April 23, 2014

Medina
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Audit finds Stepp owes school district $4,000

To see the results of the audit yourself, click here.

Loren Genson, Kiera Manion-Fischer and David Knox | The Gazette

Medina City Schools Superintendent Randy Stepp illegally spent about $4,000 of taxpayers’ money, according to a special state audit report.

The report was posted on Ohio State Auditor Dave Yost’s website Monday and noted that the audit includes “a finding for recovery or determinations that money was improperly spent and must be repaid.”

Randy Stepp

The report was scheduled to be officially released today. The Gazette obtained copy of the 10-page report Monday night.

Stepp has been on paid leave since April, pending the outcome of the audit of his spending of district money from a carryover fund held by the Medina County Schools’ Educational Service Center.

As a result of the examination of the ESC fund, the auditors issued “a Finding for Recovery for public money illegally expended is hereby issued against Randolf S. Stepp, in the amount of $3,870 and in favor of the Medina City School District’s General Fund.”

The audit, which spanned July 1, 2005, to March 31, 2013, breaks down the improper spending as follows:

• Feb. 12 2008 — $800 in gift cards from a local specialty food store by Stepp “with no apparent business purpose documented.”

• April 15, 2008 — Stepp was reimbursed for travel expenses related to a 2008 conference in Orlando, Fla. The auditors noted the conference ended on April 1, but Stepp billed the district for a $557 hotel room expense for the night of April 2. Additionally, Stepp received a $1,023 in compensation for mileage. However, the audit noted another board member who attended the same conference booked airfare for $284.

“Therefore the superintendent’s preference to drive appears to have resulted in an additional $739 cost to the district,” the audit states.

• Nov. 26, 2008 — $1,410 in gift cards to a local restaurant purchased by Stepp had “no apparent business purpose documented.”

• May 31, 2011 — Stepp was reimbursed for costs associated with his trip to China and Vietnam for his master’s of business administration he was pursuing at Case Western Reserve University. The auditor’s ruled that Stepp should not have been reimbursed for a $277 seat upgrade on the flight.

• Oct. 14, 2011 — Stepp was reimbursed $87 for candy and floral arrangements at a local grocery store. “No apparent business purpose was documented.”

While the findings for recovery were issued against Stepp, the auditors said ESC Superintendent William Koran and ESC Treasurer Michelle McNeely and their bond companies were “jointly and severally liable” for repayment of the $3,870 to the district.

McNeely resigned last month.

The auditors also issued findings for recovery against Stepp for $251 worth of gift cards and candles he purchased using school district money.

From left, Medina City Schools Treasurer Jim Hudson, board President Karla Robinson and interim Superintendent Dave Knight briefly discuss the special state audit during a school board meeting Monday night. The audit is scheduled to be officially released today. (GAZETTE PHOTO BY KIERA MANION-FISCHER)

In addition to the finding for recovery, the auditor also investigated two benefits included in Stepp’s contract that were not reported on his annual W-2 tax reports.

Auditors said they could not determine whether all or a portion of a $172,011 student loan payoff made on Stepp’s behalf using ESC funds in 2012 should have been reported to the Internal Revenue Service.

The audit stated that the matter would be turned over to the Internal Revenue Service for further investigation.

The auditors also said they would refer district payments for Stepp’s gym membership to the IRS. The audit found six payments totaling $1,545 for memberships at the Medina Community Recreation Center, which were not noted as fringe benefits on Stepp’s W-2.

“Since the recreation center is available for use to the general public it … should have been included as a taxable fringe benefit on the Superintendent’s W-2,” the audit read.

The auditors also pointed to more than a half million dollars spent from the ESC fund “in which the item’s proper public purpose was unclear.”

ESC issued 247 checks totaling $947,128 between July 1, 2005, and March 31, 2013, to vendors and the superintendent on behalf of the district. The audit found:

n None of these transactions were posted to the proper fund/account or were included in the annual expenditure fund total for the proper period in Medina City School District’s accounting records.

• None of the transactions had the proper level of approval to pay per district purchasing policy.

• Eleven of the payments for mileage reimbursement included neither “to” or “from” locations.

Medina School Board President Karla Robinson said she received a draft of the audit Monday afternoon, but she could not comment on its contents because the report was not finalized.

“We really can’t discuss it in public until it becomes a public document,” Robinson said. “If there are last-minute changes, I would be giving you bad information.”

