Liberty schools’ fiscal collapse prompts numerous questions

The decision by state Auditor Dave Yost to place the Liberty Local School District under fiscal watch does not come as a surprise, given recent reports of the turmoil surrounding the performance of former Treasurer Tracey Obermiyer. But, it is a warning shot across the district’s bow: If a financial plan correcting the problems isn’t submitted within 60 days, Auditor Yost will issue a declaration of fiscal emergency. At that stage, a state fiscal oversight commission will be appointed to manage the finances. The superintendent and the board of education would have to win approval for any actions regarding the budget, and would have to develop a five-year forecast showing a balanced budget for each year.

How did Liberty get to this point? According the auditor’s office, it was a failure by the treasurer to submit an acceptable revised recovery proposal — the district was placed in fiscal caution in January 2010 — and incomplete financial records that prompted Yost to act. The district’s five-year forecast, filed with the Department of Education on Oct. 28, 2010, projected deficits of $293,000 for fiscal year 2011 and $2,565,000 for fiscal year 2012. The auditor’s office determined that the district’s financial records were unauditable on Feb. 7, 2011.

In other words, the books were a mess.

And that prompts several questions: Was no one in the district aware that Obermiyer wasn’t doing the job and, in fact, had ignored requests from the state for information relating to the district’s finances? Were no red flags raised when the treasurer failed to attend a meeting of the board of education in April after she was told that the purpose was to discuss two letters from the state that highlighted the problems?

Indeed, the auditor’s office threatened legal action because it had been unable to obtain bank reconciliations from July 1, 2009, through June 30, 2010, and bank statements for July and August 2010; Generally Accepted Accounting Practices financial statements and related footnotes; and budgetary documentation.

The Ohio Department of Education said in a letter that the Obermiyer did not provide reports to a department fiscal consultant monitoring the district.

“In these difficult economic times, governments at every level must become more efficient with fewer tax dollars,” Auditor Yost said last week in issuing the fiscal watch declaration. “My office is ready to work with the Liberty Local Schools to bring them back to fiscal health.”

Bad to worse

While the offer of assistance is necessary, the taxpayers of the Liberty School District have a right to know how things could have spun out of control without someone in a position of authority voicing concerns publicly. The lawyer for the district, John Britton of the Cleveland law firm Britton, Smith Peters and Kalail, said last week that the district has no reason to believe the treasurer was engaged in any criminal misconduct and that there was no criminal investigation ongoing. While that is reassuring, the fact remains that the district’s financial health has gone from bad to worse because the person in charge did not do her job.

There must be consequences for such ineptitude. Obermiyer’s resignation was effective today, and it isn’t clear whether the school board intends to explore sanctions against her. An independent auditing firm is looking at the district’s financial records, and one of the questions it should answer is whether the treasurer alerted anyone in the system to the problems she was experiencing in doing her job and providing the state with the information it sought.