Mt. Healthy City Schools' $18.5 million accounting error plunged district into turmoil

Mount Healthy City Schools forecasted having $19.2 million to run the district for the 2023 fiscal year. In reality, district officials now say, the number should have been $674,000.

The school district admitted the $18.5 million mistake Thursday in a letter addressing the findings of an Ohio State Auditor's Office report, which found numerous errors in the district's financial accounting.

The auditor's report, which was released Wednesday, and the district's response to it provide the first public explanation of how Mount Healthy schools fell into fiscal emergency three months ago.

As of mid-May, Mount Healthy is the only school district in Ohio in fiscal emergency , the most severe stage of a school system's financial woes. Under the designation, the state auditor puts together a team to determine cuts and can, in some cases, consider removing a district's superintendent or treasurer.

“There appears to be a failure of leadership, given the mismanagement of public resources and the financial mess the district now finds itself in,” Ohio Auditor Keith Faber said in a news release Thursday.

Audit: District had $18.5 million less than former treasurer claimed, lacked formal budgeting process

Inaccurate bookkeeping and forecasting at Mount Healthy City School District contributed to what the auditor called a "declining financial condition."

"Through the audit process, we discovered that the former treasurer submitted inaccurate forecasts for the school district," said a letter from the school district addressing yesterday's report from the Ohio State Auditor's Office .

The school district's website shows that the former treasurer was Rebecca Brooks. Current treasurer Kimberly Hughes took over for Brooks in April of last year.

"Rebecca Brooks had been an integral part of the district for 35 years and had done a fantastic job of keeping the finances in order," says a news release from the school district .

The letter from the school district did not provide an explanation of how Brooks could have made a forecasting error of approximately $18.5 million without raising any alarms.

Instead, it pointed to the lack of protocol on the state level to determine if a forecast is accurate.

The report from the state auditor's office found that Mount Healthy City School District lacked "a formal, written budgeting process" and written policies for forecasts specifically. Historically, the treasurer was the sole district official involved in developing the forecasts.

The Enquirer contacted both Mount Healthy City School District Superintendent Valerie Hawkins and Charles J. Ogdan, assistant superintendent of human resources and operations, for comment. They were not able to respond in time for publication.

Pandemic teacher hiring worsened deficit of $7.4 million, audit says

Hawkins defended the school district in the letter, pointing to improved student outcomes between 2018 and 2023 as evidence of the district's positive impact.

For those four school years, statistics provided by the district show an increase in student proficiency of 98% or above for all grades between 3rd and 8th grade.

The gains are especially meaningful in a district that serves many low-income families, according to Hawkins, who described Mount Healthy as a “100% poverty district."

Hawkins also defended the school district's approach to its finances.

“It is important to note that at this time last year, the district was not aware of any financial issues," said Hawkins. "We had focused on grant funding bringing in over 20 million of funding, independent of the ESSER money received, to help meet the needs of our students without asking the community for additional financial support."

ESSER money refers to the pandemic relief dollars the federal government doled out to schools across the U.S. to address significant learning loss due to the pandemic.

Mount Healthy City School District used the money to hire about two dozen teachers, among other things. Those hires made it possible for student-teacher ratios in some elementary classrooms to be as low as 9-to-1.

More: Southwest Ohio schools got $745 million in pandemic relief funds. Did they spend it all?

Now, the state says that decision is part of the reason why Mount Heal t hy City Schools is heading toward a deficit upwards of $90 million by 2028. This year, the district faces a deficit of more than $7.4 million.

Hiring those teachers wasn't the problem, but the district did so "without a strategic plan to maintain or remove those teaching positions as funding expired," according to the audit.

To help overcome the deficit, the school board voted to cut 96 full-time employees in March: six exempt employees, nine administrators, 11 substitutes and 70 teachers.

The school district had previously told The Enquirer that 80 full-time employees would be cut , but 96 is the updated number, according to Matt Eiselstein, a spokesperson for the Ohio Auditor's Office.

Terminating 98 teachers, charging students for sports may be necessary

The auditor recommended cutting 98 full-time teachers, instead of the 70 the district had voted on. Terminating 98 would save the district about $8.6 million, according to the auditor's report.

This is separate from recommendations to terminate at least 36 non-teaching staff, bringing the total number of recommended full-time employee cuts to 134.

The auditor also recommended reducing funding for student extracurriculars.

To help make up for the shortfall, the school district is considering making each student pay $50 to participate in their first sport and $25 for each additional sport, according to a response to the audit from the district.

Another recommendation from the auditor: Eliminate six bus routes that serve the school district, which would save about $118,000. Even if the Mount Healthy district follows all 19 recommendations, Eiselstein said, it will still have a shortfall.

It might be time for Mount Healthy City Schools to partner with other districts, Faber said in the news release from Thursday.

"Our students deserve to continue to learn in their community," Superintendent Hawkins responded.

"Before dismissing an entire school district to be absorbed I would challenge Auditor Faber and other legislators to help us seek solutions for solvency.”

This article originally appeared on Cincinnati Enquirer: Mt. Healthy City Schools' $18.5 million accounting error plunged district into turmoil