District 210 Drains Student Activity Accounts

This past June, Lincoln-Way High School District 210 transferred $412,902.21 of funds from 35 Student Activity accounts into an unrelated account to eliminate a deficit. All of those 35 accounts were for the benefit of students.

Of those accounts, 22 were earmarked for the students of now-shuttered Lincoln-Way North High School, even though those students are still in activities at another District high school.

In his speech to the District 210 Board of Education Aug. 18, 2016, CPA Robert Ripp questioned the Board about the large amounts of student money moving between funds without public hearing. The Board had no response.

The community expected that the Board was handling its tax dollars, and funds for student activities, in a responsible and appropriate manner. And the Board continues to let questions of its mismanagement go unanswered.

Here is the full text of Ripp’s speech:

"The District maintains two types of fiduciary accounts:

1 – Scholarship Fund – A private-purpose trust fund that includes assets held by the District as the beneficiary of private donors.

2 – Student Activity Funds – An agency fund that includes assets held by the District as an agent for the students and teachers. These funds are not included in the financial statements of the District as the District merely acts as custodian of these assets for the sole benefit of the students.

"Per the District’s own Management Discussion and Analysis of it most recent annual audit: “Fiduciary Funds are not reported in the government-wide financial statements because the resources of those funds ARE NOT AVAILABLE TO SUPPORT THE District’s own programs.

"The Building & Trades – Central account has had a deficit balance in excess of $400k for the last decade. This deficit should never have occurred in the Student Activity Funds – ISBE regulations require Building & Trades funds to be accounted for in the Education Fund. Prior administration and Board members chose to ignore this requirement.

"The District’s June 2016 Student Activity Report indicates that the Building & Trades Account – Central (account #0610-1) started the month with a deficit balance of $412,902.21 and ended the month with a balance of $0 – a net increase in this fund of $412,902.21. Where did these funds come from?

"During June 2016, the District transferred $412,902.21 of funds from 35 Student Activity accounts to eliminate the Building and Trades deficit as follows:

• 1 student account related to LW West
• 3 student accounts related to LW Central
• 4 student accounts related to LW East
• 5 student accounts related to the District as a whole
• 22 student accounts related to LW North

"As a reminder, the students that used to attend Lincoln Way North are still part of this District. When you decided to shutter LW North, the former LW North students did not disappear. These students are still in the District and are still participating in the activities such as Basketball, Cross Country, Soccer, Tennis, Bookstore, and Library which are just some of the Student Accounts where money was taken from.

"This $400k transfer is in violation of the Illinois Administrative Code, ISBE’s IPAM manual, the Illinois School Code as well as the District’s own policies.

"The Illinois Admin Code allows student activity funds to be transferred from one student activity account to another in two specific instances:

1 – When the relevant activity has been discontinued

2 – When there has been no activity in the student activity account for one year

"Once again, Basketball, Cross Country, Soccer, Speech, Tennis, Bookstore and Library have not been discontinued and I refuse to believe there has been no activity in these accounts for one year.

"What does the Illinois School Code say about transfers of Student Accounts? ILCS 105 5/17-2A requires a public hearing be held on inter-fund transfer with public notice being required to be published at least 7 days and no more than 30 days prior to the public hearing. This was not done.

"What does the Districts Own Policies say about Student Activity Funds? Board Policy 4:90 states “A Student Account that is inactive for 12 consecutive months shall be closed and its funds transferred to another student activity fund with a similar purpose.” I would like to know how Basketball, Cross Country, Soccer, Speech or Tennis is similar to the decades old Building & Trades activity.

"The next time my doorbell rings on a Saturday afternoon this fall and there is a LW student soliciting funds for their club or sport I do not want to wonder if my contribution is really going for the benefit of the students or if it will simply be used by the District as it sees fit.

"You may feel better about taking the kids money by calling it a re-appropriation or an accounting correction but in the world I live in when you take something that does not belong to you from someone without their consent it is called something else.

"Also, at the last Board meeting, Mr. Lucchetti inquired as to the $6,300 current month receipt in the Building & Trades account. Administration acknowledged that this current month receipt was not related to the Building & Trades activity but was instead from vending machine sales. I’m sorry, vending machine sales has nothing to do with a decades old defunct Building & Trades activity. Just because you want an item go somewhere does not give you the right to put it there. It is precisely this attitude that the rules do not apply to LW administration and has resulted in the current financial state of the District.

"As recently as six months ago, the Building & Trades account has a deficit balance of $523K. How did the deficit balance go down to $413K? What was the source of this $110K of receipts? Based on Administration’s answer to Mr. Lucchetti about the $6,300 current month receipt, I would have to assume Administration chose to purposely misclassify / divert receipts in the amount of approximately $110k in order to decrease the Building & Trades deficit.

"In addition, during the last Board meeting, Administration indicated that when the District sells its 2 lots in Lighthouse Pointe subdivision the proceeds could be deposited into the Education Fund. As Mr. Lucchetti tried to point out to Administration, these 2 lots are already being carried as assets in the financial statements of the Student Activity Funds with a value of $240,000. The eventual sale of these 2 lots will simply result in the existing inventory asset being converted to cash. Therefore, if and when these two lots are sold, the proceeds will have to remain in the Student Activity accounts otherwise there will be a brand new $240k deficit in the Student Activity funds.

"One last item on a different topic: The draft budget on the District’s website contains a $20-million error. The beginning fund balances are off by $20 million. The distinct is confusing fund balance with cash balances derived from outstanding TAWs. A cursory review of ISBEs document titled “Common Budget Problems” should have alerted them to the problem. I emailed this information to the District’s Treasurer / Assistant Business Manager. You may or may not be surprised by his response which was: “Do not send me anymore emails – don’t even cc me on them.”

So much for transparency."