September 17, 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.