Audit Concerns Reinforce Athletic Tournament Fund Precautions; New Fraud Reporting Law Creates Additional Obligations.
I. OHSAA Tournament Fund Precautions.
When a school district hosts a tournament or a "neutral site" athletic event, the host school must arrange for individuals to work as site managers, ticket takers and in other positions. The Ohio High School Athletic Association ("OHSAA") provides the host school with funds to pay individuals for these services. The Ohio Auditor of State recently has cited some athletic directors for not properly managing these funds.
Based on the Auditor's findings, we recommend that treasurers treat OHSAA tournament funds as district funds. Expenditures from these funds must be for a proper public purpose, which must be supported by adequate documentation. As a general matter, individuals who work at these events may be treated as independent contractors if they are not otherwise employed by the district. A district should not allow an athletic director to treat tournament funds as private monies or as external, unregulated funds.
R.C. 117.27 provides that the Auditor must file a certified copy of an audit report with a public office's statutory legal counsel or the local prosecuting attorney. The legal counsel or prosecutor may then initiate a civil action for the recovery of funds or property, pursuant to R.C. 117.28, within 120 days after receiving the report. The Ohio Attorney General also may appear in or bring a lawsuit to recover funds or property.
II. H.B. 66 Creates A New System And Obligations For Reporting Fraud.
Recently passed legislation regarding the reporting of fraud will have an impact on public schools. H.B. 66 requires the Auditor of State to maintain a system for reporting fraud, including the misuse of public money by any public official or office. Under the new law, complaints may be made through a toll-free number, the Auditor's website, or by mail. In addition to maintaining systems for reporting fraud, the Auditor is also required to keep a log of all complaints filed, which typically will be a public record.
Beginning on May 4, 2012, all public offices, including school districts, must make their employees, as well as all new hires, aware of the fraud-reporting system. All new hires must confirm that they have received this information within 30 days after beginning employment. The new law provides two ways to verify compliance: (1) public offices may require new employees to sign forms acknowledging they were notified of the fraud-reporting system; or (2) public offices may provide the fraud-reporting system information in their employee manual and have each employee sign and verify receipt of the manual.
School officials, including athletic directors, should be mindful that any expenditure of funds "under color of office" is an expenditure of public money (R.C. 117.01(C)). Such an expenditure must be supported by sufficient documentation to show that it is for a proper public purpose. These records will be subject to audit and typically will be available to any person under the Ohio Public Records Act, R.C. 149.43. Boards of education and treasurers also may wish to consider additional expenditure controls of tournament funds through board policies or administrative guidelines.