One regional agency is looking elsewhere for a financial agent.

The North Central Regional Education Services Agency (RESA VII) is looking for a new financial agent after Marion County and Harrison County boards of education have refused the position.

The Marion County BOE has served as RESA VII’s financial agent since the organization moved to Marion County in 1984. When RESA VII’s offices burned down in January 2002, the organization relocated to Harrison County, but Marion remained the financial agent.

Each of the state’s eight RESAs are required to have a financial agent by state board of education policy. The county board of education where the RESA’s home office is located generally serves as the financial agent.

Kim Wade, MCBOE financial administrator, said as the financial agent, the county board processes all RESA VII’s financial information, including payroll, deposits and accounts payable.

“We don’t oversee their finances,” Wade said. “We provide financial service.”

RESA VII’s money is deposited in MCBOE’s accounts. In return for the service, MCBOE and RESA VII had a verbal agreement allowing the county board to keep any interest earned from the money in the account, said Marion County Superintendent of Schools James Phares.

Annually, Marion County schools collect between $13,000 and $22,000 in interest, Phares said. The money is nice, but not enough to cover the salary of an individual to handle the workload, Phares said.

In 2004, Phares, in response to growing concerns of the MCBOE, requested a flat fee of about $25,000 per year to continue as the financial agent. RESA VII’s advisory council refused the request, Phares said, and Harrison County volunteered to become the financial agent, Phares said.

Just before the switch was to take place, the state Legislature ordered a study on all eight RESAs. The switch was delayed until the results of the study were released, Phares said.

In the meantime, RESA VII began having some accounting problems.

According to reports from the state board of education, RESA VII accounts held a negative balance for seven of 12 months in the last fiscal year. According to the report, in the fiscal year ending June 30, 2006, RESA VII’s ending cash balance was negative $413,477.

Phares said when he became aware of the problem, he notified Gabriel Devono, RESA VII executive director, and the RESA VII regional council. He also noted the MCBOE lost $14,680 in interest revenue when the RESA VII accounts were holding negative balances. After that meeting, Phares said, other superintendents and advisory council members began calling him to discuss issues they had observed with the RESA.

Eventually, Phares drafted two letters to state superintendent of schools Steven Paine. In October, the state board of education’s office of school finance made an on-site visit and later released its findings.

The report indicated the negative balances were not caused by improprieties or wrongdoing by either RESA VII or the MCBOE, but rather a “combination of unfortunate and unusual events.”

Phares said the report leaves more questions than answers. He noted if RESA VII was following the fiscal protocol set out in state board of education policy and State Code, there shouldn’t have been an accounting problem.

“If there’s a prescription in the code but we don’t follow it, it’s not an ‘unfortunate or unusual’ event,” Phares said.

Devono said the continued negative balances were the result of timing issues. He noted money had been expended on grant projects and there was a layover of a few days before federal grant money was drawn down to cover the cost. There had also been a turnover on the RESA VII accounting staff, Devono said.

Jim Miller, chief financial officer of RESA III, said the negative statements were a “snapshot” of each month and not indicative of what the balance was the entire month long.

In December, the Harrison County Board of Education voted unanimously to rescind the offer to be the RESA’s financial agent.

Harrison County Superintendent of Schools Carl Friebel said he made the recommendation to his board not to get involved in RESA VII’s affairs until the issues brought up by Phares and other superintendents are worked out.

“We want to make sure that when we take something over, it’s perfectly clean and proper,” Friebel said.

He explained he and the Harrison County board are really just awaiting more information. Once they are satisfied, they’ll take over as financial agent, he said.

Since the visit, Devono said RESA VII has taken steps to make sure accounting issues don’t arise again. First, they bill counties for services on a monthly basis instead of quarterly. They also have hired an accountant on staff.

“We’ve learned to monitor more closely, and that’s what we’re doing,” Devono said.

As for financial agents, Devono said the RESA VII Regional Council will take up the issue at its next meeting Jan. 18.

The regional council will also discuss a recommendation from the state Office of School Finance to reimburse Marion County Schools more than $14,000, Devono said.

E-mail Katie Wilson at

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