IU5 returns funds to school districts

Nearly $534,000 will be returned to the Warren County School District by the Northwest Tri-County Intermediate Unit 5 after a forensic audit said that over $9 million in funds hoarded by the IU should rightfully be returned to member school districts.

The school board passed a motion on Monday night acknowledging receipt of $533,946.78 from IU 5 relative to a formula distribution approved by the board last month. The IU returned a total of $9,035,484.84. The funds, for which a check has been received by the district, will be moved to the district’s general fund and will “remain in said account pending further action of the board.”

Board vice president Donna Zariczny, who serves on the IU 5 board of directors, said that the IU board voted last month on the distribution formula and the specific amounts to be sent to each of the 17 member districts.

An audit, commissioned by the superintendents of the member districts, called for over $11.7 million to be returned, a total of $669,937.80 to the WCSD.

Zariczny explained that the final distribution amount originated from a forensic audit undertaken by the IU which recommended that the IU hold an additional $2.5 million; $2 million will be held in the general fund with an additional $500,000 to be held for capital expenditures.

“This is a one-time deal,” Zariczny said, adding that the IU forensic audit is moving toward phase two, which includes the auditor reviewing the rest of the IU’s accounts.

“There could be future monies, there may not be,” she added. She cautioned using these funds for staffing for that reason.

Zariczny also said that there will be a third phase to the audit which will review the IU’s financial procedures, program offerings and program costs.

“This is a work in progress,” she said.

The original superintendents’ audit, obtained by the Times Observer in October, claimed that the “IU management established financial policies that derived your clients (school districts) and the tax payers they represent.”

According to the audit, funds were accumulated over multiple fiscal years and frequently placed in “deferred revenue” accounts. “In the case of the IU, a deferred revenue liability would exist if a governmental entity and/or the member districts had paid for services that the IU had not rendered at the end of any given date.” Of the total, $11,325,616 was in such accounts.

The audit alleged that “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.