Robinson and the other board members could not be reached for comment after The Gazette obtained a copy of the report.

The board scheduled a 10 a.m. news conference today to discuss the audit’s findings at the board’s offices, at 140 W. Washington St.

At the school board’s regular meeting Monday night, Robinson said she would discuss the audit findings with other members in the meeting’s executive session, which is closed to the public.

While the board members declined to discuss the audit, they did discuss a policy that was scrutinized by the state auditors: reimbursement to staff for hotel and travel expenses.

The Gazette reported in April that Stepp was reimbursed $4,782.89 from the district’s Educational Service Center fund for a 2008 trip to Orlando, Fla., for a National School Boards Association conference.

Stepp was accompanied by his wife and three daughters and has said he billed the district only for his expenses. But records show he included receipts for two nights at a luxury hotel after the four-day conference ended.

The board is considering new policies that would include specific limits on hotel and meal costs for any district employee traveling for business.

According to Educational Services Director Kris Quallich, the changes amend “vague” language that states expenses submitted must be “reasonable and customary.”

At Monday’s meeting, Robinson said the changes will go beyond the state recommendations because “the district felt the need to.”

Stepp did not return a phone call seeking comment.

Interim Superintendent Dave Knight said he was relieved the audit would be released ahead of the Nov. 5 election, when voters will decide a five-year, 5.9-mill levy for the school district.

“It is nice when we can resolve past problems and get that off the table, and focus on our current worries,” Knight said.

John Leatherman, president of the Medina City Teacher’s Association, said he looked forward to seeing the audit results.

Leatherman and staff from the union spent time dissecting more than 800 pages of documents detailing district expenses, many of which his union brought to the board’s attention as they prepared to ask for the audit.

“If the results give Medina City Schools a better chance of passing a desperately needed levy, then there is nothing more pressing at this time,” he said.

Mark Kuhar, who founded the Medina City Schools Outrage page on Facebook and is an outspoken critic of the district’s spending, said he was pleased the audit findings would be released. But he noted that there was a sense of frustration in the community because school officials initially said they expected the audit to be completed by June.

“There was a very high expectation for the audit, but as time has gone on and the audit has dragged on further and further I think a lot of people started to feel a sense of cynicism that the audit would get finished,” Kuhar said.

If the state finds that money was misspent, Kuhar said that would be a positive outcome.

“If that is what happens — let’s just say it’s a very bright day for the Medina city school district,” he said.

The school board requested the audit in response to a storm of criticism over Stepp’s new contract — approved by the school board in January — that included an $83,000 “retention” signing bonus.

Public anger grew after it was revealed that provisions in earlier contracts obligated the district to pay for Stepp’s old college loans and for a master’s of business administration.

The educational costs, which totaled more than a quarter-million dollars, were paid with checks from the ESC carryover fund at Stepp’s direction.

School board members later said they did not know the total cost — a claim Stepp disputes in a federal lawsuit he filed May 17.

The lawsuit also challenges school board members’ statements that they did not know about all the payments he was making using the district’s carryover fund at the ESC.

Contact reporters Loren Genson at (330) 721-4063 or lgenson@medina-gazette.com and Kiera Manion-Fischer at (330) 721-4049 or kfischer@medina-gazette.com. Contact managing editor David Knox at (330) 721-4065 or dknox@medina-gazette.com.

  • Ohioguy10

    This will be interesting. I have heard it is mostly improper expenses but I hope it is more. Still think we will pay him to go away.

  • Ohioguy10

    How the heck is this a bright day for Medina Schools? Money has been misspent. The people who approved the misspending are still here. Most of the people who benefitted from the misspending are still here. Randy is a greedy idiot but he is gone. What about the others? I know we need money but we have just put down a bucket to catch the water. Time to fix the roof. Clean house. Treasurer. Business Manager . ESC staff. Any Admin that benefitted and said nothing. Let’s see who was at some of these meetings. Was it Union guy as is rumored? Clean house. Lots of unanswered questions here!

  • lookingallaroundme

    I am only guessing here: Because of the finding that Stepp did something illegal, that may justify his termination, which gets the district off the hook for his contract. This may also open the door to bargain away lawsuits.

  • lookingallaroundme

    I am only guessing here: Because of the finding that Stepp did something illegal, that may justify his termination, which gets the district off the hook for his contract. This may also open the door to bargain away lawsuits.

