11 Ohio entities now ‘unauditable,’ but face few ramifications for financial messes

By Maggie Thurber | for Ohio Watchdog

Ohio law requires all public entities to conduct a yearly audit of their financials, but the toothless statute rarely results in significant sanctions for entities deemed “unauditable.”

That’s the term the Ohio auditor uses when the condition of financial records is “not adequate to complete” the regularly-scheduled financial audit — and there are 11 entities currently on the list.

Once an entity is declared unauditable, the laws says it has 90 days to provide the necessary documentation to complete an audit.

“Failure to bring records to an auditable condition may result in legal action, including the possibility of the attorney general issuing a subpoena to township officials to explain the condition of records,” the auditor’s website says.

The attorney general may also file suit to compel officials to prepare and/or produce the required information.

But that rarely happens, Bob Hinkle, chief deputy auditor for State Auditor Dave Yost, said. “I only know of one instance and that was before I became the chief deputy” in 2006, he said.

So why have Greater Heights Academy and Lion of Judah, two community schools in Cuyahoga County, been on the list since November 2010?

“Not only did we have unauditable records but also indictments against the principals,” Hinkle explained. “Those types of situations take a lot of time to get to the result, which is to ensure that the public money is properly reported upon and those who don’t do what they’re supposed to are held accountable.” He was unable to speak about the specifics of these two schools, or any of the other entities on the unauditable list while the audits are ongoing.

Romey Coles, the head of Lion of Judah, was indicted in February, along with others associated with the school, on accusations of illegally funneling $1.2 million of public funds to a business he formed to run the school. The school’s former treasurer received a two-year prison term for stealing more than $470,000 in federal education funds from four other charter schools in the state.

Greater Heights Academy has four years of unauditable books, from 2006 through 2009. Four individuals associated with the school were indicted in November 2013 for wire fraud, mail fraud and conspiracy to launder money for defrauding the school of more than $400,000.

Hinkle said both schools are closed and the audits are finally nearing completion.

In 2012, the villages of Mount Pleasant, Mount Victory and Smithfield, along with the Warren Water Authority in Jefferson County, were declared unauditable for the 2010-11 fiscal year.

In 2013, Franklin Township in Jackson County and the villages of Clarksville, Coldwater, Fairview and Millville were declared unauditable for the 2011-12 fiscal year.

Hinkle said that some jurisdictions are on the unauditable list “longer than I would like.”

“We try to get them off the list as quickly as we can, but it can take a while,” he added. “They’re unauditable for a reason.”

He also said that if the records cannot be produced for an audit, the state auditor would issue an adverse opinion or declare that he cannot give an opinion on the finances.

There are no legal sanctions for being on the unauditable list — at least, not for most entities. Due to recent changes in the law, if a community or charter school is declared unauditable, the sponsor has 45 days and the school has 90 days to act.

Failure to act means funding can be suspended.

As a result, Hinkle said, the recent community schools that had potential loss of funding were on and off the list in about 180 days.

The Fiscal Integrity Act, House Bill 10 and its companion Senate Bill 6, would impose similar sanctions, including the ability to remove an official from office and a suspension of payments of state funds to any public office declared unauditable.

Both bills have been in committees since they were introduced early in 2013. Similar bills introduced in 2011 were not acted upon by the General Assembly.

But until some teeth can be added to the process, Hinkle hopes the public pays attention and acts.

“If their office is declared unauditable, hopefully the next time they stand for election, they won’t be re-elected or put back into office,” he said. “And if they’re appointed, my hope would be that the board that governs their activity would put people in place who can do what they need to do” regarding audits.

The auditor’s office is responsible for about 5,700 local government and state agency audits each year.

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