Confusion lost Cleveland schools nearly $8.4 million in federal reimbursements, state audit finds

Confusion lost Cleveland schools nearly $8.4 million in federal reimbursements, state audit finds

CLEVELAND, OH (WOIO) - A state audit released Tuesday looking into the Cleveland Municipal School District's failure to file for nearly $8.4 million in federal reimbursements has found that the problem was a result of confusion and change in leadership within the district.

In 2011, voters in the CMSD approved Issue 14, which gave the district insurance of $335 million in bonds for the construction and renovation of school buildings. To help facilitate this, a Bond Accountability Commission (BAC) was established.

The BAC's responsibilities included communicating updates on the renovations to the community and the school. As part of this, they issued numerous reports on the district's spending of the bond proceeds. It was one such report that prompted the state audit.

The report in question, released on March 21, 2015, looked at the district's success in receiving reimbursement under the federal E-Rate program. The program requires telecommunications service providers to give money to the Universal Service Fund, which provides discounts to schools and libraries for telecommunications costs.

The BAC determined that the district was eligible to receive up to $12.28 million in E-Rate reimbursements since 2008 for technology equipment installed, but had only received $3.71 million, approximately 30 percent of the total available. The BAC said that the district could not provide an explanation for why it was missing out on the cash.

One theory the BAC put forward was that the vendor for many of the schools, Doan Pyramid, had sold the school products that were not approved for reimbursement under the program. Doan Pyramid's former owner, Michael Forlani, was sentenced to eight years in prison in 2013 on corruption charges after he used bribery to win county contracts. However, the audit disagreed with this, saying that the materials were "in accordance with the project drawings and specifications."

State auditor Dave Yost found that the district's E-Rate policy was faulty, with undetailed instructions on filing and applications leading to the district missing mandatory deadlines.

The confusion was exacerbated by the move of former district employee Ilze Lacis to E-Rate Central, the contractor hired by the school system to handle E-rate reimbursements. This led to questions over who was responsible for submitting reimbursement requests, especially since Lacis continued to work in the same office space in the district building.

"This is a unique case where a school district lost out on nearly $8.4 million because of a number of factors, none of which are fraudulent or intentional activity," Yost said. "This was a combination of poor management, weak policies and a lack of communications that resulted in huge losses. It's not criminal, it's stupid – a very big 'stupid.'"

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