  • lookingallaroundme

    I am only guessing here: Because of the finding that Stepp did something illegal, that may justify his termination, which gets the district off the hook for his contract. This may also open the door to bargain away lawsuits.

  • Medina Retiree

    Read the report. There is no finding that Stepp did something illegal. Even the word “illegal” was used only toward other officials in Medina. All Stepp’s wrongdoings can be categorized as insufficient or missing paperwork. At most, they can demand the repayment from him, unless, and that’s still a question, he will produce the proper supporting documentation, which he may or may not do, due to the time passed. BoE cant “get off the hook for his contract” just because sometime in the past years he stayed in a hotel one extra day, or didn’t file proper supporting paperwork. They can’t just fire him because he spent more money than deemed “reasonable”. He didn’t hire an escort service or conducted an illicit activity. The contract will stand in court.

  • Medina Retiree

    Read the report. There is no finding that Stepp did something illegal. Even the word “illegal” was used only toward other officials in Medina. All Stepp’s wrongdoings can be categorized as insufficient or missing paperwork. At most, they can demand the repayment from him, unless, and that’s still a question, he will produce the proper supporting documentation, which he may or may not do, due to the time passed. BoE cant “get off the hook for his contract” just because sometime in the past years he stayed in a hotel one extra day, or didn’t file proper supporting paperwork. They can’t just fire him because he spent more money than deemed “reasonable”. He didn’t hire an escort service or conducted an illicit activity. The contract will stand in court.

  • Medina Retiree

    It’s not even a bucket. Just whipped a drop on the floor: out of 6.8 millions spent some $4K lack sufficient paperwork, which he may still be able to present (or he may not). His compensation alone (over 1 million in those 8 years report covered) dwarfs those 4 thousands.nIn any case, there is still to meaningful explanation as to why districts expenditures will go up by 10 million per year by 2017, while revenues are projected to decline? (See very nice graphs on MedinaBee.org site). How is that Stepps fault? He is just a scapegoat. The people, who actually caused all these financial woes of the district came out of this mess untainted.

  • Medina Retiree

    It’s not even a bucket. Just whipped a drop on the floor: out of 6.8 millions spent some $4K lack sufficient paperwork, which he may still be able to present (or he may not). His compensation alone (over 1 million in those 8 years report covered) dwarfs those 4 thousands.nIn any case, there is still to meaningful explanation as to why districts expenditures will go up by 10 million per year by 2017, while revenues are projected to decline? (See very nice graphs on MedinaBee.org site). How is that Stepps fault? He is just a scapegoat. The people, who actually caused all these financial woes of the district came out of this mess untainted.

  • Medina Retiree

    It’s not even a bucket. Just whipped a drop on the floor: out of 6.8 millions spent some $4K lack sufficient paperwork, which he may still be able to present (or he may not). His compensation alone (over 1 million in those 8 years report covered) dwarfs those 4 thousands.nIn any case, there is still to meaningful explanation as to why districts expenditures will go up by 10 million per year by 2017, while revenues are projected to decline? (See very nice graphs on MedinaBee.org site). How is that Stepps fault? He is just a scapegoat. The people, who actually caused all these financial woes of the district came out of this mess untainted.

  • Concerned

    Well it is finally out and as usual Mr. McKnight buries his head in the sand and thinks all is well and as usual Karla dances around the issues with her usual ” we don’t know all the facts yet”. I now agree its time to clean house with the entire financial department of the District and of those whose job it was to oversee these matters – namely Susan, Karla, and Bill. Treasurer needs to go and probably the Finance Manager as well. Not entirely sure where the law stands on this regarding possible misuse of public funds, but from a moral standpoint it seems clear that responsibility must be taken by those who left this mess go on for so long and if legal action is appropriate, then so be it! Finally, Mr. McKnight, please grow up and face the facts: You are in way over your head. This isn’t an elementary school where everything is happy and wonderful and we have to have everything put in single syllable little stories that take hours to tell. nTo the Board in general, you may very likely have grounds for the immediate termination of Stepp without having to pay him off for another 10 months and certainly grounds for recovery of at least some of the funds. To Karla and Susan, it is obvious that neither of you nor your cohorts on the Board has any clue of financial management nor of personnel management and even more clearly that neither of you should have any say in how this District is managed from this day forward. Quit hiding behind the McKnight’s fairy tales about needing your expertise – you have proved you don’t have any – shut your mouths, resign immediately and let this Community and Board attempt to move forward without any further bad input from either of you.nFinally to the other Board members in general: Step up, take action to put this behind us, get some backbone and make the tough decisions, start a professional search immediately for a new superintendent and send Mr. McKnight back to elementary school where he belongs, address other personnel issues at the treasurer level and move forward. If you don’t, it seems to me that this issue isn’t going to go away until we the voters and taxpayers are convinced that it can’t and won’t happen again.

