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ESC criticized in special audit

Auditor says funds misused

Two former members of the Lawrence County Educational Service Center have had findings of recovery found against them after a special audit by the Ohio Auditor’s Office. The same audit criticized the ESC for poorly written contracts and a lack of oversight policies.

On May 25, State Auditor David Yost released a statement saying a special audit released “cites more than $300,000 in findings for misuse of public funds at the Lawrence County Educational Service Center (ESC).”

The audit began in September 2015 and concluded in May with the release of a 50-page report in which the auditor’s office found a host of issues, including how treasurer Teresa Lawless and superintendent Dr. Payne got bonuses, converted vacation hours and used credit cards. In their management notes, auditors said that the ESC had poorly written contracts for Payne and Lawless and gave numerous suggestions about changes in the agency’s policies.

Lawless said that everything she spent and received had board approval. She has filed a lawsuit against the ESC for being terminated before the end of her five-year contract in 2018 and because the ESC didn’t provide legal counsel during the audit.

According to the Ohio State Auditor’s special audit report, the Public Integrity Assurance Team (PIAT) began a preliminary investigation on Sept. 21, 2015, after the office found irregularities during a fiscal year 2014 financial audit.

In December 2015, PIAT subpoenaed ESC records related to service agreements with school districts, contracts and payroll documents for the treasurer and the superintendent, credit card transactions, non-payroll disbursements, ESC Board minutes, and the agency’s policies and procedures.

PIAT audited records from July 1, 2012 to Dec. 15, 2015.

Lawless was placed on paid administrative leave by the board on Dec. 8, 2015. In April of this year, she was apparently fired, or at least the ESC stopped paying her salary and benefits, which lead to Lawless filing a lawsuit.

After the special audit was completed, PIAT issued finding of recovery against both the superintendent and the treasurer to get back money the auditors say was unfairly paid to them.

PIAT recommended two findings of recovery against Payne for $6,664 for an overpayment of a bonus and duplicate travel expenses. He repaid that to the ESC.

PIAT recommended five findings of recovery against Lawless for $34,493 for overpayment on her base salary, bonus payments, converting vacation time for cash, unallowable travel expense reimbursements, and unallowable credit card transactions on the ESC’s credit card. PAIT found that she was over paid between Aug. 1 2013 to April 29, 2016 by $22,139, that she was over paid on bonuses by $6,347 in December 2013 and December 2015 that she was over paid by $9,301 for converting unused vacation days to cash.

“Everything I did had board approval,” Lawless said. “It was all spelled out in my contract.”

She added that when things weren’t covered in the contract, she got verbal approval from the superintendent or the board.

In Lawless’ contract, the treasurer was allowed to convert up to 10 vacation days to cash. That was changed in 2013 to 20 days. PIAT wrote in the special audit that she was overpaid in one year and that 20 days she converted in January were not allowable and she was overpaid for that.

PIAT also reported abuse of public funds for incentive payments to Payne totaling $87,793 and to Lawless for $169,674. Both Payne and Lawless had in their contracts with ESC that they would get bonuses based on 5 percent of the unencumbered balance in the general fund at the end of each fiscal year from 2013, 2014 and 2015.

“So the board approved that not once, but twice,” Lawless said. “Once for (Payne) and once for me.”

Yost wrote “Lawless did not spend $380,872 earmarked for special education services that the ESC received from member school districts over four years. The unused funds remained in the ESC’s general fund, increasing both the balance of the fund and the incentive payments to Lawless and Payne.”

Lawless said she hasn’t received any bonus based on that $380,872, because she was on administrative leave when that bonus would have been issued.

PIAT said the ESC’s “failure to clearly document in the employment contract which general fund balance(s) were to be used in the calculation allowed Ms. Lawless to maximize the amount she was compensated for the performance incentive.” They said that because of that, “employees could make decisions and influence activity in ways that are not in the best interest of the ESC” such as holding payments at the end of the year. It also said that neither contract defined which general fund was to be used in the calculation or the term “unencumbered.”

It was recommended that the ESC review the performance incentive to see if it accomplishes the goal of the agency.

Payne had the performance incentive removed from his contract in February 2015. PIAT said that the copy of Lawless’ contract provided to them did not have the performance incentive language in it although it was approved at board meeting.

It was also commented on that the ESC Board did not have legal counsel review the contracts before voting on them. It also called the contracts “poorly written.”

Yost said in his press release that “Questionable contracts created an incentive for the treasurer to withhold valuable resources from students. That alone should serve as a catalyst for the ESC to take a serious look at the vulnerabilities in its contracts.”

In a letter from Lawless’s attorney to the ESC Board’s attorney, it was stated that “the proposed findings do not give rise to a legitimate attempt by the Board to terminate Ms. Lawless’s contract for good and just cause” and that she “did very little, if anything, that was not authorized or approved by the Superintendent and/or the Board.”

It added that not all of the authorizations and approvals were recorded into official resolutions.

“Nonetheless, the Board cannot terminate Ms. Lawless’s contract because it failed to adopt a resolution memorializing the authorizations and approvals that were made.”

Yost sent a letter to Lawless on March 10 that there may be a finding of recovery issued against her and stated that a finding of recovery is a preliminary determination by his office and that it “does not constitute a final determination that such legal liability exists and is not an accusation of criminal misconduct.”

On March 24, Lawless filed suit against the ESC asking for a jury trial to settle the matter of her being fired before her contract was up on July 31, 2018.

Her contract, which began in 2013, stated that if she were terminated before the end of the contract, she would be compensated in full for the unpaid balance of the contract unless she was “convicted of criminal behavior in the performance of her duties.” She is also asking for She is seeking $163,406 plus payment of School Employees Retirement System of Ohio retirement plan, $122,051 in damages, compensatory damages of $10,374 plus at least $398.99 for each additional day through the end of her contract.

The lawsuit also says that while Lawless was being audited, the ESC did not provide legal counsel for her as is required by her contract.

She also asked the court for a declaration that the ESC has terminated her employment, her contract and that she has been separated from her employment.

“Once this gets to court, it will come out that I acted within my contract,” Lawless said.

The Tribune reached out to ESC board members and superintendent but no one returned a call before press time on Friday.