina
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State to look at Medina Schools spending from county fund

Loren Genson and David Knox

In the last five years, Medina City Schools has spent $2.8 million from a fund maintained by the county Educational Service Center.

The total is nearly $1 million more than that spent by any of the other six school districts served by the county ESC.

While almost all of the spending by the other districts was to pay bills involving ESC programs, much of Medina’s funds went for Superintendent Randy Stepp’s education costs and for professional development for Stepp and the district’s other administrators, according to an analysis of ESC records by The Gazette.

The unusual policy of paying Medina City Schools bills with checks cut by a county agency is at the center of the growing controversy over Stepp’s compensation, which includes more than a quarter of a million dollars spent on his college education in the past three years.

On Friday, Medina school board members acknowledged they didn’t know how big a bill Stepp had run up for his education.

The situation has drawn the attention of Ohio State Auditor Dave Yost.

“The auditor has been briefed about this and he’s concerned,” said Michael Maurer, spokesperson for the auditor’s office.

While no determination has been made whether to take any action, Maurer said regional auditors “have been made aware of this and they are inquiring with the school district.”

Stepp has been using district funds set aside by the ESC since 2007 — the year after he became superintendent.

According to ESC invoices, Stepp has used the carryover funds for everything from tuition to out-of-state training and iPads.

Stepp doesn’t have to clear the spending with the school board and Board President Charles Freeman said records of money paid out of the ESC account are not included with other financial reports regularly given to board members by district Treasurer Jim Hudson.

ESC Superintendent William J. Koran said Stepp had direct control over the funds because the money belonged to the Medina District.

Koran explained that the “carryover” funds contain money left over after districts pay the ESC for a variety of services, including school nurses, interpreters for the deaf, bus driver training and computer specialists.

The surplus funds can be rolled over to pay the next year’s bills or returned to the district, Koran said. But the money also can go to pay bills unrelated to the ESC.

Koran said his agency was willing to write such checks because “we always looked at it as that was district money — that wasn’t our money.”

Often it’s the district superintendent who personally directs how the funds are spent, according to ESC Treasurer Michelle McNeely.

“We used to be an oversight board,” McNeely said. “Now, as long it’s a legal expenditure, approved by his board, we write the check.”

Koran said he favored changing the policy to provide more accountability over the carryover funds.

“After the controversy that has gone on, I probably would suggest that,” he said.

Where the money goes

Checks written on the carryover account were issued as recently as one month ago. Stepp directed McNeely to pay a $59,225 bill for executive leadership training provided by Mike Rao, “The Growth Coach.”

Principals and other building administrators in all Medina schools were required to attend the training, which took place last week.

According to emails between Stepp and Gary Kovach, a union representative with the Ohio Education Association, some teachers and administrators complained that the training took them away from their daily duties at their schools.

“I find it odd that administrators would be participating in professional development during the busiest time of the school year,” Kovach wrote to Stepp. He also asked about the nature of the training and the cost.

In response, Stepp said the $59,000 cost of the program was a bargain because Rao, whom Stepp met while serving on the county United Way Board, gave the district a 37 percent discount.

Stepp praised Rao’s training.

“In this area of expertise there are very few organizations that can deliver the specialized focus in behaviors, motivators, social and emotional intelligence, and leaders as coach,” Stepp wrote in his response.

It wasn’t the first time Stepp hire The Growth Coach. Last August, Stepp used the ESC fund to pay $17,500 for August training for himself, the district treasurer, comunications director Jeanne Hurt and two other employees.

Stepp first used ESC carryover funds to pay for staff development in 2007, when he requested payments for air fare, hotel and meal expenses for a trip to New York for himself and Human Resources director Jim Shields to attend a seminar at Radio City Music Hall.

Stepp and Shields spent a total of $5,932 on the September 2008 trip, including the registration fee of $1,690 each. A year later, they returned to the seminar — this time the bills totaled $5,090.

Also in 2008, the ESC funds were used to pay $4,782 for a five-day stay in Orlando, Fla., for a conference of the National School Boards Association. Records show four others accompanied Stepp, who said the group included at least three school board members.

Stepp had budgeted $1,600 for the trip, according to an email from McNeely directing her staff to increase the purchase order.

“Could you please change the PO we did for Medina City/Randy Stepp for conference from $1,600 to $5,000?” McNeely wrote. “Apparently, the initial amount is not going to be enough to cover the costs associated with his trip/conference.”