  • lookingallaroundme

    Can’t, won’t and ain’t gonna argue with anything you wrote. I thought the auditor’s office only found facts and then turned those facts over to the AG or some other prosecutor for determination of illegality. I do only know that dealing with public monies is a steep and slippery slope for those who are not careful. I don’t care enough to read the report–I am not an insomniac, but I do think Mike Dewhiner will. He is in search of news to detract from his less than stellar record.

  • Loren Genson

    In the audit it states “a finding for recovery for public money ILLEGALLY expended is hereby issued against Randolph S. Stepp.” A complete copy of the audit is available above and those exact words appear on page 5 and page 8. That’s why we reported it using the words illegal.

  • BeeForLife

    Who is this Mr. McKnight that you speak of?

  • Medina Retiree

    A “Finding for recovery for public money illegally expended” is merely a name of a document an auditor issues. In accordance with “Ohio Compliance Supplement” such document is issued when:n”may be made only where the auditor (after consultation and advice from Legal Division) has concluded that the public office does not possess the legal authority for the expenditure in question. This generally occur where the government either has no statutory authority (or the authority they possess was exceeded) for the expenditure or there is no public purpose for the expenditure”nIt other words – those expenditure were found to be not authorized, questionable or not supported with proper documentation. But such expenditure are reported with very scary document with the word “illegal” in it.nSure, as a reporter you can use the word “illegal”, because it is used in the actual audit report. But as a journalist you should have done more investigation, unless you are on a path of supporting anti-Stepp agenda somehow.nIn fact, the same “Ohio Compliance Supplement” required the auditor to report illegal activity to the Attorney General office. We’ll see how many of those “money illegally expended” will find its way to AG’s desk. My bet – none of them.

  • Kids not first Medina

    Oh yeah, kids first medina. What a black eye for this community. VOTE NO FOR THE LEVY until the whole board and Knight are gone. You all are a discrace. Kids first, then why are you squandering all of this money on yourselves, and Knight, why are you taking pay…we are already paying one superintendent. IF you wanted the kids first, you would not be taking away from them if the levy does not pass. You idiots need to think outside of the box and not take away from the kids. You say they are first, but only act for yourselves. The Board and Knight have already costs the taxpayers and children more than ever can be recovered. And Knight, stop asking the community to vote for the levy, BECAUSE YOU CAN NOT VOTE FOR THE LEVY as you do not even live in this community. You all should be ashamed of yourselves.

  • Concerned

    Sorry typo – Acting Superintendent Knight!

  • RyanSza

    Merriam Webster defines illegal as:n: not allowed by the law : not legaln: not allowed by the rules in a gamennnSo my take from you is you believe this report from the Ohio State Auditor’s Office is a game? I’m surprised as a taxpayer you are fine with city officials using public funds for their own personal use. If you are “lucky” to misspend $500 a year on lost paperwork, im happy you are not on my payroll! Whether its $1 or $4,000, public monies were embezzled. I hope the IRS has a field day recouping his unclaimed taxable income as a result of the city paying off his student loans.

  • dogeatdog123

    Medina Retiree needs to have his mouth retired. His brain apparently retired years ago. Do you realize what the hell a state audit is? Do you think the state auditor spent six months, thousands of man hours and inordinate monetary resources on a half-assed effort to come up with a a few sketchy and unsubstantiated instances of cavalier spending? It is what is known as a FINDING FOR RECOVERY. That means wrong-doing has been discovered. Are you under the impression they throw that designation around for fun and games? Get a clue. This finding will be used to terminate employment, recover monies lost and perhaps to bring criminal charges. This isn’t a misdemeanor for pissing in public. There is a whole second investigation that will be forthcoming focused on the ESC funds and the reimbursement of secondary education expenses. That may be even a bigger blockbuster! Meanwhile, painful as this all is, it is a bellwether achievement in this school district’s effort to right teh ship and rectify the errors of the people who mismanaged our tax dollars. This is a good day for Medina. It is ALWAYS a good day when people in a position of trust who steal from us get their due.

  • Donna J. Miller

    As far as I could tell from the report, just the $100 payment for a reimbursed gift card charge on the American Express account was actual “pocket money” for Stepp.

  • OLDNAVYVET

    “Nonfeasance” by all.

  • Medina retiree

    Do you feel somehow superior and accomplished by attempting to insult me? Does it make you feel special?nAnyway, read my post made 2 hours prior to yours, where I quoted exact paragraph from “Ohio Compliance Code” regarding a document titled “Finding for recovery for public money illegally expended”, where it states under which conditions and for what reasons such documents is issued.nAnd read the actual report and a summary in this very Gazette’s article – just a few instances of “no apparent business purpose documented”, auditor’s ruling that plane seat was improperly upgraded for $277 and some irrelevant opinion about plane ticket vs. driving to Orlando.nGood luck trying to “bring criminal charges”. At best – small claims court complaint, if enough supporting evidence from BoE.nHowever, “inordinate monetary resources on a half-assed effort to come up with a an few sketchy and unsubstantiated instances of cavalier spending” is exactly what I am calling attention to: those enablers in district management, who managed to be found by the auditor to the extent of “None of the transactions had the proper level of approval to pay per district purchasing policy” – they are exactly the menace to district finances.n$6.8 million expenditures over 8 years, over $900K paid to vendors and Stepp, and all the audit could come up with – missing documents supporting “apparent business purpose”. I bet that eventually Stepp will come up with missing documents or testimony for those gift-cards, flowers, and trip to Orlando, and all that will be left – ruling of the auditor that the transoceanic flight must be taken in basic coach. It will be shattered by any decent lawyer in minutes.nMeanwhile, district honchos are yet to sanely explain why district finances are in such disarray, that in 4 years spending will outgrow revenue by $10 million annually. nSo, my darling dogeatdog123, please, retire yourself in the whole entirety.

  • Medina retiree

    Do you understand, that “not legal” and “criminal” are not the same things?nAnd yes, if I don’t know how and where I’ve spent $500 per year due to lack of paperwork – I am not concerned, because I know that I didn’t just throw it away, and my time is worth more than to spend it on searching for paperwork.nEmbezzlement is a very specific crime, Stepp is yet to even become accused of any criminal misdeeds, so, please, presumption of innocence would be nice here.nAnd his personal IRS filings are NOT a subject of this whole ordeal, it’s just being brought up, because people like you are totally wishing all the horrible and gruesome thing on a person who they simply dislike.nI am very grateful that I live in a country where vengeful and hateful people like yourself are not in charge.

  • Medina retiree

    Yes, and even those $100 are questionable. We don’t know the details of the deal. All we know – he bought cards for $900, then repurchased $800 of them through a different account. Where did $100 go? Not that I know it, but couldn’t it be that those $100 worth of cards were already awarded and not properly documented. Besides, it could be gift cards intentionally purposed to Stepp himself: as an employee of the district, highest ranked, on that specific occasion he was awarded $100 worth of cards by the district, while other $800 went to other employees. He wouldn’t even file a special paperwork in such case.nTotally plausible scenario. nnBut what do I know, some people found him guilty beyond reasonable doubt even before the audit started.

  • RyanSza

    Who is being vengeful? As a public employee he is held to a higher standard when it comes to book keeping? He is personally responsible for every cent that in not properly documented. If the constituents of my community wanted to pay off my student loans to the tune of $172,000, give me a signing bonus and be compensated at that level, i would be sure my books were squeaky clean. So maybe i am a little harsh calling it embezzlement, Medina Retiree Esq…for he is innocent until proven guilty in the court of law, but in the court of common sense and public opinion, he has dirty books and misused taxpayer monies (so says the published report), so he is at least accused of shenanigans, swindling and knavery…..nnnI do have to wonder what your relationship is Counsel Medina Retiree Esq….did you help with these books? Defense attorney perhaps? Or do you happen to actually be………

  • Bill williams

    how in the heck can you spend $500,000 on stuff for which the proper public purpose is unclear? What????