Stepp said the increased spending was because the initial purchase order was submitted without the hotel costs included.

More trips for staff development are planned. In December, Stepp directed the ESC to set aside $5,500 for a June workshop on negotiations at Harvard University.

IPads for administrators

The ESC funds also paid for computer equipment for Stepp and other administrators.

In November 2012, Stepp requested the ESC cut a check to Apple for $17,959 for iPads. All the iPads were WiFi enabled and three were top-of-the-line models with Retina displays.

He also requested $626 in a separate invoice labeled, “ipad for Stepp.”

The payments for the executive training and computers are in addition to more than $265,000 the district paid for Stepp’s education between 2010 and 2012:
n In January 2012, Stepp directed McNeely to cut a check for $172,000 to the U.S. Department of Education to pay off all his college loans.

n Since 2010, the ESC fund also has paid out a total of $93,000 to Case Western Reserve University to pay for Stepp’s master’s in business administration.
Included in those bills was a $9,200 payment to cover the cost of a June 2011 trip to China and Vietnam.

Stepp also directed the ESC to pay a total of $1,012 for his passport, immunization and a flight upgrade to “economy plus.”

Stepp told the ESC and The Gazette that the course was required for his MBA program.

Julie DiBiasio, events and communications manager at the Weatherhead School of Management at Case Western Reserve University, could not confirm whether the China trip was required for the MBA program.

Case offers both part-time and full-time MBA programs. The full-time program, which Stepp used, takes two years to complete and includes two spring and two fall semesters.

Stepp only took one summer semester at the university and completed his degree last year.

The district may face more bills for Stepp’s education. Twelve words added to Stepp’s new contract obligates district taxpayers to bear the cost of “any tax liability that may result” from the education payments.

Stepp said he would include the $172,000 payoff of his college loans in his 2012 tax return, which will be filed this year.

“My accountant will determine what portion is taxable as income, if any,” Stepp wrote in his email Saturday.

Stepp indicated he didn’t pay any federal taxes on the 2010 and 2011 payments to Case Western Reserve because the school board required he get the MBA degree.

“Based on my understanding of tax law the Case Western Reserve MBA was a part of the job requirement and therefore should not be considered income,” Stepp wrote Saturday in an email response to a Gazette reporter’s questions. “It is professional development that was supported and directed by the Board.”

Stepp’s contract with the school board, however, does not include a requirement that he get an MBA degree.

When asked to document the requirement, Stepp referred all questions to Medina City Schools communications director Jeanne Hurt.

School board members also said all questions should be routed through Hurt.

In an email Sunday evening, Hurt said no further response from either Stepp or board members would be available until today.

Several Medina City teachers said the money spent from the ESC funds could be better used.

Lori Berger, an intensive needs intervention teacher at Heritage Elementary, said she would like to use more ESC-provided services in her classroom.

Some of Berger’s students are nonverbal, and often act out physically. Berger said she has used Rachel Krauss, a behavioral specialist employed by the ESC, to help her students. This year, the hours the district purchased from the ESC for Krauss’ services were kept to a minimum, Berger said.

“The whole special education department got an email asking us to handle problems with our school psychologist because we only get Rachel for 30 days,” Berger said. She added that the 30 days was for the entire district to share.

“I have high respect for our school psychologist, but she’s not a behavior specialist,” Berger said.

Berger said she was upset last week when she learned about the $60,000 spent on staff development for administrators.

“There’s a time and a place, and now’s not the time, there’s other bigger things the staff is concerned about,” she said. “Is this training what’s best for the kids? Not when there are other things we need.”

Not all districts run their carryover funds the way Medina does. Some districts apply carryover funds to the following year’s bill, and others bring the money back into their district.

In 2011, Brunswick Superintendent Mike Mayell said Brunswick’s school district decided to bring $600,000 in ESC carryover funds back to Brunswick’s general fund to be used for construction and renovations at the football field.

Mayell said the district has also left carryover funds at the ESC to be applied toward the bill to come in the following year. But in 2011, he said the district chose to spend the money because the $600,000 carryover was large enough to be put to a capital use.

He said transferring the money back into the school district makes it easier for his district to account for where the money goes.

By putting the money in the permanent improvement fund, the district was obligated to spend it on items that would remain in the district for at least five years.

“We didn’t want to use it for any other purpose,” he said.

Contact Loren Genson at (330) 721-4063 or lgenson@medina-gazette.com and David Knox at (330) 721-4065 or dknox@medina-gazette.com.